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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, 1999
COMMISSION FILE NUMBER 1-14337
PENTON MEDIA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 36-2875386
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(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
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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:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE
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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. [X]
Aggregate market value of common stock held by non-affiliates as of March
20, 2000 at a closing price of $27.00 per share as reported by the New York
Stock Exchange was approximately $499,498,056. 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.
31,734,861 COMMON SHARES OUTSTANDING AS OF MARCH 20, 2000
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the annual meeting of
stockholders to be held on May 5, 2000 are incorporated by reference into Part
III of this report.
PENTON MEDIA, INC.
INDEX TO
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
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PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
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
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PART I
ITEM 1. BUSINESS.
OVERVIEW
We are a leading business-to-business media company. We provide media
products that deliver proprietary business information to owners, operators,
managers and professionals in the industries we serve. Through these products,
we offer industry suppliers multiple ways to reach their customers and
prospects. We publish 50 trade magazines, produce 103 trade shows and
conferences and maintain 83 Web sites and other electronic media products
serving the following ten industries:
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- Internet/Broadband - Management
- Design/Engineering - Supply Chain/Aviation
- Electronics - Government/Compliance
- Manufacturing - Mechanical Systems/Construction
- Natural Products/Food/Retail - Leisure/Hospitality
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We believe we have leading media products in each of the ten industry
sectors we serve. We are structured along industry rather than product lines.
This enables us to promote our related group of products, including
publications, trade shows and conferences and Web sites, to our more than 18,000
customers.
Since our founding in 1892, we have grown from an industrial trade magazine
publishing company into a leading, integrated business-to-business media company
serving a range of industrial, service and technology markets. We became an
independent company, incorporated in the State of Delaware, as a result of our
spinoff from Pittway Corporation in August 1998. Our independence has enabled us
to focus on building our business through acquisitions and internal growth. We
have acquired eight companies since the spinoff. We also have launched several
new media properties. These initiatives have helped us:
- Strengthen our presence in our existing markets;
- Provide us with strong market positions in new, high-growth markets;
- Expanded our presence in higher-margin trade shows and conferences;
and
- Increased our international product offerings.
OUR GROWTH STRATEGY
We believe we have significant growth potential. We intend to increase our
revenues, cash flows and market share by continuing to:
Strengthen Our Market Positions. We believe we can strengthen our market
positions by:
- capitalizing on our industry expertise to create new products to
serve the needs of our customers;
- completing strategic acquisitions of complementary business media
products and services;
- adding Internet-based products and services to meet the expanding
information and marketing needs of our customers;
- repositioning or eliminating publications and trade shows and
conferences that are not market leaders;
- cross-promoting media products within similar markets; and
- improving the operating efficiency of existing publications and
trade shows and conferences.
Expand Our Trade Show and Conference Business. We believe that significant
opportunities exist to capitalize on the editorial content and the nationally
recognized brand names of our existing publications to produce new and expand
existing trade shows and conferences. We intend to continue to acquire trade
shows and conferences in the industries we currently serve, such as our 1999
acquisition of the New Hope trade
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shows. We believe that increasing the percentage of revenues generated by trade
shows and conferences improves margins and profitability and mitigates the
cyclicality of advertising in slower economic times.
Acquire Leading Positions in New, Growing Markets. We continuously evaluate
trends in new markets to identify acquisition opportunities in attractive
markets. For example, the acquisition of New Hope has provided us with a
leadership position in the natural foods industry.
Expand Market Positions Globally. We intend to extend our established
brands into key international markets. In doing so, we hope to broaden our
customer base by capitalizing on our strong brand names. For example, we expect
to add additional Internet World or ISPCON trade shows in Europe, Asia and the
Middle East in 2000 and 2001.
Develop Web Sites That Capture Growing Internet Business Spending. We
intend to further develop our Web media portfolio to better complement our
publications and trade shows and conferences. We believe that customized
information delivery capabilities, real-time access to customers, commerce
opportunities, audience targeting and global reach benefits, and cost-efficiency
of Internet-based media will be increasingly attractive to our customers.
OUR PRODUCTS AND SERVICES
We serve specific industry sectors with our business publications, our
trade shows and conferences and our Web sites and 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. Eighty-three percent of Penton's audited
magazines hold the leading or number-two market share positions in their fields.
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 3.4
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 publications. 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
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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 103 trade shows and conferences in our ten industry sectors
which annually attract more than a million attendees with significant buying and
specifying responsibility. In addition to these events, we maintain licensing
agreements for seven trade shows and we produce one trade show under a
management contract.
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 New Hope in 1999 and Mecklermedia in 1998 added the Natural
Products Expo East and West, ISPCON and Internet World trade shows to our
portfolio. In addition, we have expanded our global presence. In 1997, we
acquired Independent Exhibitions, Ltd., a United Kingdom-based producer of trade
shows, and Industrial Shows of America, 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: WEB SITES AND ELECTRONIC MEDIA
We currently maintain 83 Web sites serving numerous market segments. We
believe that the Internet, and more specifically, the exponential growth of
business-to-business commerce being conducted over the Internet, presents us
with significant growth potential. We are developing a new generation of
market-focused Web sites that include improved features for e-commerce
transactions and for valued information exchange within targeted business
communities. These sites will incorporate state-of-the-art Web technologies and
will leverage the inherent assets of Penton's existing media products: the brand
recognition of our magazines and trade shows; our editorial content; and our
customer and product databases. We believe we have a competitive advantage in
the online business because of our established customer relationships in the
markets we serve, the industry expertise of our staff, and the opportunities we
have to promote our Web sites to targeted audiences through the magazines and
trade shows we own and operate. We expect to enter into various strategic
partnerships to facilitate our Internet development plans, including Internet
technology partnerships.
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. 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.
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- Specialized Advertising Services. We collect and forward reader
inquiries to our advertisers. In addition, classified advertising
sections in our publications and on our Web sites 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 Media 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.
RECENT DEVELOPMENTS
Our strategy to focus on core market segments led to two dispositions in
1999. On November 30, 1999, we sold our printing press and on December 30, 1999,
we signed a letter of intent to sell our direct mail business, which sale was
completed on March 15, 2000. These dispositions will allow us to more closely
focus on our principal businesses.
During 1999, Penton continued its strategic acquisition program, purchasing
six companies. These acquisitions comprise the following:
- In December 1999, Penton completed the acquisition of the assets of
Nutracon, a conference serving the rapidly growing functional
foods/nutraceutical market.
- In October 1999, Penton acquired all the outstanding stock of
Stardust.com and simultaneously purchased the net assets of Stardust
Technologies Inc., (collectively "Stardust"). Stardust, through its
Web portal site, conferences, forums and newsletters, facilitates
collaboration between Internet technology standards bodies,
technology product vendors and the IT user community to speed market
adoption of next-generation Internet technologies.
- In August 1999, Penton completed the asset acquisition of Multimedia
Week, a weekly publication that features IPOs and venture capital
tracking, in-depth product and technology spotlights; information
about new and emerging technologies; and market data.
- In May 1999, Penton acquired substantially all the assets of New
Hope Communications, Inc. ("New Hope"), a leading business media
company serving the natural products industry through its trade
shows, conferences, magazines and Web sites.
- In May 1999, Penton completed the acquisition of Jon Peddie
Associates ("Jon Peddie"), an information company that conducts
research, publishes market studies and special reports, and provides
consulting services to the electronics, semiconductor and digital
media industries.
- In February 1999, Penton acquired the assets of MFG Publishing, Inc.
("MFG"). MFG provides information to the enterprise resource
planning (ERP) segment of the manufacturing technology industry.
The aggregate purchase price of these acquisitions was approximately $91.4
million, excluding future contingent consideration of up to $24.7 million in
cash and stock based on the acquired companies' ability to meet or exceed
certain performance goals. All of these transactions have been accounted for
under the purchase method of accounting.
CUSTOMERS
We have over 18,000 customers. None of our customers accounted for more
than 0.9% of our total revenues in 1999. Our top ten customers accounted for
only 5.1% of our total revenues in 1999.
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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 and trade shows and conferences. We
compete for readers and advertisers in the publishing marketplace which is
fragmented. According to industry sources, there are about 1,500 trade magazine
publishing companies that publish about 5,000 titles. We also compete for trade
show and conference expenditures and venues, sponsorships and show attendees in
the trade show and conference marketplace. This market is also highly
fragmented. There are about 3,900 trade shows in the United States and Canada
produced by more than 2,100 independent companies and industry associations,
according to industry sources. Because our industry is relatively easy to enter,
additional competitors may enter these markets and intensify competition.
Our Publications generally compete on the basis of:
- advertisers' perception of the target audience served by the
magazine;
- readers' preference of the target audience served by the magazine;
- readers' 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;
- the effectiveness of sales and customer service; and
- advertising rates.
Our trade shows and conferences generally compete on the basis of:
- the availability of attractive venues and dates;
- the ability to provide events that meet the needs of particular
market segments;
- the ability to attract qualified attendees; and
- the ability to provide high quality show services, exhibition space
and attractive marketing and sponsorship opportunities.
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.
DOMESTIC AND FOREIGN REVENUES AND ASSETS
Domestic sales of our products and services comprised 96.9%, 92.3% and
92.2% of total revenues for the fiscal years ended December 31, 1997, 1998,
1999, respectively. Foreign sales totaled 3.1%, 7.7% and 7.8% of our revenues
for the fiscal years ended December 31, 1997, 1998, 1999, respectively. In 1999,
65.7% of these foreign sales were to customers in the United Kingdom.
Substantially all of the United Kingdom sales were made by Independent
Exhibitions, Ltd. (INDEX), a subsidiary of Penton located in the United Kingdom.
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.
PRODUCTION AND DISTRIBUTION
In November 1999, we sold our printing facility in Berea, Ohio to R. R.
Donnelley & Sons Company and signed a seven-year service contract providing for
the printing of a majority of our 50 specialized business magazines. If
additional printing capacity is needed, we believe that additional printing
services are readily available at competitive prices.
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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 4.9% of our total operating costs for the year ended
December 31, 1999. 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
6.3% of our total operating costs and expenses for the year ended December 31,
1999.
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 by available in every
country in which our publications and services are available.
We may by 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 are subject to various federal, state and local environmental laws and
regulations that (1) govern activities and operations that may have adverse
environmental effects, such as discharges to air and water, as well as handling
and disposal practices for solid and hazardous or toxic wastes, or (2) impose
liability for the costs of cleaning up, and damages resulting from, sites of
past spills, disposals, or other releases of hazardous or toxic substances of
wastes.
EMPLOYEES
On December 31, 1999, we employed about 1,244 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.
UNCERTAINTY OF FORWARD-LOOKING STATEMENTS
Penton considers portions of this information to be forward-looking
statements within the meaning of Section 27A of the Securities Exchange Act of
1933 and Section 21E of the Securities Exchange Act of 1934, both as amended,
with respect to Penton's expectations for future periods. Although Penton
believes that the expectations reflected in such forward-looking statements are
based upon reasonable assumptions, it can give no assurance that its
expectations will be achieved. For this purpose, any statements contained herein
that are not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, the words "believes," "anticipates,"
"plans," "expects," "seeks," "estimates" and similar expressions are intended to
identify forward-looking statements. A number of important factors could cause
Penton's results to differ materially from those indicated by such
forward-looking statements, including, among other factors, pending litigation,
government regulation, competition, technological change, intellectual property
rights, capital spending, international operations and Penton's acquisition
strategies.
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RISK FACTORS
The following are factors that may affect our actual operating results and
could cause results to differ materially from those in any forward-looking
statements. There may be other factors, and new risk factors may emerge in the
future. You should carefully consider the following information.
We Depend on Advertising Revenues, Which Decrease During Economic Downturns
and Fluctuate from Period to Period.
For the year ended December 31, 1999, about 67.6% of our revenues came from
advertising. Our advertising revenues fluctuate with general economic cycles.
Any material decline in advertising revenue would have a material adverse effect
on our business, results of operations and financial condition. Historically,
advertising revenues have increased during economic recoveries and decreased
during both general economic downturns and regional economic recessions. In the
event of a general economic downturn or a recession, our advertisers may reduce
their advertising budgets or intensify their attempts to negotiate lower
advertising rates.
Our advertising revenues may fluctuate from period to period based on the
spending patterns of our customers. Many of our large customers may concentrate
their advertising expenditures around major new product launches. We cannot
always know or predict when our large customers intend to launch new products.
We cannot predict any related fluctuation in our advertising revenues.
If We Are Unable to Complete Acquisitions or Integrate Acquisitions
Effectively, Our Business Could Be Adversely Affected.
We intend to continue to grow in part through acquisitions. We may not be
able to identify suitable candidates or make acquisitions on terms that are
favorable to us. In addition, we may not be able to successfully complete any
acquisitions or integrate acquisitions into our existing operations or
effectively manage those businesses once integrated. If we are unable to
integrate our recent or future acquisitions successfully, our business could be
adversely affected.
Financing of Future Acquisitions May Increase Our Debt, Reduce Our Cash and
Adversely Affect our Stockholders.
We may finance future acquisitions with internally generated funds, bank
borrowings, public offerings or private placements of debt securities, or
through a combination of these sources. This may have the effect of increasing
our debt and reducing our cash available for other purposes. In addition,
although it is unlikely in the foreseeable future due to tax considerations, we
could issue additional shares of our common stock as consideration for
acquisitions. See "--Contingent Tax Liability Related to the Spin Off of Our
Common Stock by Pittway." If we do, our stockholders may experience dilution.
Acquisitions May Divert Our Management's Attention Away From Running Our
Company.
Acquisitions are an important part of our business strategy. Acquisitions
may require substantial attention from, and place substantial additional demands
upon, our senior management. This may divert their attention from our existing
businesses, making it more difficult to manage effectively. In addition,
unanticipated events or liabilities relating to these acquisitions or the
failure to retain key personnel could have a material adverse effect on our
business, results of operations and financial condition.
The Terms of Our Indebtedness May Restrict Our Ability to Pursue Our Growth
Strategy.
Our credit agreement requires us to satisfy specified financial covenants.
Our ability to comply with these provisions depends, in part, on factors over
which we may have no control. These restrictions could adversely affect our
ability to pursue our growth strategy. If we breach any of our financial
covenants or fail to make scheduled payments, our creditors could declare all
amounts owed to them to be immediately due and payable. We may not have
available funds sufficient to repay the amounts declared due and payable, and we
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may have to sell assets to repay those amounts. Our credit agreement is secured
by substantially all of our assets, including the stock of our subsidiaries. If
we cannot repay all amounts that we have borrowed under our credit agreement,
our lenders could proceed against our assets.
The Profitability and Success of Our Trade Shows and Conferences Could Be
Adversely Affected if We Lose Scheduled Dates and Locations of Those Events.
As the trade show and conference industry grows, we increasingly compete
for desirable dates and venues for our trade shows and conferences. As this
competition intensifies, we could lose important engagements. If we lose dates
and venues for events, the profitability and future success of these events
could be adversely affected. Although we generally reserve venues and dates more
than a year in advance, these reservations are not binding until we sign a
contract with a facility operator. These contracts generally hold venues and
dates for only one year. In addition, circumstances beyond our control, like
natural disasters, labor strikes and transportation shutdowns, could present
financial risk to our trade shows and conferences, which could have an adverse
effect on our business, results of operations and financial condition.
A Significant Decline in Our Internet Trade Show and Conference Business Could
Adversely Affect Our Results of Operations.
Going forward, we anticipate that our Internet trade shows and conferences
will produce a significant portion of our cash flow. As a result, a significant
decline in the performance of these trade shows and conferences could adversely
affect our business, results of operations and financial condition.
We Depend on Trade Show and Conference and Publishing Revenues, Which Vary Due
to Seasonality.
Our trade shows and conferences and publishing revenues are seasonal. Our
revenue typically reaches its highest level during the second and fourth
quarters of each calendar year. As a result, we could incur a net loss during
the first and third calendar quarters. This is due largely to the timing of our
trade shows and conferences and the general increase in publishing revenue in
the second and fourth quarters.
Contingent Tax Liability Related to the Spin Off of Our Common Stock by
Pittway.
In connection with the tax-free spin off of our common stock by Pittway to
its stockholders in August of 1998, we agreed not to take any action that would
cause the spin off to be taxable to Pittway under section 355 of the Internal
Revenue Code. We also agreed to indemnify Pittway for any liability suffered by
it if we were to take any action that would cause the spin off to be taxable to
Pittway. The spin off would become taxable to Pittway, on a presumptive basis,
if 50.0% or more of our common stock is acquired during a period that ends two
years from the date of the spin off. Accordingly, our ability to raise capital
or consummate acquisitions through additional issuances of equity securities may
be impaired during this period. We believe that the major transactions involving
our common stock that have occurred since the spin off and that to our knowledge
are currently contemplated to occur would not trigger the presumption. If,
However, the Internal Revenue Service were to assert that any future major
transactions involving our common stock during the two-year period resulted in
the spin off being taxable to Pittway on a presumptive basis, we cannot assure
you, in light of the lack of specific guidance in this area of the tax law, that
we could successfully rebut the presumption. If any such liability became due
and payable by us to Pittway, the payment of such liability could have a
material adverse effect on our financial condition.
Competition May Adversely Affect Our Earnings and Results of Operations.
We experience intense competition for our products and services. If we fail
to compete effectively, our earnings and results of operations could be
adversely affected. We compete with several much larger international firms that
operate in many markets and have broad product offerings in publishing and trade
shows and conferences. We compete for readers and advertisers in the publishing
marketplace and for trade show and conference expenditures, sponsorships and
show attendees in the trade show and conference
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marketplace. Because our industry is relatively easy to enter, we anticipate
that additional competitors, some of whom may have greater resources than
Penton, may enter these markets and intensify competition.
Our Overall Operations May be Adversely Affected by Risks Associated with
International Operations.
We have operations outside the United States. We intend to expand further
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 the
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 the 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.
New Product Launches or Acquired Products May Reduce Our Earnings or Generate
Losses.
Our future success will depend in part on our ability to continue offering
new products that successfully gain market acceptance by addressing the needs of
specific audience groups within our targeted industries. Our efforts to
introduce new or integrate acquired products may not be successful or
profitable. The process of internally researching and developing, launching,
gaining acceptance and establishing profitability for a new product, or
assimilation and marketing an acquired product, is both risky and costly. New
products generally incur initial operating losses.
In addition, we have invested in, and intend to continue to invest in, the
development of various Internet products, which are currently generating losses.
The Internet is still in the early stages of development as a commercial medium.
These products may not be successful or profitable.
Costs related to the development of new products are expensed as incurred
and, accordingly, our profitability from year to year may be adversely affected
by the number and timing of new product launches.
Reliance on Principal Vendors Could Adversely Affect Our Business.
We rely on our principal vendors. Currently, our principal vendors are
paper suppliers, the Untied States Postal Service and our printing supplier. If
any of our principal vendors discontinues or temporarily terminates its services
and we are unable to find adequate alternatives, we may experience increased
prices, interruptions and delays in services. These factors could adversely
affect our business.
Increases in Paper or Postage Costs Would Cause Our Expenses to Increase and
May Adversely Affect Our Profitability.
Paper is a significant expense relating to our print products, accounting
for about 4.9% of our total operating expenses in 1999. Significant increases in
paper prices, which have been volatile in recent years, may have an adverse
effect on our business. We do not use forward contracts and all of our paper
supply vendor arrangements provide for price adjustments on a quarterly basis to
reflect then-prevailing market prices.
11
<PAGE> 12
Postage for magazine distribution and direct mail solicitations is also a
significant expense for us, accounting for about 6.3% of our total operating
expenses in 1999. Significant increases in postage prices may have an adverse
effect on our business. We use the Untied States Postal Service for domestic
distribution of substantially all of our products and marketing materials.
Loss of Key Personnel Could Impair Our Success.
We benefit from the leadership and experience of our senior management
team, and we depend on their continued services in order to successfully
implement our business strategy. Although we have entered into employment
agreements with Thomas L. Kemp and Daniel J. Ramella and other management
members, they and other key personnel may not remain in our employment. The loss
of key personnel could have a material adverse affect on our business, results
of operation or financial condition.
Takeover Defense Provisions May Adversely Affect the Market Price of Our
Common Stock.
Various provisions of Delaware corporation law and of our corporate
governance documents may inhibit changes in control not approved by our Board of
Directors and may have the effect of depriving stockholders of an opportunity to
receive a premium over the prevailing market price of our common stock in the
event of an attempted hostile takeover. In addition, the existence of these
provisions may adversely affect the market price of our common stock. These
provisions include:
- a classified Board of Directors;
- a prohibition on stockholder action through written consents;
- a requirement that special meetings of stockholders be called only
by the Board of Directors;
- advance notice requirements for stockholder proposals and
nomination; and
- availability of "blank check" preferred stock.
The Infringement or Invalidation of Our Proprietary Rights Could Have An
Adverse Effect On Our Business.
We regard our copyrights, trademarks, service marks and similar
intellectual property as critical to our success. We rely on copyright and
trademark laws in the United States and other jurisdictions and on
confidentiality agreements with some of our employees and others to protect our
proprietary rights. If any of these rights were infringed or invalidated, our
business could be materially adversely affected. In addition, our business
activities could infringe upon the proprietary rights of others, who could
assert infringement claims against us.
We seek to register our trademarks in the Untied States and elsewhere.
These registrations could be challenged by others or invalidated through
administrative process or litigation. In addition, our confidentiality
agreements with some of our employees or others may not provide adequate
protection of our proprietary rights in the event of unauthorized use or
disclosure of our proprietary information or if our proprietary information
otherwise becomes known or is independently developed, by competitors.
Ownership by Significant Stockholders and Sales of Substantial Amounts of Our
Common Stock May Adversely Affect the Market for Our Common Stock.
Members of the Harris Group and Mario J. Gabelli, and entities controlled
directly or indirectly by Mr. Gabelli, own a significant amount of our common
stock.
These concentrations of voting power may inhibit changes in control of our
company and may adversely affect the market price for our common stock. In
addition, sales of a substantial amount of common stock in the public market, or
the perception that these sales may occur, could adversely affect the market
price of our common stock prevailing from time to time and could impair our
ability to raise additional capital through the sale of our equity securities.
12
<PAGE> 13
ITEM 2. PROPERTIES.
The Company's principal properties, all of which are used in the Company's
media services segment, and their general characteristics are as follows:
<TABLE>
<CAPTION>
LEASE APPROXIMATE
LOCATION PRINCIPAL USE EXPIRATION SQUARE FEET
-------- ------------- ---------- -----------
<S> <C> <C> <C>
Cleveland, Ohio......................................... General Offices 2000 186,000
Cleveland, Ohio......................................... General Offices 2010 151,740
Cleveland, Ohio......................................... Warehousing 2001 28,000
Hasbrouck Heights, New Jersey........................... General Offices 2001 25,000
Darien, Connecticut..................................... General Offices 2009 18,200
New York, New York...................................... Sales Offices 2000 10,000
Boulder, Colorado....................................... General Offices 2006 29,000
Golden, Colorado........................................ Sales Offices 2001 10,850
Isleworth, Middlesex UK................................. General Offices 2014 7,600
Campbell, California.................................... General Offices 2000 4,162
</TABLE>
Other smaller properties include 29 sales and/or editorial offices under
leases expiring through 2005 located in major cities throughout the United
States and 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 Corporation 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. In January 2000, the United States District Court for the Southern
District of New York denied class certification for this case. Two other former
shareholders have since moved to intervene as plaintiffs and renewed the motion
for class certification.
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 1999.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
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 from the common stock as
reported on the New York Stock Exchange.
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
----------------
HIGH LOW
------ ------
<S> <C> <C>
Year Ended December 31, 1999:
First Quarter............................................ $22.50 $18.13
Second Quarter........................................... 29.63 19.50
Third Quarter............................................ 24.25 12.63
Fourth Quarter........................................... 24.75 14.75
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
----------------
HIGH LOW
------ ------
<S> <C> <C>
Year Ended December 31, 1998:
Third Quarter (from August 10, 1998)..................... $17.00 $12.88
Fourth Quarter........................................... 20.25 12.50
</TABLE>
On March 20, 2000, the reported last sale price of the Common Stock on the
New York Stock Exchange was $27.00 per share. The company has approximately 770
holders of the common stock, as calculated by using the number of record holders
on March 20, 2000.
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.
On August 8, 1998, Penton acquired the outstanding stock of Donohue/Meehan
Publishing Company ("DM Publishing") for, among other consideration, 1,541,638
shares of Penton common stock. On May 27, 1999, Penton acquired the assets of
New Hope for, among other consideration, 2,102,564 shares of Penton common
stock. On March 22, 2000, Penton made a contingent payment to New Hope, in part,
with 52,920 shares of Penton common stock. In making such payments, Penton
relied upon the exemption from registration provided by Section 4(2) under the
Securities Act as these transactions did not involve a public offering.
ITEM 6. SELECTED FINANCIAL DATA.
The following table presents our selected financial data. The statement of
income data for each of the three years in the period ended December 31, 1999
and the balance sheet data as of December 31, 1998 and 1999 have been derived
from our audited consolidated financial statements and related notes, which
appear elsewhere in this Form 10-K. The statement of income data for each of the
two years in the period ended December 31, 1996 and the balance sheet data as of
December 31, 1995, 1996 and 1997 have been derived from our audited consolidated
financial statements and related notes that are not included in this Form 10-K.
You should read the following information together with our audited
consolidated financial statements and related notes and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" appearing
elsewhere herein.
You should also consider the following when reading the statement of income
data below:
- All historical amounts have been restated to reflect the
classification of our Printing segment and Direct Mail segment as
discontinued.
- EBITDA is earnings before interest, taxes, depreciation and
amortization.
- Penton defines EBITDA as operating income before depreciation and
amortization. EBITDA is often used to analyze and compare companies
on the basis of operating performance and cash flow. However, EBITDA
is not adjusted for all non-cash expenses or for working capital,
capital expenditures and other investment requirements. EBITDA
should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with generally
accepted accounting principles. Not all companies calculate EBITDA
in the same manner, and EBITDA as presented may not be comparable to
similarly titled measures presented by other companies.
- Operating income equals revenues less operating expenses. See
Consolidated Statement of Income included elsewhere herein.
- Cash flows from investing activities include capital expenditures
and acquisitions.
14
<PAGE> 15
CONSOLIDATED COMPARATIVE SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1999 1998 1997 1996 1995
--------------------------------------------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Revenues........................................ $300,824 $ 207,682 $181,109 $166,631 $158,314
Operating income................................ 39,390 26,218 24,854 17,681 9,428
Income from continuing operations............... 7,930 11,186 14,612 10,475 7,109
Income (loss) from discontinued operations...... 33 (296) 262 481 1,468
Gain on sale of discontinued operations......... 8,660 -- -- -- --
Extraordinary item -- early extinguishment of
debt......................................... (8,413) -- -- -- --
Net income...................................... 8,210 10,890 14,874 10,956 8,577
Earnings per common share -- basic and diluted:
Income from continuing operations............ 0.28 0.51 0.69 0.49 0.34
Net income................................... 0.29 0.50 0.70 0.52 0.40
CASH FLOWS AND OTHER DATA
Cash flows
Operating.................................... $ 34,357 $ 25,749 $ 23,186 $ 20,507 $ 7,423
Investing.................................... (27,770) (271,157) (53,192) (4,722) (4,989)
Financing.................................... 19,879 246,993 30,854 (15,888) (1,697)
Capital expenditures............................ 5,884 5,775 5,450 4,822 4,989
Depreciation and amortization................... 27,918 7,791 3,903 3,335 3,302
EBITDA.......................................... 67,308 34,009 28,757 21,016 12,730
AT PERIOD END
Total assets of continuing operations........... $805,151 $ 479,301 $156,426 $108,799 $116,494
Investment in discontinued operations........... 4,228 -- -- -- --
Total assets.................................... 809,379 479,301 156,426 108,799 116,494
Goodwill and other intangibles.................. 451,236 387,612 71,822 21,940 21,916
Total debt...................................... 215,000 307,000 34,170 -- --
Stockholders' equity............................ 402,601 87,489 69,613 59,151 70,763
</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 should be read in
conjunction with the consolidated financial statements, the notes thereto and
the comparative summary of selected financial data appearing elsewhere in this
report. Historical results and percentage relationships set forth in the
consolidated financial statements, including trends that might appear, should
not be taken as indicative of future operations.
OVERVIEW
Penton was spun off from Pittway Corporation ("Pittway") and acquired DM
Publishing in August 1998; then acquired Internet World Media, Inc. ("IWM") in
November 1998; MFG in February 1999; Jon Peddie in May 1999; New Hope in May
1999; Multimedia Week in August 1999; Stardust.com in October 1999; and Nutracon
in December 1999. As Penton acquires additional companies, its sales mix, market
focus, cost structure, operating leverage and the seasonality of its business
may change significantly. Consequently, Penton's historical and future results
of operations reflect and will reflect the impact of acquisitions, and
period-to-period comparisons may not be meaningful in certain respects.
Historical information for companies
15
<PAGE> 16
subsequent to their acquisition may include integration and other costs that are
not expected to continue in the future.
On November 30, 1999, Penton completed the sale of its Printing segment to
R.R. Donnelley & Sons Company for approximately $31.0 million. Penton recorded a
gain on the sale of $15.5 million ($9.3 million, or $0.33 per share, after tax).
In December 1999, Penton signed a letter of intent to sell its Direct Mail
segment for approximately $4.0 million in cash. The cash sales price will be
received and recorded in the first quarter of 2000. A sales price of $4.0
million will result in a loss for Penton estimated at $0.7 million, or $0.02 per
share, including a provision of $0.06 million for operating losses during the
phase-out period. Operating results, net assets and cash flows for the Printing
and Direct Mail segments have been reflected as discontinued operations in the
accompanying financial statements. Net income for the Printing segment was $0.3
million, $0.5 million and $0.9 million in 1999, 1998 and 1997, respectively
($0.01, $0.02 and $0.04 per share), on revenues of $10.4 million, $11.7 million
and $10.5 million, respectively. Net losses for the Direct Mail segment were
$0.3 million, $0.8 million and $0.7 million in 1999, 1998 and 1997, respectively
($0.01, $0.04 and $0.03 per share), on revenues of $12.2 million, $13.8 million
and $13.3 million, respectively.
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,
--------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Revenues.................................................... 100.0% 100.0% 100.0%
----- ----- -----
Operating Expenses:
Editorial, production and circulation..................... 38.9% 41.5% 44.3%
Selling, general and administrative....................... 38.8% 42.2% 39.8%
Depreciation and amortization............................. 9.2% 3.7% 2.2%
----- ----- -----
86.9% 87.4% 86.3%
----- ----- -----
Operating Income............................................ 13.1% 12.6% 13.7%
----- ----- -----
Other Income (expenses):
Interest expense.......................................... (7.2)% (2.7)% (0.5)%
Gain on sale of investments............................... 2.0% -- 0.6%
Miscellaneous, net........................................ 0.1% -- --
----- ----- -----
(5.1)% (2.7)% 0.1%
----- ----- -----
Income from continuing operations before income taxes....... 8.0% 9.9% 13.8%
Provision for income taxes.................................. 5.4% 4.5% 5.7%
----- ----- -----
Income from continuing operations........................... 2.6% 5.4% 8.1%
Discontinued operations..................................... 2.9% (0.2)% 0.1%
----- ----- -----
Income before extraordinary item............................ 5.5% 5.2% 8.2%
Extraordinary item -- early extinguishment of debt.......... (2.8)% --% --%
----- ----- -----
Net income.................................................. 2.7% 5.2% 8.2%
===== ===== =====
</TABLE>
16
<PAGE> 17
1999 COMPARED WITH 1998
Revenues
Total revenues increased $93.1 million, or 44.8%, from $207.7 million in
1998 to $300.8 million in 1999.
Publishing revenues increased $23.7 million, or 13.2%, from $179.7 million
to $203.4 million, due primarily to the following: (i) the addition of Baking
Management, Modern Baking and Convenience Store Decisions magazines, which were
part of the DM Publishing acquisition in August 1998; (ii) the addition of
Boardwatch magazine and Internet World magazine, which were part of the IWM
acquisition in November 1998; (iii) the addition of Natural Foods Merchandiser,
Delicious!, Health and Nutrition Breakthroughs, Nutrition Science News and
Expansion Management magazines, which were part of the New Hope acquisition in
May 1999; (iv) the addition of Mid-Range ERP magazine, which was part of the MFG
acquisition in February 1999; (v) the addition of IW Growing Companies,the first
issue of which was not published until the second quarter of 1998; and (vi)
increased revenues year-over-year in Penton's core magazines, such as
Contracting Business, Machine Design, Foundry Management and Technology,
Government Procurement and Penton's Embedded Systems Development. These
increases were offset by (i) lower revenues from Electronic Design magazine
compared with the same period in the prior year, due to a slowdown in the
electronics market; (ii) the absence of the Fluid Power Handbook &
Directory,which was published in 1998, and is published every other year; and
(iii) lower revenues from various other core magazines compared with the same
period in the prior year.
Trade show and conference revenues increased $69.5 million, or 248.6%, from
$28.0 million to $97.4 million, due primarily to the following: (i) the
first-time inclusion of IWM which was acquired in late November 1998 and which
added the Fall and Spring Internet World trade shows as well as the ISPCON trade
shows; (ii) the first-time inclusion of New Hope, which was acquired at the end
of May 1999 and includes the Natural Products Expo East and West trade shows;
(iii) the addition of A/E/C Systems UK Show, A/E/C GEO Expo and the
Metalmecanica show, all of which were held for the first time in 1999; and (iv)
significant year-over-year revenue increases for the Supply Chain Expo, Service
Management Europe and Wireless Symposium/Portable by Design Conference &
Exhibition.
Operating Expenses. Operating expenses increased $80.0 million, or 44.1%,
from $181.5 million in 1998 to $261.4 million in 1999. As a percentage of
revenues, operating costs decreased from 87.4% in 1998 to 86.9% in 1999. The
improvement in operating expenses as a percentage of revenues was due primarily
to higher margins earned on acquired trade shows that were held for the first
time in 1999. These improvements were offset by the increase in depreciation and
amortization related to the acquisitions and to the change in Penton's goodwill
amortization policy for acquired trade shows, which reduced the write-off period
from 40 years to 20 years.
Editorial, Production and Circulation. Total editorial, production and
circulation expenses grew to $116.9 million in 1999 compared with $86.1 million
in 1998, representing an increase of $30.8 million, or 35.8%. Approximately
$29.4 million of the increase was due to the DM Publishing acquisition in August
1998, the IWM acquisition in November 1998 and the New Hope acquisition in May
1999. These increases in costs were offset by the absence of costs related to
the biennial Fluid Power Handbook & Directory, which was published in 1998, but
not in 1999. In addition, costs related to Penton's core publishing operations
were down due to advertising slowdowns, primarily in the electronics and
computer markets.
As a percentage of revenues, editorial, production and circulation expenses
decreased from 41.5% in 1998 to 38.9% in 1999. The decrease was due largely to
DM Publishing magazines, higher margins earned from the IWM and New Hope trade
shows, and production improvements.
Selling, General and Administrative. Total selling, general and
administrative expenses grew $29.0 million, or 33.1%, from $87.6 million in 1998
to $116.6 million in 1999. Approximately $27.2 million of the increase was due
to the DM Publishing acquisition in August 1998, the IWM acquisition in November
1998 and the acquisition of New Hope in May 1999. Costs related to the biennial
Fluid Power Handbook & Directory, which was published in 1998, were not incurred
in 1999. In addition, costs related to
17
<PAGE> 18
Penton's core publishing operations decreased due to advertising slowdowns,
primarily in the electronics and computer markets.
As a percentage of revenues, selling, general and administrative expenses
decreased from 42.2% in 1998 to 38.8% in 1999. The improvement was due largely
to the addition of new trade shows and conferences to Penton's product mix.
Depreciation and Amortization. Depreciation and amortization increased
$20.1 million, or 258.3%, to $27.9 million. The higher expense was the result
primarily of the amortization of intangible assets of approximately $0.6 million
associated with the DM Publishing acquisition in August 1998; of approximately
$15.9 million from the IWM acquisition in November 1998; and approximately $2.5
million from the New Hope acquisition in May 1999. In addition, the increase was
due to the change in Penton's goodwill amortization policy for acquired trade
shows, effective with the fourth quarter of 1998. Penton reduced the write-off
period from 40 years to 20 years. The acquisitions of MFG, Jon Peddie,
Multimedia Week,Stardust.com and Nutracon also contributed to the increase.
Operating Income. Overall, Penton's operating income increased $13.2
million, or 50.2%, to $39.4 million from $26.2 million in the prior year.
Operating income as a percentage of revenue increased from 12.6% in 1998 to
13.1% in 1999.
Interest Expense. Interest expense increased $16.0 million to $21.6
million, due to additional borrowings used to finance Penton's acquisition
strategy since its spinoff in August 1998.
Effective Tax Rates. The effective tax rates from continuing operations
were 67.0% and 45.8% in 1999 and 1998, respectively. Penton's acquisition of
Independent Exhibitions, Ltd.(INDEX), in December 1997, DM Publishing in August
1998 and IWM in November 1998 resulted in the recording of goodwill. The
amortization of goodwill for these transactions is recognized for financial
statement purposes, but is not deductible for tax purposes due to the structure
of the purchase transactions. Accordingly, Penton's effective tax rate increased
from 1998 due to the full-year effect of the acquisitions.
Extraordinary Item. The extraordinary item in 1999, which aggregated $8.4
million, net of $5.6 million in taxes, relates to the writeoff of unamortized
deferred finance costs associated with the partial paydown of senior debt with
the proceeds from the common stock offering completed in May 1999 and the
refinancing of senior debt in September 1999.
Gain on Sale of Investments. In July 1999, Penton sold 510,000 shares of
internet.com Corporation stock and recognized a gain of approximately $5.9
million.
18
<PAGE> 19
1998 COMPARED WITH 1997
Revenues
Total revenues increased $26.6 million, or 14.7%, from $181.1 million in
1997 to $207.7 million in 1998.
Publishing revenues increased $9.3 million to $179.7 million, due primarily
to the following: (i) the DM Publishing acquisition in August 1998; (ii) two
publications launched in the first quarter, IW Growing Companies and Penton's
Embedded Systems Development; (iii) the publication of Fluid Power Handbook &
Directory, which is published every other year; and (iv) 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 was due to the first-time inclusion
of the operations of INDEX, and about $5.0 million was due to Industrial Shows
of America. Both INDEX and Industrial Shows of America (ISOA) were acquired in
December 1997. In addition, 1998 included an increase in the Wireless
Symposium/Portable by Design Conference & Exhibition and approximately $0.8
million related to the addition of IWM in November 1998.
Operating Expenses. Operating expenses for Penton increased $25.2 million,
or 16.1%, from $156.3 million in 1997 to $181.5 million in 1998. As a percentage
of revenues, operating costs increased from 86.2% in 1997 to 87.4% in 1998. The
increase in percentage was due primarily to the increase in amortization related
to acquisitions, period costs related to IWM and one-time spin-off and start-up
costs. These increases were offset partially by the first full year of
operations of INDEX and ISOA.
Editorial, Production and Circulation. Total editorial, production and
circulation expenses grew to $86.1 million in 1998 compared with $80.3 million
in 1997, representing an increase of $5.8 million, or 7.2%. The increase was due
to the inclusion of the INDEX and ISOA trade shows acquired in late 1997, which
accounted for $4.7 million of the total production expense increase. Other
expense increases related to the acquisition of DM Publishing in August 1998,
the acquisition of IWM in November 1998 and the publication of the biennial
Fluid Power Handbook & Directory,which was not published in 1997. Accordingly,
editorial, production and circulation expenses declined as a percentage of
revenues from 44.3% in 1997 to 41.5% in 1998.
Selling, General and Administrative. Total selling, general and
administrative expenses grew $15.6 million, or 21.7%, to $87.6 million in 1998.
The increase was due to: (i) expenses of the INDEX and ISOA trade shows held in
1998, which amounted to $4.9 million and $3.7 million, respectively; (ii) period
costs of the newly acquired IWM trade shows in the amount of $1.7 million (for
which related revenues were deferred until those trade shows were held in future
periods); (iii) costs related to launching two publications in the first
quarter, IW Growing Companies and Penton's Embedded Systems Development; (iv)
the DM Publishing acquisition in August 1998; (v) one-time spin-off costs of
approximately $0.4 million; (vi) costs related to the biennial Fluid Power
Handbook & Directory; (vii) sales volume growth; and (viii) higher charges
related to Pittway stock appreciation rights held by Penton employees, which
will not recur. Total costs charged to Penton by Pittway for 1998 and 1997 were
$1.4 million. Accordingly, selling, general and administrative expenses
increased as a percentage of revenues from 39.8% in 1997 to 42.2% in 1998.
Depreciation and Amortization. Depreciation and amortization increased $3.9
million to $7.8 million in 1998. The higher expense was the result primarily of:
the amortization of intangible assets associated with the trade shows acquired
in December 1997; the DM Publishing acquisition in August 1998; the IWM
acquisition in November 1998; and, beginning with the fourth quarter of 1998,
the change from 40 years to 20 years in Penton's goodwill amortization policy
for acquired trade shows, which accounted for $0.3 million of additional
amortization in 1998. While this change negatively impacted the reported
earnings per share, it has no impact on EBITDA.
Operating Income. Overall, Penton's operating income increased $1.3
million, or 5.2%, to $26.2 million from $24.9 million in the prior year.
Operating income as a percentage of revenue decreased from 13.7% to 12.6%, due
primarily to the increase in amortization associated with Penton's acquisitions.
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<PAGE> 20
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 DM Publishing acquisition in August 1998 and
the IWM acquisition in November 1998.
Other. In 1998, Penton 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 from continuing operations
were 45.8% and 41.7% in 1998 and 1997, respectively. Penton's acquisition of
INDEX in December 1997, DM Publishing in August 1998 and IWM in November 1998
resulted in the recording of goodwill. The amortization of goodwill for these
transactions is recognized for financial statement purposes, but is not
deductible for tax purposes due to the structure of the purchase transactions.
Accordingly, Penton's effective tax rate increased in 1998.
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION
Earnings before interest, taxes, depreciation and amortization ("EBITDA")
is a widely used and commonly reported standard measure utilized by analysts and
investors in the analysis of the media industry. EBITDA is not a measure of
performance under GAAP because it excludes those items listed above that are
significant components in understanding and evaluating Penton's financial
performance. However, the following EBITDA information can be helpful in
determining Penton's ability to meet its debt service requirements and in
comparative analyses of operating performance relative to other media companies.
Penton's calculation of EBITDA is as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1999 1998
------- -------
<S> <C> <C>
Net income.................................................. $ 8,210 $10,890
Interest expense............................................ 21,558 5,545
Gain on sale of investments................................. (5,906) --
Provision for income taxes.................................. 16,065 9,442
Depreciation and amortization............................... 27,918 7,791
Extraordinary item, net of taxes............................ 8,413 --
Discontinued operations, net of taxes....................... (8,693) 296
Miscellaneous, net.......................................... (257) 45
------- -------
EBITDA.................................................... $67,308 $34,009
======= =======
</TABLE>
Penton's EBITDA increased $33.3 million, or 97.9%, from $34.0 million in
1998 to $67.3 million in 1999. EBITDA margins increased from 16.4% in 1998 to
22.4% in 1999. The increases were due primarily to the addition of trade shows
and conferences to Penton's product mix.
Penton's calculation of EBITDA for the Media Services segment is as follows
(in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1999 1998
------- -------
<S> <C> <C>
Media Services segment:
Publishing and other................................... $45,897 $45,147
Trade shows and conferences............................ 43,008 4,024
Corporate.............................................. (21,597) (15,162)
------- -------
EBITDA.................................................... $67,308 $34,009
======= =======
</TABLE>
EBITDA for Penton's publishing operations increased $0.8 million to $45.9
million in 1999, compared with $45.1 million in 1998. The increase was due
primarily to a full year of DM Publishing, offset by an advertising decrease
from slowdowns in the technology markets. EBITDA for Penton's trade show and
conference operations increased $39.0 million, or 968.8% from $4.0 million in
1998 to $43.0 million in 1999. This increase was due primarily to the acquired
IWM and New Hope trade shows and conferences.
20
<PAGE> 21
FOREIGN CURRENCY
The functional currency of Penton'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 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 in 1999 or 1998.
LIQUIDITY AND CAPITAL RESOURCES
During the periods presented, Penton financed its operations primarily
through cash generated from operating activities, borrowings under its credit
facilities and, in 1999, the sale of equity securities, investments and assets.
Cash flow provided by operations in 1999 was $34.4 million, up $8.7 million
from $25.7 million in 1998. The increase was attributable to the acquisitions
completed in 1998 and 1999 and to the effect for non-cash items, including
depreciation and amortization, gains and losses on the sale of investments and
assets, and the extraordinary loss on the extinguishment of debt.
Cash from operating activities, along with cash from the sale of
internet.com Corporation stock and the sale of the Printing segment, was used
for capital expenditures, to make acquisitions and to exercise options for
internet.com Corporation stock. Penton's capital expenditures for 1997 were $5.5
million; in 1998, $5.8 million; and in 1999, $5.9 million. The Company
anticipates that total capital expenditures for 2000 will be about $18.3
million, which will be used primarily to relocate corporate headquarters. These
expenditures will be funded from cash on hand, cash flow from operations and, if
necessary, borrowings under our credit facility.
On September 1, 1999, Penton entered into a credit agreement with several
banks under which it can borrow up to $340.0 million. The agreement provides for
a revolving credit facility of up to $125.0 million, a long-term loan of $140.0
million ("Term Loan A") and a long-term loan of $75.0 million ("Term Loan B").
The proceeds of this credit agreement were used to repay Penton's debt
outstanding under the $325.0 million credit facility obtained when Penton
purchased IWM. At December 31, 1999, Penton had $215.0 million outstanding under
its term loans and $125.0 million available under its revolving credit facility.
In May 1999, Penton completed a 6.5 million-common share offering and
received net proceeds of approximately $118.4 million, which were used to repay
senior debt and for general corporate purposes, including the acquisition of New
Hope.
Based upon current and anticipated levels of operations, management
believes that cash on hand and cash flow from operations, combined with
borrowings available under Penton's credit facilities, will be sufficient to
enable Penton to meet 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 that Penton may make. Penton's
ability to meet current and anticipated operating requirements will depend upon
its future performance, which, in turn, will be subject to general economic
conditions and to financial, business and other factors, including factors
beyond Penton's control. Depending on the nature, size and timing of future
acquisitions, Penton may be required to raise additional capital through
additional financing arrangements or the issuance of private or public debt or
equity securities. Management cannot assure that such additional financing will
be available at acceptable terms. Substantially all of Penton's debt bears
interest at floating rates. Therefore, Penton's liquidity and financial
condition are, and will continue to be, affected by changes in prevailing
interest rates.
SEASONALITY
Prior to 1998, Penton had not experienced significant seasonality in its
business. The introduction of trade shows and conferences into Penton's product
mix through the acquisition of INDEX and ISOA in late 1997, the acquisition of
IWM in November 1998 and the acquisition of New Hope in May 1999 has changed the
seasonal pattern of revenue and profit because all four companies have
pronounced seasonal patterns in their businesses. The majority of the trade
shows owned by ISOA and IWM are held in the second and fourth quarters and,
accordingly, the majority of their revenue is recognized in these quarters.
Furthermore, the
21
<PAGE> 22
majority of the INDEX shows historically have been held in the fourth quarter,
and the New Hope shows have been held in the first and third or fourth quarters.
Accordingly, these acquisitions had a positive impact on revenue and profit for
these quarters.
Penton also may experience seasonal 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 Penton's results of operations has not been
significant in recent years.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"). Penton was required
to adopt this statement in the first quarter of 2000. In June 1999, the FASB
issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No. 133 an
Amendment of FASB Statement No 133" ("SFAS 137"). SFAS 137 deferred the
effective date of SFAS 133, for all fiscal quarters beginning after June 15,
2000. Even though Penton has entered into interest rate cap, collar and swap
agreements, management does not believe these statements will have a material
impact on Penton's business, results of operations or financial condition.
EURO CONVERSION
On January 1, 1999, 11 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 this transition period, both the Euro and the existing
currency will be available in the participating countries. Although Penton
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.
YEAR 2000
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 a company's
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.
Penton did not experience any significant malfunctions or errors in its
operating or business systems when the date changed from 1999 to 2000. Based on
operations since January 1, 2000, Penton expects no significant impact on its
ongoing business as a result of the year 2000 issue. However, it is possible
that the full impact of the date change has not been fully recognized. It is
possible that year 2000 or similar issues may occur with billing, payroll or
financial closings at month, quarter or year end. Penton believes that any such
problems are likely to be minor and correctable. In addition, Penton could be
negatively impacted if customers or suppliers were adversely affected by the
year 2000 or similar issues. Penton is aware of no significant year 2000 or
similar problem that has arisen for its customers or suppliers.
As of December 31, 1999, Penton spent approximately $0.9 million associated
with the replacement of computerized systems, hardware and equipment; however,
Penton cannot quantify the amount directly related to year 2000 compliance.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market risk is the potential loss arising from adverse changes in market
rates and prices, such as foreign currency exchange and interest rates. Penton
does not enter into derivatives or other financial instruments for trading or
speculative purposes.
22
<PAGE> 23
In the normal course of business, Penton manages fluctuations in interest
rates through swap agreements to hedge up to 50% of its floating rate
borrowings. Penton's objective in managing this exposure is to reduce
fluctuations in earnings and cash flows associated with changes in interest
rates. See Note 8 - Fair Value of Financial Instruments.
Penton maintains assets and operations in Europe, and as a result, may be
exposed to cost increases relative to the markets in which it sells. For 1999, a
hypothetical 10% strengthening of the U.S. dollar relative to the currencies of
foreign countries in which Penton operates was not material.
23
<PAGE> 24
PENTON MEDIA, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.
<TABLE>
<S> <C>
FINANCIAL STATEMENTS:
Report of Independent Accountants........................... 25
Consolidated Balance Sheets at December 31, 1999 and 1998... 26
Consolidated Statements of Income for the Years Ended
December 31, 1999, 1998, and 1997......................... 28
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997.......................... 29
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1999, 1998 and 1997.............. 30
Notes to Consolidated Financial Statements.................. 31
FINANCIAL STATEMENT SCHEDULES:
Consolidated Financial Statement Schedule II -- Valuation
and Qualifying Accounts................................... 51
</TABLE>
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.
24
<PAGE> 25
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Penton Media, Inc.
In our opinion, the consolidated financial statements 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, 1999 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1999, in conformity with accounting principles generally accepted in the
United States. In addition, in our opinion, the financial statement schedule
listed in the accompanying index presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statement schedule are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States, 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 9, 2000
25
<PAGE> 26
PENTON MEDIA, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1999 1998
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 30,370 $ 3,953
Accounts and notes receivable, less allowance for doubtful
accounts of $3,958 and $4,899, respectively............ 40,199 37,956
Inventories............................................... 818 2,361
Deferred tax assets....................................... -- 5,797
Prepayments, deposits and other........................... 7,201 8,086
Net current assets of discontinued operations............. 4,228 --
-------- --------
Total current assets.............................. 82,816 58,153
-------- --------
Property, plant and equipment, at cost:
Land and buildings........................................ 95 6,596
Machinery and equipment................................... 45,243 69,730
-------- --------
45,338 76,326
Less: accumulated depreciation............................ 30,252 47,395
-------- --------
15,086 28,931
-------- --------
Other assets:
Goodwill, less accumulated amortization of $27,399 and
$10,129 in 1999 and 1998, respectively................. 411,173 340,706
Other intangibles, less accumulated amortization of $9,541
and $7,828 in 1999 and 1998, respectively.............. 40,063 46,906
Investments............................................... 259,859 4,472
Miscellaneous............................................. 382 133
-------- --------
711,477 392,217
-------- --------
$809,379 $479,301
======== ========
</TABLE>
26
<PAGE> 27
PENTON MEDIA, INC.
CONSOLIDATED BALANCE SHEETS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1999 1998
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Senior debt facility...................................... $ 3,875 $ 11,250
Revolving credit facility................................. -- 6,000
Notes payable............................................. -- 1,000
Accounts payable.......................................... 7,499 10,823
Income taxes payable...................................... 10,172 8,059
Accrued earnouts.......................................... 7,447 4,616
Accrued compensation and benefits......................... 8,377 7,238
Other accrued expenses.................................... 10,546 15,312
Deferred tax liability.................................... 39,634 --
Unearned income, principally trade show and conference
deposits............................................... 30,214 14,564
-------- --------
Total current liabilities......................... 117,764 78,862
-------- --------
Long-term liabilities and deferred credits:
Senior debt facility...................................... 211,125 288,750
Net deferred pension credits.............................. 16,269 18,007
Deferred taxes............................................ 60,887 5,313
Other..................................................... 733 880
-------- --------
289,014 312,950
-------- --------
Stockholders' equity:
Preferred stock, 2,000,000 shares authorized; none
issued................................................. -- --
Common stock, $0.01 par value, 60,000,000 shares
authorized; 31,325,896 and 22,781,713 shares issued and
outstanding at December 31, 1999, and 1998,
respectively........................................... 313 228
Capital in excess of par value............................ 214,551 55,050
Retained earnings......................................... 36,970 32,262
Accumulated other comprehensive income (loss)............. 150,767 (51)
-------- --------
402,601 87,489
-------- --------
$809,379 $479,301
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
27
<PAGE> 28
PENTON MEDIA, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues.................................................. $300,824 $207,682 $181,109
-------- -------- --------
Operating expenses:
Editorial, production and circulation................... 116,924 86,091 80,321
Selling, general and administrative..................... 116,592 87,582 72,031
Depreciation and amortization........................... 27,918 7,791 3,903
-------- -------- --------
261,434 181,464 156,255
-------- -------- --------
Operating income.......................................... 39,390 26,218 24,854
Other income (expense):
Interest expense........................................ (21,558) (5,545) (823)
Gain on sale of investments............................. 5,906 -- 1,040
Miscellaneous, net...................................... 257 (45) (2)
-------- -------- --------
(15,395) (5,590) 215
-------- -------- --------
Income from continuing operations before income taxes..... 23,995 20,628 25,069
Provision for income taxes................................ 16,065 9,442 10,457
-------- -------- --------
Income from continuing operations......................... 7,930 11,186 14,612
Discontinued operations:
Income (loss) from discontinued operations (less
applicable income taxes (benefit) of $34, $(199), and
$175, respectively).................................. 33 (296) 262
Gain on sale of discontinued operations, including
provision of $60 for operating losses during phaseout
period (less applicable income taxes of $5,771)...... 8,660 -- --
-------- -------- --------
8,693 (296) 262
Income before extraordinary item.......................... 16,623 10,890 14,874
Extraordinary item -- early extinguishment of debt (net of
income taxes of $5,600)................................. 8,413 -- --
-------- -------- --------
Net income................................................ $ 8,210 $ 10,890 $ 14,874
======== ======== ========
Earnings per common share -- basic and diluted:
Income from continuing operations....................... $ 0.28 $ 0.51 $ 0.69
Discontinued operations................................. 0.31 (0.01) 0.01
Extraordinary item...................................... (0.30) 0.00 0.00
-------- -------- --------
Net income.............................................. $ 0.29 $ 0.50 $ 0.70
======== ======== ========
Weighted average number of shares outstanding:
Basic................................................... 28,108 21,882 21,240
======== ======== ========
Diluted................................................. 28,209 21,882 21,240
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
28
<PAGE> 29
PENTON MEDIA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1999 1998 1997
--------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 8,210 $ 10,890 $ 14,874
Adjustments to reconcile income from operations to net
cash provided by operating activities:
Depreciation and amortization including $2,929 and
$2,648 in 1998 and 1997, respectively, related to
discontinued operations............................... 27,918 10,720 6,551
Gain on sale of investments............................. (5,906) -- (1,040)
Gain on sale of Press segment........................... (9,324) -- --
Non-cash loss on sale of Direct Mail segment............ 668 -- --
Extraordinary loss on extinguishment of debt............ 8,413 -- --
Deferred income taxes................................... (363) (5,093) 878
Retirement and deferred compensation plans.............. (1,182) (1,584) (2,000)
Provision for losses on accounts receivable............. 943 282 662
Writedown on impairment of assets....................... -- 1,000 --
Changes in assets and liabilities, excluding effects
from acquisitions and dispositions:
Accounts and notes receivable......................... (3,470) (1,960) 1,261
Inventories........................................... (389) 284 931
Prepayments and deposits.............................. 869 (1,481) 630
Accounts payable and accrued expenses................. (5,444) 10,170 1,584
Unearned income....................................... 12,325 2,421 (552)
Other changes, net.................................... 1,089 100 (593)
--------- --------- --------
Net cash provided by operating activities.......... 34,357 25,749 23,186
--------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (5,884) (5,775) (5,450)
Acquisitions, net of cash acquired........................ (53,969) (283,382) (48,733)
Proceeds from sale of internet.com........................ -- 18,000 --
Proceeds from sale of investments......................... 6,640 -- --
Cash paid for investments................................. (3,446) -- --
Net proceeds from sale of Printing segment................ 28,889 -- --
Proceeds from sale of publications........................ -- -- 991
--------- --------- --------
Net cash used for investing activities............. (27,770) (271,157) (53,192)
--------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facility................... -- 6,000 --
Proceeds from $325 million senior debt facility........... 24,500 300,000 --
Repayment of $325 million senior debt facility............ (330,500) -- --
Proceeds from $340 million senior debt facility........... 235,000 -- --
Repayment of $340 million senior debt facility............ (20,000) -- --
Payment of notes payable.................................. (1,000) (38,066) (14,000)
Increase in notes payable................................. -- -- 48,342
Payment of financing costs................................ (3,461) (14,754) --
Advances to parent company................................ -- (4,820) 924
Proceeds from equity offering, net........................ 118,416 -- --
Proceeds from deferred shares and options exercised....... 170 -- --
Dividends paid............................................ (3,246) (1,367) (4,412)
--------- --------- --------
Net cash provided by financing activities.......... 19,879 246,993 30,854
--------- --------- --------
Effect of exchange rate changes on cash..................... (49) (51) --
--------- --------- --------
Net increase in cash and equivalents............... 26,417 1,534 848
Cash and equivalents at beginning of period................. 3,953 2,419 1,571
--------- --------- --------
Cash and equivalents at end of period....................... $ 30,370 $ 3,953 $ 2,419
========= ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
29
<PAGE> 30
PENTON MEDIA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
COMMON CAPITAL IN OTHER
PREFERRED COMMON STOCK EXCESS OF RETAINED COMPREHENSIVE
SHARES SHARES PAR VALUE PAR VALUE EARNINGS INCOME (LOSS) TOTAL
--------- ------ --------- ---------- -------- ------------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996.................... -- 21,240 $212 $ 29,630 $29,309 $ -- $ 59,151
--------- ------ ---- -------- ------- -------- --------
Net income................ -- -- -- -- 14,874 -- 14,874
Dividends to Pittway...... -- -- -- -- (4,412) -- (4,412)
--------- ------ ---- -------- ------- -------- --------
Balance at December 31,
1997.................... -- 21,240 $212 $ 29,630 $39,771 $ -- $ 69,613
--------- ------ ---- -------- ------- -------- --------
Comprehensive income:
Net income.............. -- -- -- -- 10,890 -- 10,890
Other comprehensive
income -- foreign
currency translation
adjustments.......... -- -- -- -- -- (51) (51)
--------- ------ ---- -------- ------- -------- --------
Comprehensive income.... -- -- -- -- -- -- 10,839
--------- ------ ---- -------- ------- -------- --------
Dividends................. -- -- -- -- (1,367) -- (1,367)
Issuance of common stock
to acquire DM
Publishing.............. -- 1,542 16 25,420 -- -- 25,436
Dividends to Pittway...... -- -- -- -- (17,032) -- (17,032)
--------- ------ ---- -------- ------- -------- --------
Balance at December 31,
1998.................... -- 22,782 $228 $ 55,050 $32,262 $ (51) $ 87,489
--------- ------ ---- -------- ------- -------- --------
Comprehensive income:
Net income.............. -- -- -- -- 8,210 -- 8,210
Other comprehensive
income:
Foreign currency
translation
adjustments..... -- -- -- -- -- (787) (787)
Mark to market
adjustments.......... -- -- -- -- -- 151,605 151,605
--------- ------ ---- -------- ------- -------- --------
Comprehensive income.... -- -- -- -- -- -- 159,028
--------- ------ ---- -------- ------- -------- --------
Dividends................. -- -- -- -- (3,502) -- (3,502)
Issuance of common stock,
net of issuance costs... -- 6,430 64 118,352 -- -- 118,416
Issuance of shares to
acquire New Hope........ -- 2,103 21 40,979 -- -- 41,000
Deferred shares and
options exercised....... -- 11 -- 170 -- -- 170
--------- ------ ---- -------- ------- -------- --------
Balance at December 31,
1999.................... -- 31,326 $313 $214,551 $36,970 $150,767 $402,601
--------- ------ ---- -------- ------- -------- --------
</TABLE>
The accompanying notes are an integral part of these Consolidated financial
statements.
30
<PAGE> 31
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Penton Media, Inc., ("Penton") is a leading diversified
business-to-business media company that produces market focused magazines, Web
sites, trade shows and conferences. Penton's integrated media portfolio serves
the following market sectors: Internet/broadband; design/engineering;
electronics; natural products/food/retail; government/compliance;
leisure/hospitality; management; manufacturing; mechanical systems/construction;
and supply chain/aviation.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Penton and
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated. Acquisitions are accounted for under the purchase method of
accounting and are included in the consolidated financial statements from their
respective dates of acquisition.
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 these estimates.
CASH AND CASH EQUIVALENTS
Cash and short-term investments include cash on hand and commercial paper.
Short-term investments that have an original maturity of three months or less
are considered cash equivalents. All investments in debt securities that have an
original maturity of three months or less are considered to be held to maturity.
Short-term securities are carried at amortized cost, which approximates fair
value.
INVENTORIES
Inventories are stated at the lower of cost or market. Costs included in
inventories are raw materials, direct labor and manufacturing overhead. Prior to
the sale of the Printing segment and the classification of the Direct Mail
segment as discontinued in 1999, Penton's raw material inventory consisted of
paper and ink stock, which is valued using the last-in, first-out (LIFO) method.
After the sale and discontinuance of these businesses, raw material inventory
consists of paper stock only. The LIFO reserve balances of $0.3 million and $0.4
million at December 31, 1999, and 1998, respectively, represent, the excess of
current replacement cost over the LIFO value of paper inventory.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Penton records
depreciation, using the straight-line method, in amounts sufficient to write off
the cost of depreciable assets over the following estimated useful lives:
<TABLE>
<S> <C>
Computer equipment................................... 3-5 years
Furniture, fixtures and equipment.................... 3-10 years
Building............................................. 18-40 years
Leasehold improvements............................... Estimated useful lives or lease term,
whichever is shorter
</TABLE>
31
<PAGE> 32
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Depreciation expense amounted to approximately $4.9 million, $3.4 million
and $2.8 million for the years ended December 31, 1999, 1998 and 1997,
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 operations.
INTANGIBLE ASSETS
Goodwill, trademarks and trade names identified in purchase transactions
are amortized using the straight-line method over periods ranging from 20 to 40
years. Effective October 1, 1998, Penton changed its estimated useful life on
goodwill associated with trade show acquisitions from 40 years to 20 years. The
change decreased 1998 net income by $0.3 million, or $0.01 per share. The change
was made to better reflect the estimated useful life of goodwill and to be
consistent with prevalent industry practice.
It is Penton's policy to continually evaluate the period of amortization
and the recoverability of goodwill. This review is based upon an evaluation of
significant adverse events or changes in our operating environment. If expected
future net cash flows, undiscounted and without interest, are less than the
carrying amount of the asset, an impairment loss is recognized in the period the
determination is made.
Other intangibles developed internally or acquired in purchase
transactions, consisting of non-compete agreements, customer mailing lists,
exhibitor lists, 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 $23.0 million, $4.4 million
and $1.1 million for the years ended December 31, 1999, 1998 and 1997,
respectively.
DEFERRED FINANCING COSTS
Costs incurred in obtaining long-term financing are included in "other
intangible assets" in the accompanying balance sheet, and are amortized by the
straight-line method over the terms of the related indebtedness.
INTEREST RATE SWAP AGREEMENTS
Penton's interest rate swap agreements are designated and effective as
modifications to existing debt obligations to reduce the impact of changes in
the interest rates on its floating-rate borrowings and, accordingly, are
accounted for using the settlement method of accounting. The differentials to be
paid or received under the interest rate swap agreements are accrued as interest
rates change and are recognized as adjustments to interest expense. Penton
considers swap terms, including the reference rate, payment and maturity dates,
and the notional amount, in determining if an interest rate swap agreement is
effective at modifying an existing debt obligation. If the criteria for
designation are no longer met or the underlying instrument matures or is
extinguished, Penton accounts for outstanding swap agreements at fair market
value, and any resulting gain or loss is recognized. Any gains or losses upon
early termination of the agreements are deferred and amortized over the shorter
of the remaining life of the hedged existing debt obligation or the original
life of the interest rate swap agreement.
At December 31, 1999, the effects of swap transactions were insignificant
and recorded in interest expense. There were no swap agreements in effect at
December 31, 1998.
32
<PAGE> 33
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REVENUE RECOGNITION
Advertising revenues from Penton's trade magazines are generally recognized
in the month the publications are mailed. Revenues from trade shows and
conferences are recognized in the month the events are held. Licensing revenues
are recognized on a straight-line basis over the term of the license agreement.
ADVERTISING AND PROMOTION EXPENSES
Advertising and promotion costs are expensed primarily as incurred. These
costs amounted to $18.2 million, $12.4 million and $7.7 million in 1999, 1998
and 1997, respectively.
INCOME TAXES
Income taxes are accounted for using the asset and liability method.
Deferred tax assets and liabilities are recognized for the expected future tax
consequences attributable to temporary differences between the financial
statement carrying amounts and the tax basis of assets and liabilities. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. 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 spin-off date (see Note 2), Penton's
results were included in Pittway's consolidated U.S. federal income tax returns.
The 1998 provision for income taxes included in the consolidated statement of
income represented an allocated share of Pittway's tax expense. The allocated
share approximated the tax expense that was incurred on a separate return basis.
Pittway recorded the liability as income taxes payable at December 31, 1997.
Pursuant to the Combination Agreement (see Note 2), Penton 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. The Internal Revenue Service has audited all consolidated federal
income tax returns of Pittway through 1995.
TRANSLATION OF FOREIGN CURRENCIES
The functional currency of Penton's foreign operations is their local
currency. Accordingly, assets and liabilities of foreign operations are
translated to U.S. dollars at the rates of exchange at December 31, 1999, and
1998; income and expense are translated at the average rates of exchange
prevailing during the applicable year. There were no significant foreign
currency gains or losses in 1999 or 1998. The effects of translation are
included in "accumulated other comprehensive income" in stockholders' equity.
EARNINGS PER SHARE
The weighted-average number of common shares outstanding is adjusted for
common stock equivalents when they are dilutive.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"). Penton was required
to adopt this statement in the first quarter of 2000. In June 1999, the FASB
issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No. 133 an
Amendment of FASB Statement No 133" ("SFAS 137"). SFAS 137 deferred the
effective date of SFAS 133 for all fiscal quarters beginning after June 15,
2000. Even
33
<PAGE> 34
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
though Penton has entered into interest rate cap, collar and swap agreements,
management does not believe these statements will have a material impact on
Penton's business, results of operations or financial condition.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1998 and 1997 financial
statements to conform to the 1999 presentation.
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 Penton's common
stock on a share-for-share basis to holders of Pittway stock.
Immediately after the spinoff, Penton entered into an agreement (the
"Combination Agreement") and completed the acquisition of DM Publishing. DM
Publishing was acquired for $7.0 million in cash, 6.767% of Penton's stock
(1,541,638 shares) 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 and $0.8 million were earned,
respectively. Penton also 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. This contingent payment is subject to certain
limitations as to any of such shares sold prior to the calculation date. A
portion of the contingent payment may be payable in common stock rather than
cash under certain conditions. At December 31, 1999, Penton was not required to
accrue for this event. The final review period is 30 days, ending on the second
anniversary of the date of the combination.
The transaction was accounted for as a purchase and, accordingly, the
operating results of DM Publishing have been included in Penton'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 $31.3 million is being amortized over 40 years.
NOTE 3 -- ACQUISITIONS
In December 1999, Penton completed the acquisition of the assets of
Nutracon for $3.1 million in cash. The excess of the aggregate purchase price
over the fair market value of net assets acquired of approximately $3.1 million
is being amortized over 20 years. Nutracon is a conference serving the
functional foods/nutraceutical market.
In October 1999, Penton acquired all the outstanding stock of Stardust.com
and simultaneously purchased the net assets of Stardust Technologies Inc.
(collectively "Stardust"), for a combined purchase price of $4.0 million in cash
and future contingent payments of up to $5.0 million tied to future earnings of
Stardust through the year 2002. The excess of the aggregate purchase price over
the fair market value of net assets acquired of approximately $3.7 million is
being amortized over 20 years. Stardust, through its Web portal site,
conferences, forums and newsletters, facilitates collaboration between Internet
technology standards bodies, technology product vendors and the IT user
community to speed market adoption of next-generation Internet technologies.
In August 1999, Penton completed the asset acquisition of Multimedia Week
for $0.2 million in cash. Multimedia Week is a weekly publication that features
IPOs and venture capital tracking; in-depth product and technology spotlights;
information about new and emerging technologies; and market data.
In May 1999, Penton acquired substantially all the assets of New Hope. In
full consideration for the transfer of the assets, Penton agreed to pay a total
purchase price of up to $97.0 million for New Hope. The
34
<PAGE> 35
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
purchase price comprised $41.0 million in cash and $41.0 million (2,102,564
shares) in common stock which were paid and issued at the closing. New Hope is
eligible to earn a contingent payment of up to $15.0 million to be paid half in
cash and half in common stock, based on New Hope's performance for the fiscal
years 1999, 2000 and 2001. At December 31, 1999, Penton accrued $2.3 million for
the 1999 contingent payout. The excess of the aggregate purchase price over the
fair market value of net assets acquired of approximately $78.2 million is being
amortized over periods ranging from 20 to 40 years. New Hope is a leading
business media company serving the natural products industry through trade
shows, conferences, magazines and Web sites.
In May 1999, Penton completed the acquisition of Jon Peddie Associates for
$1.3 million in cash and contingent payments of up to $3.0 million tied to
future earnings of Jon Peddie through the year 2001. The excess of the aggregate
purchase price over the fair market value of net assets acquired of
approximately $1.0 million is being amortized over 40 years. At December 31,
1999, Penton accrued $1.0 million for the 1999 contingent payout. Jon Peddie is
an information company that conducts research, publishes market studies and
special reports, and provides consulting services to the electronics,
semiconductor and digital media industries.
In February 1999, Penton acquired the assets of MFG Publishing, Inc. for a
total purchase price of up to $2.5 million, of which $0.8 million was paid in
cash and the remaining $1.7 million is contingent upon earnings through the year
2001. The excess of the aggregate purchase price over the fair market value of
net assets acquired of approximately $0.6 million is being amortized over 40
years. MFG provides information to the enterprise resource planning segment of
the manufacturing technology industry.
In November 1998, Penton completed a cash tender offer for all the
outstanding shares of Mecklermedia Corporation ("Mecklermedia"). Each
Mecklermedia shareholder received $29.00 in cash for each share of common stock
held. The total value of the transaction was $273.8 million, funded with the net
proceeds from Penton's credit facility (see Note 7). Simultaneous with the
completed transaction, Penton sold an 80.1% equity interest in internet.com
Corporation to Alan M. Meckler for $18.0 million (see Note 6) and renamed
Mecklermedia Internet World Media, Inc. The excess of the aggregate purchase
price over the fair market value of net assets acquired of approximately $244.0
million is being amortized over periods ranging from 20 to 40 years. Penton
increased its goodwill by $1.5 million in 1999 as a result of resolving certain
contingencies existing at the date of acquisition. IWM is a business media
company serving the Internet market through publications, trade shows and
conferences, and Web sites.
During 1997, Penton 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 included contingent payments up to $13.5 million
tied to future earnings of the acquired companies through the year 2000, of
which $3.3 million, $2.4 million and $0.7 million was earned in 1999, 1998 and
1997, respectively.
35
<PAGE> 36
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4 -- DISCONTINUED OPERATIONS AND DISPOSITIONS
On November 30, 1999, Penton sold its Printing segment, realizing cash
proceeds of $31.0 million. The sale resulted in a gain of $9.3 million, net of
$6.2 million in income taxes. Operating results of the discontinued Printing
segment are as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Revenues.................................................... $10,424 $11,657 $10,526
------- ------- -------
Income before income tax expense............................ 531 821 1,534
Provision for income taxes.................................. 220 328 614
------- ------- -------
Income from discontinued operations......................... $ 311 $ 493 $ 920
======= ======= =======
</TABLE>
On December 30, 1999, Penton signed a letter of intent to sell its Direct
Mail segment for approximately $4.0 million in cash, and expects to complete the
sale in the first quarter of 2000. Penton recorded the net assets available for
sale as a separate line in the balance sheet at December 31, 1999. Such sale
will result in a loss estimated at $0.7 million, including a provision of $0.06
million for operating losses during the phase-out period. Operating results of
the discontinued Direct Mail segment are as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Revenues.................................................... $12,199 $13,779 $13,296
------- ------- -------
Loss before income tax benefit.............................. (464) (1,316) (1,097)
Benefit for income taxes.................................... (186) (527) (439)
------- ------- -------
Loss from discontinued operations........................... $ (278) $ (789) $ (658)
======= ======= =======
</TABLE>
In 1997, Penton sold one publication for $1.0 million cash and recognized a
gain on the sale of approximately $1.0 million. Penton classified the sale as
"Gain on sale of investments."
NOTE 5 -- PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following unaudited pro forma operating data are presented for the
twelve months ended December 31, 1999, as if each of the following transactions
had occurred on January 1, 1999: (i) the acquisition of MFG in February 1999;
(ii) the addition of $15 million in Term B loans in April 1999; (iii) the sale
by Penton of 6,430,000 common shares in May 1999; (iv) the acquisition of New
Hope in May 1999; (v) the sale of 510,000 shares of internet.com Corporation in
July 1999; (vi) the refinancing of debt in September 1999; (vii) the acquisition
of Stardust.com in October 1999; (viii) the sale of the Printing segment in
November 1999; (ix) the acquisition of Nutracon in December 1999; and (x) the
discontinuation of the Direct Mail segment in December 1999.
The following unaudited pro forma operating data are presented for the
twelve months ended December 31, 1998, as if each of the following transactions
had occurred on January 1, 1998: (i) the acquisition of DM Publishing in August
1998; (ii) the issuance of 1,541,638 shares of common stock for the acquisition
of DM Publishing; (iii) the acquisition of Mecklermedia in November 1998; (iv)
the sale of an 80.1% interest in internet.com Corporation to Mr. Meckler in
November 1998; (v) and the 1999 pro forma transactions noted above.
The 1999 and 1998 pro forma disclosures above do not include the operations
of Jon Peddie and Multimedia Week, because the impact of these transactions is
immaterial to such information.
36
<PAGE> 37
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The pro forma financial information is presented for informational purposes
only and may not be indicative of the actual results of operations had the
acquisitions occurred as indicated, nor does it purport to represent the results
of the operations for future periods (in thousands, except per share data):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
Pro forma revenues.......................................... $319,922 $309,755
======== ========
Pro forma income before extraordinary item.................. $ 21,760 $ 11,618
======== ========
Pro forma net income applicable to common shareholders...... $ 13,347 $ 11,618
======== ========
Per share data:
Earnings per common share -- basic and diluted:
Income before extraordinary item.......................... $ 0.69 $ 0.37
Extraordinary item........................................ (0.26) --
-------- --------
Net income................................................ $ 0.43 $ 0.37
======== ========
</TABLE>
NOTE 6 -- INVESTMENTS
In November 1998, Penton entered into a joint venture agreement with Mr.
Meckler, formerly associated with Mecklermedia, with respect to internet.com,
LLC. As part of the acquisition of Mecklermedia, Penton sold 80.1% of its
interest in internet.com, LLC to Mr. Meckler; other ownership interests were
made to internet.com, LLC management such that Penton's ownership interest
decreased to 19.0%. In April and June 1999, Penton contributed $0.4 million in
cash and exercised a warrant for $3.0 million in cash, respectively, increasing
its ownership interest from 19.0% to 27.4%.
On June 23, 1999, internet.com, LLC converted into a corporation and
completed its initial public offering at $14.00 per share. At that time, Penton
received 5,483,383 shares in exchange for its interest in internet.com, LLC,
retaining a 23.4% ownership interest. In July 1999, Penton sold 510,000 shares
of internet.com Corporation stock as part of internet.com Corporation's initial
public offering over-allotment option which reduced Penton's ownership interest
to 21.25%. Penton received cash of $6.6 million, net of expenses, and recognized
a gain of $5.9 million. Penton intends for its investment to be temporary;
accordingly, Penton marks to market its investment in internet.com Corporation.
At December 31, 1999, Penton's investment totaled $259.9 million; including a
cumulative mark to market adjustment of $252.7 million and related adjustment in
long-term deferred taxes of $101.1 million and other comprehensive income of
$151.6 million.
Penton and internet.com have also entered into various agreements relating
to the exchange of services between the two companies, which are in effect until
November 24, 2001.
NOTE 7 -- DEBT
SENIOR SECURED CREDIT FACILITY
On September 1, 1999, Penton entered into a credit agreement with several
banks under which it may borrow up to $340.0 million. The agreement provides for
a revolving credit facility of up to $125.0 million, a long-term loan of $140.0
million ("Term Loan A") and a long-term loan of $75.0 million ("Term Loan B").
Some of the proceeds were used to retire debt under Penton's former $325.0
million credit facility. In the third quarter, Penton recognized a non-cash
extraordinary charge of approximately $6.3 million ($0.20 per share), net of
$4.2 million in taxes, relating to the writeoff of unamortized deferred finance
costs associated with the former credit facility.
37
<PAGE> 38
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The credit facility is collateralized by all tangible and intangible assets
of Penton, including the equity interests in all of its U.S. subsidiaries and
not less than 65% of the equity interests of any of its foreign subsidiaries.
Under the terms of the agreement, Penton is required to maintain certain
financial ratios and other financial conditions. The agreement also prohibits
Penton from incurring certain additional indebtedness; limits certain
investments, advances or loans; and restricts substantial asset sales and cash
dividends. At December 31, 1999, Penton was in compliance with all loan
covenants.
The revolving credit facility bears interest, at Penton's option, at either
the Alternative Base Rate ("ABR"), defined as the higher of the Administrative
Agent's Prime Rate or the Federal Funds Rate plus 0.50%, or at LIBOR, plus a
rate margin ranging from 0.25% to 2.125% based on Penton's consolidated leverage
ratio, as defined. Up to the full amount of the revolving credit facility may be
borrowed, repaid and reborrowed until maturity on August 31, 2006; however, the
revolving credit facility commitment shall be reduced as of September 30, 2003,
by 7.5% per quarter until September 30, 2005, at which time it will be reduced
by 10% per quarter until maturity. Penton may also, prior to the first
anniversary of the credit facility, request an increase in the revolving credit
facility by an amount not to exceed $60.0 million. At December 31, 1999, no
amounts were outstanding under the revolving credit facility. Penton has agreed
to pay a commitment fee ranging from 0.375% to 0.50%, based on Penton's
consolidated leverage ratio, on the average unused portion of the revolving
credit facility commitment. At December 31, 1999, $125.0 million was available
under the facility.
Term Loan A bears interest, at Penton's option, at either the ABR rate or
at LIBOR, plus a rate margin ranging from 0.25% to 2.125%, based on Penton's
consolidated leverage ratio. Interest on ABR loans is payable quarterly in
arrears, while interest on LIBOR loans is payable in arrears at the end of each
applicable interest period not to exceed three months. At December 31, 1999, the
rate in effect was 8.0%. The loan, which requires quarterly principal payments
starting in September 2000, will mature on August 31, 2006. At December 31,
1999, $140.0 million was outstanding under Term Loan A.
Term Loan B bears interest, at Penton's option, at either the ABR rate or
at LIBOR, plus a rate margin ranging from 0.5% to 2.50%, based on Penton's
consolidated leverage ratio. Interest on ABR loans is payable quarterly in
arrears, while interest on LIBOR loans is payable in arrears at the end of each
applicable interest period not to exceed three months. At December 31, 1999, the
rate in effect was 8.5%. The loan requires quarterly principal payments of
approximately $0.2 million starting in September 2000, and four balloon payments
of $17.6 million beginning in September 2006, and will mature on August 31,
2007. At December 31, 1999, $75.0 million was outstanding under Term Loan B.
In May 1999, Penton recognized a non-cash extraordinary charge of
approximately $2.1 million ($0.08 per share), net of approximately $1.4 million
in taxes, for the writeoff of unamortized deferred finance costs upon the
extinguishment of part of the outstanding former senior debt with the proceeds
from the 6.5 million share common stock offering (see Note 12).
38
<PAGE> 39
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of December 31, 1999, the scheduled principal payments of the Term A and
B loans for the next five years and thereafter are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
---- --------
<S> <C>
2000........................................................ $ 3,875
2001........................................................ 11,250
2002........................................................ 18,250
2003........................................................ 25,250
2004........................................................ 32,250
Thereafter.................................................. 124,125
--------
$215,000
========
</TABLE>
The Credit Agreement requires Penton to hedge not less than 50% of the term
loans outstanding for a period of at least three years (see Note 8).
NOTE PAYABLE
The short-term note of $1.0 million payable at December 31, 1998,
represented foreign indebtedness, was denominated in British pounds and bore
interest at Penton's foreign borrowing rate (8.2% at December 31, 1998). The
note, plus accrued interest, was paid off in January 1999.
NOTE 8 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of accounts and notes receivable, accounts payable,
accrued expenses and notes payable approximates fair value due to the short
maturity of these instruments.
In connection with the refinancing of Penton's debt in September 1999,
Penton entered into two interest rate caps, an interest rate collar and a swap
agreement with several financial institutions, as required under the senior
secured credit facility. The notional amounts of the interest rate agreements
are used to measure interest to be paid or received, and do not represent the
amount of exposure to credit loss. The net cash paid for the interest rate caps,
collar and swap of approximately $0.2 million has been deferred and will be
amortized over the life of the term loans.
At December 31, 1999, Penton had the following interest rate instruments in
effect that provide protection on the three-month LIBOR rate upon which Penton's
variable-rate term loans are based (actual rate paid is LIBOR plus the
respective margin) (in thousands):
<TABLE>
<CAPTION>
NOTIONAL
AMOUNT RATE PERIOD
-------- ------------- -----------
<S> <C> <C> <C>
Interest rate caps.................................. $53,750 8.50% 10/99-10/02
Interest rate swap.................................. $17,916 5.95% 10/99-10/02
Interest rate collar................................ $35,832 6.00% to 7.5% 10/99-10/02
Interest rate cap................................... $28,500 8.50% 2/99-2/01
</TABLE>
Swap agreements, which were required under the former credit facility, were
unwound, and proceeds of approximately $0.2 million were credited against
interest expense.
39
<PAGE> 40
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9 -- INCOME TAXES
The source of income (loss) on continuing operations before income tax
expense consists of (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
U.S. domestic......................... $23,021 $20,359 $25,322
Foreign............................... 974 269 (253)
------- ------- -------
$23,995 $20,628 $25,069
======= ======= =======
</TABLE>
The provision for income taxes (benefits) on continuing operations in the
consolidated statements of income is as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Current --
Federal............................. $12,797 $11,379 $ 7,982
State and local..................... 2,837 2,423 1,597
Foreign............................. 794 733 --
------- ------- -------
16,428 14,535 9,579
------- ------- -------
Deferred --
Federal............................. (301) (4,348) 851
State and local..................... (62) (816) 98
Foreign............................. -- 71 (71)
------- ------- -------
(363) (5,093) 878
------- ------- -------
$16,065 $ 9,442 $10,457
======= ======= =======
</TABLE>
The consolidated provision for income taxes comprises the following (in
thousands):
<TABLE>
<S> <C> <C> <C>
Provision for income taxes from continuing
operations:.................................... $16,065 $9,442 $10,457
Provision for income taxes (benefit) from
discontinued operations:....................... 5,805 (199) 175
Provision for income (benefit) from extraordinary
item:.......................................... (5,600) -- --
------- ------ -------
Consolidated tax provision....................... $16,270 $9,243 $10,632
======= ====== =======
</TABLE>
The difference between the actual income tax provision on continuing
operations and the tax provision computed by applying the statutory federal
income tax rate of 35% to income before income taxes is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------ -------
<S> <C> <C> <C>
Income tax at statutory rate..................... $ 8,398 $7,220 $ 8,774
Tax effect of :
State income taxes, net of federal benefit..... 1,804 1,049 1,101
Non-deductible goodwill........................ 4,830 -- --
Non-deductible expenses........................ 548 1,173 582
Other items, net............................... 485 -- --
------- ------ -------
Actual income tax provision...................... $16,065 $9,442 $10,457
======= ====== =======
Effective income tax rate........................ 67.0% 45.8% 41.7%
======= ====== =======
</TABLE>
40
<PAGE> 41
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of deferred tax assets and liabilities at December 31, 1999,
1998 and 1997 follow:
<TABLE>
<CAPTION>
1999 1998 1997
--------- -------- -------
<S> <C> <C> <C>
Deferred tax assets --
Deferred pension credits................... $ 6,532 $ 7,087 $ 7,651
Accrued vacation........................... 989 1,335 1,159
Bad debts.................................. 1,551 2,541 805
Reserves recorded for financial reporting
purposes................................ 2,107 1,735 826
Inventory capitalization................... 158 164 29
Other...................................... 482 379 252
--------- -------- -------
Total deferred tax assets.......... 11,819 13,241 10,722
--------- -------- -------
Deferred tax liabilities --
Mark to market adjustment for securities... (101,070) -- --
Depreciation............................... (1,366) (3,312) (3,640)
Amortization............................... (9,209) (9,249) (164)
Trade show expenses........................ (668) (196) --
Other...................................... (27) -- --
--------- -------- -------
Total deferred tax liabilities..... (112,340) (12,757) (3,804)
--------- -------- -------
Net deferred tax asset (liability)........... $(100,521) $ 484 $ 6,918
========= ======== =======
</TABLE>
At December 31, 1999, the net deferred tax liability is allocated between
current liabilities ($39.6 million) and long-term liabilities ($60.9 million).
The net change from the net deferred asset as of December 31, 1998, and the
net deferred liability as of December 31, 1999, is primarily the result of the
mark to market adjustment for investments, with such change having a balance
sheet impact only.
NOTE 10 -- EMPLOYEE PLANS
RETIREMENT PLAN
Penton has various non-contributory retirement plans covering substantially
all current and former domestic employees. Retirement benefits for employees in
foreign countries generally are provided by national statutory programs.
Benefits for domestic employees are based on years of service and annual
compensation as defined by each plan. The Combination Agreement (see Note 2)
provided that all employees receive credit for their years of service in the
Pittway plan. Prior to 1995, Pittway allocated net pension plan income credits
to Penton based upon the assets of a previously separate Pittway plan, which was
merged into the Pittway plan in 1991. At the time the plans were merged, the
amount of Penton's plan assets exceeded its projected benefit obligation and, by
1995, such funding excess had increased and had become substantially
disproportionate to the funding excess for the remainder of the Pittway plan. As
a result, for 1997, Pittway limited the allocation of net pension income credits
to Penton to $1.5 million.
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 Penton 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.
41
<PAGE> 42
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the funded status of Penton's portion of the
plan and amounts recognized in the balance sheet:
<TABLE>
<CAPTION>
1999 1998
--------- --------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation, January 1......................... $ 42,370 $ 34,539
Service cost....................................... 2,107 1,684
Interest cost...................................... 2,666 2,488
Benefits paid...................................... (2,947) (3,944)
Actuarial (gain) loss.............................. (6,099) 7,603
Plan amendments.................................... 91 --
Curtailments....................................... (755) --
--------- --------
Benefit obligation, December 31....................... $ 37,433 $ 42,370
========= ========
CHANGE IN PLAN ASSETS
Fair value of plan assets, January 1.................. $ 37,800 $ 45,000
Actual return on plan assets....................... 6,055 (3,256)
Benefits paid...................................... (2,947) (3,944)
--------- --------
Fair value of plan assets, December 31................ $ 40,908 $ 37,800
========= ========
FUNDED STATUS OF THE PLAN
Projected benefit obligation (in excess of) less than
fair value of assets as of December 31................ $ 3,475 $ (4,570)
Unrecognized actuarial gain........................... (19,926) (13,368)
Unrecognized prior service cost....................... 1,022 1,612
Unrecognized net transition asset..................... (840) (1,681)
--------- --------
Net deferred pension credits.......................... $ (16,269) $(18,007)
========= ========
ASSUMPTIONS AS OF DECEMBER 31
Discount rate......................................... 8% 7%
Expected return on plan assets........................ 9% 7%
Weighted-average salary increase rate................. 5% 5%
</TABLE>
42
<PAGE> 43
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the components of pension expense:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
NET PERIODIC COST
Service cost.................................. $ 2,107 $ 1,684 $ 1,767
Interest cost................................. 2,667 2,488 2,226
Expected return on assets..................... (3,782) (3,065) (2,684)
Amortization of:
Transition asset........................... (841) (841) (841)
Prior service cost......................... 346 357 357
Actuarial (gain) loss...................... (1,679) (2,207) (2,325)
------- ------- -------
Net pension expense (income).................... $(1,182) $(1,584) $(1,500)
------- ------- -------
Cost of special termination benefits............ 91 -- --
Curtailment gain................................ (647) -- --
------- ------- -------
Total net periodic pension cost
(benefit)........................... $(1,738) $(1,584) $(1,500)
======= ======= =======
ASSUMPTIONS AS TO PERIODIC PENSION COST
Discount rate................................. 7% 7% 7%
Expected return on plan assets................ 9% 7% 7%
Weighted-average salary increase rate......... 5% 5% 5%
</TABLE>
During 1999, Penton sold its Printing segment and as a result incurred
$0.09 million in special termination benefits and recognized curtailment gains
of $0.6 million.
401(k) PLAN
Effective September 1, 1998, Penton adopted a 401(k) defined contribution
plan (the "401(k) Plan") covering substantially all officers and employees. The
Combination Agreement provided for assets and liabilities attributable to Penton
employees in the Pittway 401(k) plan to be transferred to Penton's Plan. The
401(k) Plan permits participants to defer up to a maximum of 15% of their
compensation. Penton matches 50% of the employee's contributions up to a maximum
of 6% of the employee's annual compensation. The employee's contribution and
Penton's matching contribution vest immediately. Penton's contributions to the
401(k) Plan for the years ended December 31, 1999, and 1998 were $1.5 million
and $0.4 million, respectively. The 401(k) Plan was fully funded at December 31,
1999.
SERP
Two executive officers participate in Penton's supplemental executive
retirement plan, which is not tax qualified. At December 31, 1999, 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, 1999, $0.05 million was accrued related to this
future obligation and $0.02 million of expense was recognized, representing
service costs and interest.
NOTE 11 -- COMMITMENTS AND CONTINGENCIES
Penton 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. Following is a schedule of approximate annual future minimum rental
payments required
43
<PAGE> 44
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
under operating leases that have initial or remaining non-cancelable lease terms
in excess of one year as of December 31, 1999 (in thousands):
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
------------
<S> <C>
2000........................................................ $ 8,793
2001........................................................ 3,505
2002........................................................ 2,818
2003........................................................ 2,314
2004........................................................ 2,018
Thereafter.................................................. 6,796
-------
$26,244
=======
</TABLE>
On January 5, 2000, Penton signed a 10-year lease agreement to relocate its
corporate headquarters. The lease begins on December 1, 2000, with annual
minimum rental payments for 2000, 2001, 2002, 2003, 2004 and thereafter of $0.2
million, $2.5 million, $2.5 million, $2.5 million, $2.5 million and $15.7
million, respectively. The lease provides that Penton pay taxes, maintenance,
insurance and certain other operating expenses applicable to the premises.
Penton has an option to extend this lease for two terms of five years each.
Future minimum lease payments under capital leases are as follows (in
thousands):
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
------------
<S> <C>
2000........................................................ $125
2001........................................................ 89
2002........................................................ 43
2003........................................................ 16
2004........................................................ 1
Thereafter.................................................. --
Less: amount representing interest.......................... (34)
----
Present value of net minimum lease payments................. 240
Less: current portion....................................... (78)
----
Long-term obligations (included in other long-term
liabilities).............................................. $162
====
</TABLE>
For the years ended December 31, 1999, 1998, and 1997, the total rent
expense (including taxes, insurance and maintenance when included in the rent)
incurred by Penton was approximately $7.5 million, $6.3 million and $6.3
million, respectively.
In connection with the tax-free spinoff of Penton common stock by Pittway
to its stockholders in August 1998, Penton agreed not to take any action that
would cause the spinoff to be taxable to Pittway under section 355 of the
Internal Revenue Code. Penton also agreed to indemnify Pittway for any liability
suffered if Penton were to take any action that would cause the spinoff to be
taxable to Pittway. The spinoff would become taxable to Pittway, on a
presumptive basis, if 50% or more of Penton common stock is acquired during a
period that ends two years from the date of the spinoff. Penton believes that
the major transactions involving its common stock that have occurred since the
spinoff and that, to its knowledge, are contemplated to occur, will not trigger
any tax liability. If, however, the Internal Revenue Service were to asset that
any future major transactions involving Penton's common stock during this
two-year period resulted in the spinoff being taxable to Pittway on a
presumptive basis, Penton could not assure, in light of the lack of specific
guidance in this area of the tax law, that it could successfully rebut the
presumption. If any such liability became due and payable by Penton to Pittway,
the payment of such liability could have a material adverse effect on Penton's
financial condition.
44
<PAGE> 45
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the acquisition of Mecklermedia, a lawsuit was brought
against Penton by a former shareholder of Mecklermedia for an unspecified
amount, as well as other relief. The plaintiff is claiming that Penton violated
the federal securities laws by selling Mr. Meckler an 80.1% interest in
internet.com, LLC 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. Penton
believes that the allegations are without merit and intends to contest them
vigorously. In January 2000, the United States District Court for the Southern
District of New York denied class certification for this case. Two other former
shareholders have since moved to intervene as plaintiffs and renewed the motion
for class certification.
In the normal course of business, Penton 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 Penton's financial statements, management is unable to estimate the
magnitude or financial impact of claims and lawsuits that may be filed in the
future.
NOTE 12 -- COMMON STOCK
In connection with the spinoff (see Note 2), Penton 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, Penton
issued 21,240,000 shares of common stock in replacement of the 1,000 shares of
$1 par value stock previously outstanding. An amount of $0.2 million 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. Penton's transfer agent and registrar for preferred and common
shares is Harris Trust & Savings Bank.
In May 1999, Penton completed a 6,500,000 common share offering; Penton
offered 6,250,000 of the shares and existing stockholders offered 250,000
shares. The underwriters exercised their option to purchase an additional
180,000 shares from Penton and 795,000 shares from existing stockholders to
cover over-allotments. Penton received net proceeds of approximately $118.4
million, which were used to repay debt, finance the acquisition of New Hope and
for general corporate purposes. Penton did not receive any proceeds from the
shares sold by the selling stockholders.
Effective August 1998, Penton established a stock option plan under which
Penton 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 1999 and 1998, 405,749 shares and 700,452
shares, respectively, were granted under the Equity and Incentive Plan, of which
349,500 and 686,055, respectively, were stock options and 56,249 and 14,397,
respectively, were deferred shares. Options granted under the plan generally
vest equally over three years from the date of grant. 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.
All options granted pursuant to the plan will expire no later than 10 years from
the date the option was granted.
As noted above, 56,249 and 14,397 deferred shares were granted in 1999 and
1998, respectively. Of the shares granted in 1999, 47,553 shares vest on the
third anniversary of the grant date, while the remaining 8,696 shares vest at
the rate of 20% per year over a five-year period from date of grant. The shares
granted in 1998 vest between one and three years; in 1999, 7,619 of these
deferred shares were issued. During 1999 and 1998, approximately $0.01 million
and $0.08 million, respectively, was charged to expense for these shares. The
Board of Directors may authorize the payment of dividend equivalents on such
shares on a current, deferred or contingent basis, either in cash or in
additional shares of common stock. At December 31, 1999, no such authorization
had been made.
45
<PAGE> 46
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In addition to the Equity and Incentive Plan described above, in 1998,
Penton granted options for a total of 69,000 shares to its directors who are not
employees of Penton. Such options were granted at the fair market value on the
date of grant. Options with respect to 13,000 shares were exercisable
immediately upon grant, and the remaining options vest in 25% increments
commencing with the date of grant. The option price at the date of grant was
$16.23 per share.
Penton accounts for stock options under Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and not the fair
value method as provided by Financial Accounting Standard 123, "Accounting and
Disclosure of Stock-Based Compensation" ("FAS 123"). Penton's Equity and
Incentive Plan requires options to be granted at the market price on Penton's
common stock on the date the options are granted and, as a result, under APB 25,
no compensation expense is recognized.
The following table presents a summary of Penton's stock option activity
and related information for the years ended 1997, 1998 and 1999 (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
NUMBER OF OPTIONS
----------------------
EMPLOYEES DIRECTORS WEIGHTED AVERAGE
--------- --------- ----------------
<S> <C> <C> <C>
Balance, December 31, 1997............... -- -- --
Granted.................................. 686 69 $16.23
Exercised................................ -- -- --
Canceled................................. (5) -- $16.23
----- -----
Balance, December 31, 1998............... 681 69
----- -----
Granted.................................. 349 -- $21.50
Exercised................................ (4) -- $16.23
Canceled................................. (65) -- $17.70
----- -----
Balance, December 31, 1999............... 961 69
===== =====
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1999 (in thousands):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- -------------------------------------------------- --------------------------
WEIGHTED-
AVERAGE WEIGHTED- OPTIONS WEIGHTED-
NUMBER REMAINING AVERAGE EXERCISABLE AT AVERAGE
OF CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
EXERCISE PRICE OPTIONS LIFE PRICE 1999 PRICE
- -------------- ------- ----------- --------- -------------- ---------
<S> <C> <C> <C> <C> <C>
$21.50 ... 331 9.0 years $21.50 -- --
$16.23 ... 699 8.5 years $16.23 42 $16.23
</TABLE>
Pro forma information regarding net income and earnings per share is
required by FAS 123, and has been determined as if Penton had accounted for its
employee stock options under the fair value method of FAS 123. The weighted
average fair value of options granted in 1999 and 1998 was $5.07 and $3.70,
respectively. For purposes of the pro forma presentation, the fair value of each
option grant was estimated on the date of grant using the Black-Scholes option
pricing model, under the following assumptions for 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Risk-free interest rate................... 6.2% 5.4%
Dividend yields........................... 0.5% 0.3%
Expected volatility....................... 61.25% 70.6%
Expected life............................. 1 to 5 years 1 to 5 years
</TABLE>
46
<PAGE> 47
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Had compensation cost for Penton's stock-based compensation plans been
determined based on the fair values of the options granted at the grant dates,
consistent with FAS 123, Penton's net income and earnings per share would have
been as follows (dollars in thousands, except per share data):
<TABLE>
<CAPTION>
1999 1998 1997
------ ------- -------
<S> <C> <C> <C>
Net income applicable to common shareholders
As reported............................................... $8,210 $10,890 $14,874
Pro forma................................................. $6,238 $10,007 $14,874
Basic and diluted earnings per share
As reported............................................... $ 0.29 $ 0.50 $ 0.70
Pro forma................................................. $ 0.22 $ 0.46 $ 0.70
</TABLE>
In November 1999, the Board of Directors approved a plan to establish an
Employee Stock Purchase Plan, with the intent of aligning the interests of
Penton's employees and its shareholders by allowing employees the opportunity to
purchase shares of Penton. The plan, which was effective January 1, 2000, allows
employees to purchase common stock at 85% of the lower of the market price at
the beginning or end of each quarter.
In November 1999, the Board of Directors approved a plan, effective January
1, 2000, to establish a Management Stock Purchase Plan for designated officers
and other key employees. Participants in the plan may elect to receive
restricted stock units ("RSUs") in lieu of a designated portion of up to 100% of
their annual incentive bonus. Each RSU represents the right to receive one share
of Penton common stock. RSUs are granted at a 20% discount from fair market
value on the date awarded. RSUs vest two years after the date of grant and are
settled in shares of common stock after a period of deferral selected by the
participant, or upon termination of employment. On February 15, 2000, 25,507
RSUs were granted at a fair market value of $25.94 per share.
NOTE 13 -- RELATED-PARTY TRANSACTIONS
Included in the Consolidated Statements of Income for 1998 and 1997 is an
allocation of corporate expenses related to services provided for Penton by
Pittway. This allocation was based on an estimate of the incremental corporate
expenses related to Penton'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 Penton been a separate company. The aggregate allocated
costs totaled $0.02 million and $0.04 million for the years ended 1998 and 1997,
respectively. Penton's employees also participated in Pittway's pension plan
(see Note 10). Certain Penton employees participated in Pittway's 1990 stock
awards plan, for which Pittway allocated costs to Penton totaling $1.2 million
and $1.0 million in 1998 and 1997, respectively.
Other transactions between Penton and Pittway, consisting principally of
taxes and other reimbursable expenses paid by Pittway, have been reflected in
the 1998 and 1997 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) were transferred to Pittway and reflected as "Due from parent company"
in the balance sheet. In August 1998, a final non-cash dividend of $12.2 million
was made to Pittway to settle the "Due from parent company" account.
There were no related-party transactions in 1999.
47
<PAGE> 48
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14 -- EARNINGS PER SHARE
Earnings per share ("EPS") have been computed pursuant to the provisions of
Statement of Financial Accounting Standards No. 128, "Earnings Per Share."
The following table provides a reconciliation of both income before
extraordinary item and the number of common shares used in the computations of
basic EPS, which utilized the weighted average number of common shares
outstanding without regard to dilutive potential common shares, and diluted EPS,
which include all such shares.
Computations of basic and diluted earnings per share for the years ended
December 31, 1999, 1998 and 1997 are as follows (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Income from continuing operations applicable to common
shareholders.............................................. $ 7,930 $11.186 $14,612
======= ======= =======
Number of shares:
Basic - average shares outstanding.......................... 28,108 21,882 21,240
Effect of dilutive securities:
Stock options............................................. 71 -- --
Deferred shares........................................... 3 -- --
Contingent shares......................................... 27 -- --
------- ------- -------
Diluted - average shares outstanding........................ 28,209 21,882 21,240
======= ======= =======
Per share amount:
Income from continuing operations
Basic..................................................... $ 0.28 $ 0.51 $ 0.69
Diluted................................................... $ 0.28 $ 0.51 $ 0.69
</TABLE>
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 options would have been anti-dilutive.
NOTE 15 -- SEGMENT INFORMATION
Historically, Penton had three reportable segments: Media Services,
Printing and Direct Mail. As discussed in Note 4, Penton sold its Printing
segment in November 1999 and has classified its Direct Mail segment as
discontinued. Consequently, Penton currently operates within one segment.
Within the Media Services segment, operating units serving differing
industries were combined due to the manner in which these segments are managed,
the similarity of their economic characteristics and other factors. The Media
Services segment serves specific industries with integrated product offerings,
including trade magazines, trade shows and conferences, Web sites, and a variety
of other products and services. Revenues of this segment are generated primarily
from magazine advertising and trade show booth rentals.
Non-current assets at December 31, 1999 and 1998 include $31.3 million and
$31.7 million, respectively, identified with operations in the United Kingdom,
substantially all of which are intangible assets, with the remaining assets
identified with domestic operations. Export sales were not material, and no
single customer accounted for 10% or more of sales.
48
<PAGE> 49
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 16 -- SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES
Penton assumed liabilities of approximately $5.6 million in connection with
acquisitions completed in 1999. In conjunction with the acquisition of New Hope
in May 1999, Penton issued 2.1 million common shares valued at $41.0 million as
consideration.
In 1999, Penton marked to market its investment in internet.com Corporation
for approximately $252.7 million.
At December 31, 1999, Penton had $4.2 million of net current assets of
discontinued operations for the Direct Mail segment and a related non-cash loss
of $0.7 million.
At December 31, 1999 and 1998, dividends of $0.9 million and $0.7 million,
respectively, were declared and not paid.
In August 1998, a final non-cash dividend of $12.2 million was made to
Pittway to settle the "Due from parent company" account. In addition, 1,541,638
shares of common stock were issued in conjunction with the DM Publishing
acquisition.
The foregoing transactions do not provide or use cash and, accordingly, are
not reflected in the statements of cash flows.
For 1999, 1998, and 1997, cash paid for income taxes was $13.9 million,
$10.0 million and $10.8 million, respectively. Cash paid for interest for 1999,
1998 and 1997, was $19.9 million, $5.5 million and $0.8 million, respectively.
NOTE 17 -- QUARTERLY RESULTS (UNAUDITED)
Quarterly results of operations for the years ended December 31, 1999, and
1998, are shown below. (dollars in thousands, except per share amounts):
<TABLE>
<CAPTION>
1999 QUARTERS
------------------------------------------ TOTAL
FIRST SECOND THIRD FOURTH FOR YEAR
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues........................... $52,518 $78,792 $ 64,435 $105,079 $300,824
Operating income (loss)............ (2,637) 14,705 (953) 28,275 39,390
Income (loss) from continuing
operations....................... (3,033) 2,710 (5) 8,258 7,930
Discontinued operations............ 197 454 205 7,837 8,693(a)
Extraordinary item - extinguishment
of debt.......................... -- (2,156) (6,257) -- (8,413)
Net income (loss).................. (2,836) 1,008 (6,057)(b) 16,095 8,210
Earnings per share (basic and
diluted):
Income from continuing
operations.................... (0.13) 0.10 -- 0.26 0.28
Discontinued operations.......... 0.01 0.02 0.01 0.25 0.31
Extraordinary item............... -- (0.08) (0.20) -- (0.30)
Net income (loss)................ (0.12) 0.04 (0.19) 0.51 0.29
</TABLE>
49
<PAGE> 50
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1998 QUARTERS
-------------------------------------------- TOTAL
FIRST SECOND THIRD FOURTH FOR YEAR
------- ------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues.......................... $46,631 $52,633 $ 46,345 $ 62,073 $207,682
Operating income.................. 4,495 6,910 4,709 10,104 26,218
Income from continuing
operations...................... 2,239 3,679 2,229 3,039 11,186
Discontinued operations........... 101 2 19 (418)(c) (296)
Net income........................ 2,340 3,681 2,248 2,621 10,890
Earnings per share (basic and
diluted):
Income from continuing
operations................... 0.11 0.17 0.10 0.13 0.51
Discontinued operations......... -- -- -- (0.01) (0.01)
Net income...................... 0.11 0.17 0.10 0.12 0.50
</TABLE>
Income per share calculations for each of the quarters are based on the
weighted average number of shares outstanding for each quarter, and the sum of
the quarters may not necessarily be equal to the full year income per share
amount.
- ---------------
(a) Includes gain on disposal of the Printing segment of $9.3 million net of tax
and loss on disposal of Direct Mail segment of $0.7 million net of tax. In
addition, includes income from operations of the Printing segment of $0.3
million and loss from operations of the Direct Mail segment of $0.3 million.
(b) Includes $5,906, or $0.19 per share, gain on sale of 510,000 shares of
internet.com stock.
(c) Includes $600, or $0.03 per share, after-tax writedown on impairment of
assets.
NOTE 18 -- SUBSEQUENT EVENTS
On January 14, 2000, the Board of Directors approved an executive loan
program, which allows Penton to loan money to five key executives to purchase an
aggregate of up to 400,000 shares of Penton common stock at the then fair market
value. The loans, in the form of recourse notes, bear interest compounded
semiannually, at a rate equal to the applicable interest rate as published by
the Internal Revenue Service, and mature on or before the fifth anniversary of
the first loan date. No principal or interest payments are required until
maturity, at which time all outstanding amounts are due. As of March 20, 2000,
400,000 shares had been issued with a weighted average share price of $23.54 and
an outstanding principal balance of approximately $9.4 million.
In February 2000, Penton sold 2.0 million shares of internet.com
Corporation stock as part of a 3.75 million-share offering. Penton received cash
of $113.1 million and recognized a gain of approximately $110.2 million. Penton
maintains an 11.8% ownership interest in internet.com, or approximately 3.0
million shares.
On February 7, 2000, Penton signed a purchase agreement for the sale of its
Direct Mail segment (see Note 4). The sale was completed on March 15, 2000.
In February 2000, the Board of Directors approved a grant of 99,000
performance shares to certain key executives, subject to the attainment of
certain performance goals over a three-year period from January 1, 2000, through
December 31, 2002. Performance shares are convertible into common stock on a
one-for-one basis and are not issuable until earned.
In February 2000, the Board of Directors approved the addition of 10 key
employees to participate in Penton's supplemental executive retirement plan (see
Note 10).
In February 2000, Penton acquired the assets of Profit.Net, Inc. for $0.4
million in cash and contingent payments of up to $0.1 million in 2000. The
assets of Profit.Net, Inc. include BAKERY-NET.com, a Web site for the commercial
baking market.
50
<PAGE> 51
PENTON MEDIA, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, 1997
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING CHARGE TO
OF YEAR EXPENSES
---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
1999
Allowance for doubtful accounts..................... $4,899 $943
1998
Allowance for doubtful accounts..................... $2,406 $282
1997
Allowance for doubtful accounts..................... $2,069 $662
</TABLE>
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, 2000.
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 5, 2000 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 5, 2000 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 5, 2000 is incorporated herein
by reference.
51
<PAGE> 52
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
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 5, 2000 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, 1999 and 1998.
Consolidated Statements of Income for the years ended December
31, 1999, 1998 and 1997.
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1999, 1998 and 1997.
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997.
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 and/or 8-K/A were filed on February 8, 1999; April
20, 1999; May 19, 1999; June 11, 1999 and August 10, 1999, in which
information regarding Items 5 and 7 of Form 8-K and Form 8-K/A were
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.
52
<PAGE> 53
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT
- ----------- -----------------------
<C> <S>
2.1 Asset Purchase Agreement, dated as of May 18, 1999, by and
among Penton Media, Inc., New Hope Communications, Inc. and
R. Douglas Greene (filed as Exhibit 2.0 to the Company's
Form 8-K/A on August 10, 1999 and incorporated herein by
reference). The Registrant agrees to furnish supplementally
a copy of any omitted schedule to the Commission upon
request.
2.2 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. 33-56877 and
incorporated herein by reference). The Registrant agrees to
furnish supplementally a copy of any omitted schedule to the
Commission upon request.
3.1 Restated Certificate of Incorporation of the Registrant
(filed as Exhibit 3.1 to the Registrant's Registration
Statement No. 333-56877 on form S-1, dated August 5, 1998,
and incorporated herein by reference).
3.2 Amended and Restated By-laws of the Registrant (filed as
Exhibit 3.2 to the Registrant's Registration Statement No.
333-56877 on Form S-1, dated August 5, 1998, and
incorporated herein by reference).
10.1 Credit Facility, dated September 1, 1999, between Penton
Media Inc., as borrower, the lenders listed therein, as
lenders, Banc of America Securities, LLC, as syndication
agent, The First National Bank of Chicago, as documentation
agent and The Bank of New York, as administrative agent,
filed herewith.
10.2 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).
10.3 Penton Media, Inc. Management Stock Purchase Plan (filed as
Exhibit 4.3 to the Company's Form S-8 on March 21, 2000, and
incorporated herein by reference).
10.4 Penton Media, Inc. Employee Stock Purchase Plan (filed as
Exhibit 4.3 to the Company's Form S-8 on November 17, 1999
and incorporated herein by reference).
10.5 Penton Media, Inc. 1998 Director Stock Option Plan (filed as
Exhibit 4.3 to the Company's Form S-8 on April 1, 1999, and
incorporated herein by reference).
10.6 Penton Media, Inc. 1998 Equity and Performance Incentive
Plan (filed as Exhibit 4.3 to the Company's Form S-8 on
April 1, 1999 and incorporated herein by reference).
10.7 Penton Media, Inc. Retirement Plan (filed as Exhibit 10.9 to
the Company's Registration Statement No. 333-56877 and
incorporated herein by reference).
10.8 Penton Media, Inc. Senior Executive Bonus Plan, filed
herewith.
10.9 Penton Media, Inc. Supplemental Executive Retirement Plan
(As Amended and Restated Effective as of January 1, 2000,
filed herewith.
10.10 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).
10.11 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).
10.12 Employment Agreement, dated July 16, 1998 between Penton
Media, Inc. and David Nussbaum (file as Exhibit 10.4 to the
Company's Form 10-Q on November 16, 1998 and incorporated
herein by reference).
10.13 Restated Employment Agreement, dated February 5, 1999,
between Penton Media, Inc. and Thomas Kemp (filed as Exhibit
10.13 to the Company's Form 10-K on March 31, 1999 and
incorporated herein by reference).
10.14 Restated Employment Agreement, dated February 10, 1999,
between Penton Media, Inc. and Daniel J. Ramella (filed as
Exhibit 10.14 to the Company's Form 10-K on March 31, 1999
and incorporated herein by reference).
</TABLE>
53
<PAGE> 54
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT
- ----------- -----------------------
<C> <S>
10.15 Employment Agreement, dated February 14, 1999, between
Penton Media, Inc. and James W. Zaremba (filed as Exhibit
10.16 to the Company's Form 10-K on March 31, 1999 and
incorporated herein by reference).
10.16 Employment Agreement, dated August 24, 1999 between Penton
Media, Inc. and Joseph G. NeCastro, filed herewith.
10.17 Employment Agreement, dated August 24, 1999 between Penton
Media, Inc. and Preston L. Vice, filed herewith.
21. Subsidiaries of Penton Media, Inc.
23. Consent of the Independent Accountants.
24. Powers of Attorneys.
27. Financial Data Schedule filed herewith.
</TABLE>
54
<PAGE> 55
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 30, 2000
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 30, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------- -----
<S> <C>
* Chief Executive Officer and Director
- -------------------------------------------- (Principal Executive Officer)
Thomas L. Kemp
* Chief Financial Officer (Principal Financial
- -------------------------------------------- Officer)
Joseph G. NeCastro
* Vice President/Controller
- --------------------------------------------
Jocelyn A. Bradford
* Director
- --------------------------------------------
Anthony Downs
* Director
- --------------------------------------------
William J. Friend
* Director
- --------------------------------------------
Joan W. Harris
* Director
- --------------------------------------------
King Harris
* Director
- --------------------------------------------
Daniel J. Ramella
* Director
- --------------------------------------------
Edward J. Schwartz
* Director
- --------------------------------------------
Don E. Schultz
* Director
- --------------------------------------------
Richard B. Swank
</TABLE>
55
<PAGE> 56
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------- -----
<S> <C>
* Director
- --------------------------------------------
William C. Donohue
* Director
- --------------------------------------------
John J. Meehan
/s/ R. DOUGLAS GREENE Director
- --------------------------------------------
R. Douglas Greene
</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 officers and directors of Penton Media, Inc. and files herewith as
Exhibit 24 on behalf of Penton Media, Inc. and each such person.
March 30, 2000
By: /s/ JOSEPH G. NECASTRO
--------------------------------------------------------
Joseph G. NeCastro
Attorney-in-Fact
56
<PAGE> 57
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT
- ----------- -----------------------
<C> <S>
2.1 Asset Purchase Agreement, dated as of May 18, 1999, by and
among Penton Media, Inc., New Hope Communications, Inc. and
R. Douglas Greene (filed as Exhibit 2.0 to the Company's
Form 8-K/A on August 10, 1999 and incorporated herein by
reference). The Registrant agrees to furnish supplementally
a copy of any omitted schedule to the Commission upon
request.
2.2 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. 33-56877 and
incorporated herein by reference). ). The Registrant agrees
to furnish supplementally a copy of any omitted schedule to
the Commission upon request.
3.1 Restated Certificate of Incorporation of the Registrant
(filed as Exhibit 3.1 to the Registrant's Registration
Statement No. 333-56877 on form S-1, dated August 5, 1998,
and incorporated herein by reference).
3.2 Amended and Restated By-laws of the Registrant (filed as
Exhibit 3.2 to the Registrant's Registration Statement No.
333-56877 on Form S-1, dated August 5, 1998, and
incorporated herein by reference).
10.1 Credit Facility, dated September 1, 1999, between Penton
Media Inc., as borrower, the lenders listed therein, as
lenders, Banc of America Securities, LLC, as syndication
agent, The First National Bank of Chicago, as documentation
agent and The Bank of New York, as administrative agent,
filed herewith.
10.2 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).
10.3 Penton Media, Inc. Management Stock Purchase Plan (filed as
Exhibit 4.3 to the Company's Form S-8 on March 21, 2000, and
incorporated herein by reference).
10.4 Penton Media, Inc. Employee Stock Purchase Plan (filed as
Exhibit 4.3 to the Company's Form S-8 on November 17, 1999
and incorporated herein by reference).
10.5 Penton Media, Inc. 1998 Director Stock Option Plan (filed as
Exhibit 4.3 to the Company's Form S-8 on April 1, 1999, and
incorporated herein by reference).
10.6 Penton Media, Inc. 1998 Equity and Performance Incentive
Plan (filed as Exhibit 4.3 to the Company's Form S-8 on
April 1, 1999 and incorporated herein by reference).
10.7 Penton Media, Inc. Retirement Plan (filed as Exhibit 10.9 to
the Company's Registration Statement No. 333-56877 and
incorporated herein by reference).
10.8 Penton Media, Inc. Senior Executive Bonus Plan, filed
herewith.
10.9 Penton Media, Inc. Supplemental Executive Retirement Plan
(As Amended and Restated Effective as of January 1, 2000,
filed herewith.
10.10 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).
10.11 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).
10.12 Employment Agreement, dated July 16, 1998 between Penton
Media, Inc. and David Nussbaum (file as Exhibit 10.4 to the
Company's Form 10-Q on November 16, 1998 and incorporated
herein by reference).
10.13 Restated Employment Agreement, dated February 5, 1999,
between Penton Media, Inc. and Thomas Kemp (filed as Exhibit
10.13 to the Company's Form 10-K on March 31, 1999 and
</TABLE>
57
<PAGE> 58
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT
- ----------- -----------------------
<C> <S>
incorporated herein by reference.
10.14 Restated Employment Agreement, dated February 10, 1999,
between Penton Media, Inc. and Daniel J. Ramella (filed as
Exhibit 10.14 to the Company's Form 10-K on March 31, 1999
and incorporated herein by reference).
10.15 Employment Agreement, dated February 14, 1999, between
Penton Media, Inc. and James W. Zaremba (filed as Exhibit
10.16 to the Company's Form 10-K on March 31, 1999 and
incorporated herein by reference).
10.16 Employment Agreement, dated August 24, 1999 between Penton
Media, Inc. and Joseph G. NeCastro, filed herewith.
10.17 Employment Agreement, dated August 24, 1999 between Penton
Media, Inc. and Preston L. Vice, filed herewith.
21. Subsidiaries of Penton Media, Inc.
23. Consent of the Independent Accountants.
24. Powers of Attorneys.
27. Financial Data Schedule filed herewith.
</TABLE>
58
<PAGE> 1
Exhibit 10.1
CREDIT AGREEMENT
DATED AS OF SEPTEMBER 1, 1999,
AMONG
PENTON MEDIA, INC.,
AS BORROWER,
THE LENDERS PARTY HERETO,
BANC OF AMERICA SECURITIES, LLC,
AS SYNDICATION AGENT,
THE FIRST NATIONAL BANK OF CHICAGO,
AS DOCUMENTATION AGENT
AND
THE BANK OF NEW YORK,
AS ADMINISTRATIVE AGENT
---------------------------
BNY CAPITAL MARKETS, INC.
AS LEAD ARRANGER AND BOOK RUNNER
<PAGE> 2
CREDIT AGREEMENT, dated as of September 1, 1999, among PENTON MEDIA,
INC., the LENDERS party hereto, BANC OF AMERICA SECURITIES, LLC, as Syndication
Agent, THE FIRST NATIONAL BANK OF CHICAGO, as Documentation Agent and THE BANK
OF NEW YORK, as Administrative Agent.
The parties hereto agree as follows:
ARTICLE 1. DEFINITIONS
Section 1.1 Defined Terms
As used in this Credit Agreement, the following terms have the
meanings specified below:
"A Term Commitment" means, with respect to each Lender having
an A Term Commitment, the commitment of such Lender to make an A Term Loan
hereunder, expressed as an amount representing the maximum aggregate amount of
such Lender's A Term Loan hereunder. The amount of each applicable Lender's A
Term Commitment is set forth on Schedule 2.1. The aggregate amount of the A Term
Commitments is $140,000,000.
"A Term Loan" means a Loan referred to in Section 2.1(b) and
made pursuant to Section 2.4.
"A Term Maturity Date" means June 30, 2006.
"ABR", when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Alternate Base Rate.
"Adjusted EBITDA" means, as of any date, EBITDA for the most
recent four consecutive fiscal quarter period in respect of which the financial
statements required by paragraphs (a) or (c) of Section 6.1 have been delivered,
adjusted on a consistent basis to give effect to all acquisitions, dispositions
and exchanges made by the Borrower and the Subsidiaries during such period as if
each had occurred on the first day of such period.
"Adjusted LIBO Rate" means, with respect to any Eurodollar
Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such
Interest Period multiplied by (b) the Statutory Reserve Rate.
"Administrative Agent" means BNY, in its capacity as
administrative agent for the Lenders hereunder.
<PAGE> 3
"Administrative Questionnaire" means an Administrative
Questionnaire in a form supplied by the Administrative Agent.
"Affiliate" means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.
"Agent" means the Administrative Agent, the Syndication Agent
or the Documentation Agent, as the case may be.
"Alternate Base Rate" means, for any day, a rate per annum
equal to the greater of (a) the Prime Rate in effect on such day and (b) the
Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in
the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective from and including the effective date of such
change in the Prime Rate or the Federal Funds Effective Rate, respectively.
"Applicable Margin" means, at all times during the applicable
periods set forth below: (a) with respect to ABR Revolving Borrowings, ABR A
Term Loan Borrowings and Swingline Borrowings, the percentage set forth below
under the heading "Revolving, A Term and Swingline ABR Margin", (b) with respect
to Eurodollar Revolving Borrowings, Eurodollar A Term Loan Borrowings and fees
payable under Section 3.3(b), the percentage set forth below under the heading
"Revolving, A Term and LC Eurodollar Margin", (c) with respect to ABR B Term
Loan Borrowings, the percentage set forth below under the heading "B Term ABR
Margin", and (d) with respect to Eurodollar B Term Loan Borrowings, the
percentage set forth below under the heading "B Term Eurodollar Margin":
<TABLE>
<CAPTION>
REVOLVING, REVOLVING, A
WHEN THE LEVERAGE A TERM AND TERM AND LC B TERM
RATIO IS GREATER SWINGLINE ABR EURODOLLAR B TERM ABR EURODOLLAR
THAN OR EQUAL TO AND LESS THAN MARGIN MARGIN MARGIN MARGIN
<S> <C> <C> <C> <C> <C>
4.50:1.00 0.875% 2.125% 1.250% 2.500%
4.00:1.00 4.50:1.00 0.625% 1.875% 1.125% 2.375%
3.50:1.00 4.00:1.00 0.375% 1.625% 0.875% 2.125%
3.00:1.00 3.50:1.00 0.250% 1.500% 0.750% 2.000%
3.00:1.00 0.000% 1.250% 0.500% 1.750%
</TABLE>
Changes in the Applicable Margin resulting from a change in
the Leverage Ratio shall be based upon the certificate most recently delivered
under Section 6.1(e) and
2
<PAGE> 4
shall become effective on the Rate Change Date with respect thereto.
Notwithstanding anything to the contrary in this definition, (i) if the Borrower
shall fail to deliver to the Administrative Agent any such certificate on or
prior to any date required hereby, the Leverage Ratio for purposes of this
defined term only shall be deemed to be greater than 4.50:1.00 from and
including such date to the earlier of (a) delivery of such certificate, and (b)
the next succeeding Rate Change Date, and (ii) subject to clause (i), during the
period commencing on the Effective Date and ending on the applicable Rate Change
Date with respect to the certificate required by Section 6.1(e) delivered for
the fiscal year ending December 31, 1999, the Leverage Ratio for purposes of
this defined term only shall be deemed to be no lower than 3.00:1.00.
"Applicable Percentage" means, with respect to any applicable
Lender, the percentage of the total Revolving Commitments represented by such
Lender's Revolving Commitment. If the Revolving Commitments have terminated or
expired, the Applicable Percentages shall be determined based upon the Revolving
Commitments most recently in effect, giving effect to any assignments.
"Approved Fund" means, with respect to any Lender that is a
fund that invests in commercial loans, any other fund that invests in commercial
loans and is managed or advised by the same investment advisor as such Lender or
by an Affiliate of such investment advisor.
"Approved Subordinated Debt" means each of the following to
the extent that it is subordinated on terms and conditions substantially similar
to those set forth on Exhibit F: (a) unsecured indebtedness for borrowed money
of the Borrower on terms and conditions that are less restrictive on the
Borrower and the Subsidiaries than the terms and conditions of the Loan
Documents, and (b) unsecured guarantees thereof by one or more Subsidiary
Guarantors.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an assignee (with the consent of any party whose
consent is required by Section 10.4), and accepted by the Administrative Agent,
substantially in the form of Exhibit A or any other form approved by the
Administrative Agent.
"Availability Period" means the period from and including the
Effective Date to but excluding the earlier of the Revolving Maturity Date and
the date of termination of the Revolving Commitments.
"B Term Commitment" means, with respect to each Lender having
a B Term Commitment, the commitment of such Lender to make a B Term Loan
hereunder, expressed as an amount representing the maximum aggregate amount of
such Lender's B Term Loan hereunder. The amount of each applicable Lender's B
Term Commitment is set forth on Schedule 2.1. The aggregate amount of the B Term
Commitments is $75,000,000.
3
<PAGE> 5
"B Term Loan" means a Loan referred to in Section 2.1(c) and
made pursuant to Section 2.4.
"B Term Maturity Date" means June 30, 2007.
"BNY" means The Bank of New York and its successors.
"Board" means the Board of Governors of the Federal Reserve
System of the United States of America.
"Borrower" means Penton Media, Inc., a Delaware corporation.
"Borrowing Request" means a request by the Borrower for a
Borrowing in accordance with Section 2.3.
"Borrowing" means (a) Revolving Loans, A Term Loans or B Term
Loans, as applicable, of the same Type made, converted or continued on the same
date and, in the case of Eurodollar Loans, as to which a single Interest Period
is in effect or (b) a Swingline Loan.
"Business Day" means any day that is not a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or required
by law to remain closed, provided that, when used in connection with a
Eurodollar Loan, the term "Business Day" shall also exclude any day on which
banks are not open for dealings in dollar deposits in the London interbank
market.
"Capital Lease Obligations" of any Person means the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Change in Control" means (a) the beneficial ownership,
directly or indirectly, by any Person or group (within the meaning of the
Securities Exchange Act of 1934 and the rules of the Securities and Exchange
Commission thereunder as in effect on the date hereof), of shares representing
30% or more of the aggregate ordinary voting power represented by the issued and
outstanding securities of the Borrower, or (b) the occupation of a majority of
the seats (other than vacant seats) on the board of directors of the Borrower by
Persons who were not (i) nominated by the board of directors of the Borrower as
of the Effective Date nor (ii) appointed by directors so nominated, or (iii) on
such board of directors as of the Effective Date.
"Change in Law" means (a) the adoption of any law, rule or
regulation after the date of this Credit Agreement, (b) any change in any law,
rule or regulation or in
4
<PAGE> 6
the interpretation or application thereof by any Governmental Authority after
the date of this Credit Agreement or (c) compliance by any Credit Party (or, for
purposes of Section 3.5(b), by any lending office of such Credit Party or by
such Credit Party's holding company, if any) with any request, guideline or
directive (whether or not having the force of law) of any Governmental Authority
made or issued after the date of this Credit Agreement.
"Class", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are
Revolving Loans, A Term Loans, B Term Loans or Swingline Loans.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Collateral" means any and all "Collateral" or "Mortgaged
Property", as defined in any applicable Security Document.
"Commitment" means the Revolving Commitment, the A Term
Commitment or the B Term Commitment, as the case may be.
"Commitment Fee Margin" means, at all times during the
applicable periods set forth below, the percentage set forth below under the
heading "Commitment Fee" and adjacent to such period:
<TABLE>
<CAPTION>
WHEN THE LEVERAGE
RATIO IS GREATER AND EQUAL TO OR COMMITMENT
THAN LESS THAN FEE
- ---- --------- -----------
<S> <C> <C>
4.00:1.00 0.500%
4.00:1.00 0.375%
</TABLE>
Changes in the Commitment Fee Margin resulting from a change
in the Leverage Ratio shall be based upon the certificate most recently
delivered under Section 6.1(e) and shall become effective on the Rate Change
Date with respect thereto. Notwithstanding anything to the contrary in this
definition, if the Borrower shall fail to deliver to the Administrative Agent
any such certificate on or prior to any date required hereby, the Leverage Ratio
for purposes of this defined term only shall be deemed to be greater than
4.00:1.00 from and including such date to the earlier of (a) delivery of such
certificate, and (b) the next succeeding Rate Change Date.
"Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through
5
<PAGE> 7
the ability to exercise voting power, by contract or otherwise. The terms
"Controlling" and "Controlled" have meanings correlative thereto.
"Credit Parties" means the Administrative Agent, the Issuing
Bank and the Lenders.
"Default" means any event or condition which constitutes an
Event of Default or that upon notice, lapse of time or both would, unless cured
or waived, become an Event of Default.
"Disclosed Matters" means the actions, suits and proceedings
and the environmental matters disclosed in Schedule 4.6.
"dollars" or "$" refers to lawful money of the United States
of America.
"Domestic Subsidiary" means each Subsidiary organized under
the laws of the United States of America or any state thereof.
"EBITDA" means, subject to Section 1.5, with respect to any
period (a) net income for such period, minus (b) the sum of, without
duplication, for such period (i) extraordinary gains, (ii) non-cash additions to
income, and (iii) non-recurring additions to income, plus (c) the sum of,
without duplication, for such period (i) extraordinary losses, (ii) interest
expense, (iii) depreciation, (iv) amortization, (v) provision for income taxes,
(vi) non-cash charges against income, and (vii) non-recurring charges to income;
in each case with respect to the Borrower and the Subsidiaries on a consolidated
basis in accordance with GAAP.
"Effective Date" means the date on which the conditions
specified in Section 5.1 are satisfied (or waived in accordance with Section
10.2).
"Environmental Laws" means all laws, rules, regulations,
codes, ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material or to health and safety matters.
"Environmental Liability" means any liability, contingent or
otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of any Loan Party directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
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<PAGE> 8
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with the Borrower or any Subsidiary, is treated as
a single employer under Section 414(b) or (c) of the Code or, solely for
purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a
single employer under Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by the Borrower or any ERISA Affiliate
of any liability under Title IV of ERISA with respect to the termination of any
Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a
plan administrator of any notice relating to an intention to terminate any Plan
or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by
the Borrower or any ERISA Affiliate of any liability with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the
receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by
any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"Eurodollar", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.
"Event of Default" has the meaning assigned to such term in
Article 8.
"Excluded Taxes" means, with respect to any Credit Party or
any other recipient of any payment to be made by or on account of any obligation
of any Loan Party under any Loan Document, (a) income or franchise taxes imposed
on (or measured by) its net income by the United States of America, or by the
jurisdiction under the laws of which such recipient is organized or in which its
principal office is located or, in the case of any Credit Party, in which its
applicable lending office is located, (b) any branch profits taxes imposed by
the United States of America or any similar tax imposed by any other
jurisdiction in which such Loan Party is located and (c) in the case of a
Foreign Lender, any withholding tax that is imposed on amounts payable to such
Foreign Lender at the time such Foreign Lender becomes a party to this Credit
Agreement (or designates a new lending office) or is attributable to such
Foreign Lender's failure to comply with
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<PAGE> 9
Section 3.7(e), except to the extent that such Foreign Lender (or its assignor,
if any) was entitled, at the time of designation of a new lending office (or
assignment), to receive additional amounts from such Loan Party with respect to
such withholding tax pursuant to Section 3.7(a).
"Federal Funds Effective Rate" means, for any day, a rate per
annum (expressed as a decimal, rounded upwards, if necessary, to the next higher
1/100 of 1%) equal to the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged by
federal funds brokers on such day, as published by the Federal Reserve Bank of
New York on the Business Day next succeeding such day, provided that (i) if the
day for which such rate is to be determined is not a Business Day, the Federal
Funds Effective Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day,
and (ii) if such rate is not so published for any day, the Federal Funds
Effective Rate for such day shall be the average of the quotations for such day
on such transactions received by the Administrative Agent from three Federal
funds brokers of recognized standing selected by it.
"Financial Officer" means the chief financial officer,
principal accounting officer, treasurer or controller of the Borrower.
"Fixed Charge Coverage Ratio" means, as of any fiscal quarter
end, the ratio of (i) EBITDA to (ii) Fixed Charges, in each case for the period
comprised of the four consecutive fiscal quarters then ended as reflected in the
financial statements in respect thereof delivered pursuant to Section 6.1(a) or
6.1(c), as the case may be.
"Fixed Charges" means, subject to Section 1.5, for any period,
the sum of, without duplication, each of the following with respect to the
Borrower and the Subsidiaries on a consolidated basis in accordance with GAAP:
(i) Interest Expense, (ii) all expenditures during such period which would be
characterized as "Additions to property, plant and equipment" or similar
nomenclature, (iii) tax payments (including estimated tax payments), (iv) all
Restricted Payments paid pursuant to Section 7.8(c), (v) all Restricted Payments
paid to any non-Loan Party pursuant to Section 7.8(b), and (vi) all Required
Principal Payments.
"Foreign Lender" means any Lender that is organized under the
laws of a jurisdiction other than that in which the applicable Loan Party is
located. For purposes of this definition, the United States of America, each
State thereof and the District of Columbia shall be deemed to constitute a
single jurisdiction.
"GAAP" means generally accepted accounting principles in
effect from time to time in the United States of America.
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<PAGE> 10
"Governmental Authority" means the government of the United
States of America, any other nation or any political subdivision thereof,
whether state or local, and any agency, authority, instrumentality, regulatory
body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
"Guarantee" of or by any Person (the "guarantor") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor as to enable the primary obligor
to pay such Indebtedness or other obligation or (d) as an account party in
respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation, provided that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guaranteed" has a meaning correlative thereto.
"Guarantee Agreement" means the Guarantee Agreement,
substantially in the form of Exhibit D, among the Subsidiary Guarantors and the
Administrative Agent, for the benefit of the Secured Parties.
"Hazardous Materials" means all explosive or radioactive
substances or wastes and all hazardous or toxic substances, wastes or other
pollutants, including petroleum or petroleum distillates, asbestos or asbestos
containing materials, polychlorinated biphenyls, radon gas, infectious or
medical wastes and all other substances or wastes of any nature regulated
pursuant to any Environmental Law.
"Hedging Agreement" means any interest rate protection
agreement, foreign currency exchange agreement, commodity price protection
agreement or other interest or currency exchange rate or commodity price swap,
cap, collar, hedging or other like arrangement.
"IDC" has the meaning set forth in Section 7.4(g).
"Increase Request" means a request by the Borrower for an
increase of the total Revolving Commitments in accordance with Section 2.5(f).
"Indebtedness" of any Person means, without duplication, (a)
all obligations of such Person for borrowed money, (b) all obligations of such
Person
9
<PAGE> 11
evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such Person upon which interest charges are customarily paid
(including, without limitation, margin debt), (d) all obligations of such Person
under conditional sale or other title retention agreements relating to property
acquired by such Person, (e) all obligations of such Person in respect of the
deferred purchase price of property or services (excluding current accounts
payable incurred in the ordinary course of business), (f) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the Indebtedness secured thereby has
been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h)
all Capital Lease Obligations of such Person, (i) all obligations, contingent or
otherwise, of such Person as an account party in respect of letters of credit
and letters of guaranty, (j) all obligations, contingent or otherwise, of such
Person in respect of bankers' acceptances, (k) the principal balance outstanding
under any synthetic lease, tax retention operating lease, off-balance sheet loan
or similar off-balance sheet financing product of the Borrower or any Subsidiary
where such transaction is considered borrowed money indebtedness for tax
purposes but is classified as an operating lease under GAAP, and (l) all
obligations of such Person to pay a specified purchase price for goods or
services whether or not delivered or accepted (e.g., take-or-pay obligations) or
similar obligations. The Indebtedness of any Person shall include the
Indebtedness of any other entity (including any partnership in which such Person
is a general partner) to the extent such Person is liable therefor as a result
of such Person's ownership interest in or other relationship with such entity,
except to the extent the terms of such Indebtedness provide that such Person is
not liable therefor.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Indemnitee" has the meaning assigned to such term in Section
10.3(b).
"Initial Syndication Period" means the period commencing on
the Effective Date and ending on the day on which the Administrative Agent
notifies the Borrower in writing that the initial syndication of the credit
facilities established under this Credit Agreement has been completed, but in no
event later than three months after the Effective Date.
"Interest Coverage Ratio" means, as of any fiscal quarter end,
the ratio of (i) EBITDA to (ii) Interest Expense, in each case for the period
comprised of the four consecutive fiscal quarters then ended as reflected in the
financial statements in respect thereof delivered pursuant to Section 6.1(a) or
6.1(c), as the case may be.
"Interest Election Request" means a request by the Borrower to
convert or continue a Borrowing in accordance with Section 3.2.
"Interest Expense" means, subject to Section 1.5, for any
period, the sum, without duplication, of each of the following with respect to
the Borrower and the
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<PAGE> 12
Subsidiaries, determined on a consolidated basis in accordance with GAAP: (i)
all interest that accrued or accreted during such period, regardless of whether
it shall have been paid, (ii) the amount of debt discounts amortized during such
period, (iii) the amortization during such period of all fees payable in
connection with the incurrence of any debt (including any Indebtedness), and
(iv) the interest component of any rents payable under capital leases.
"Interest Payment Date" means (i) with respect to any ABR
Loan, the last day of each March, June, September and December, (ii) with
respect to any Eurodollar Loan, the last day of the Interest Period applicable
to the Borrowing of which such Loan is a part and, in the case of a Eurodollar
Loan with an Interest Period of more than three months' duration, each day prior
to the last day of such Interest Period that occurs at intervals of three
months' duration after the first day of such Interest Period, (iii) as to all
Revolving Loans, the Revolving Maturity Date, (iv) as to all A Term Loans, the A
Term Maturity Date, (v) as to all B Term Loans, the B Term Maturity Date, and
(vi) with respect to any Swingline Loan, the day that such Swingline Loan is
required to be repaid.
"Interest Period" means, with respect to any Eurodollar
Borrowing, the period commencing on the date of such Borrowing and ending on the
numerically corresponding day in the calendar month that is one, two, three, six
or, with the consent of all of the applicable Lenders, nine or twelve months
thereafter, as the Borrower may elect, provided that (i) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day, unless in the case of a Eurodollar
Borrowing only, such next succeeding Business Day would fall in the next
calendar month, in which case such Interest Period shall end on the next
preceding Business Day, (ii) any Interest Period pertaining to a Eurodollar
Borrowing that commences on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the last calendar
month of such Interest Period) shall end on the last Business Day of the last
calendar month of such Interest Period and (c) during the Initial Syndication
Period, the Borrower may only select Interest Periods of not greater than one
month all of which shall commence on the same date and end on the same date. For
purposes hereof, the date of a Borrowing initially shall be the date on which
such Borrowing is made and, thereafter, shall be the effective date of the most
recent conversion or continuation of such Borrowing.
"Interest Rate Protection Arrangement" means any interest rate
swap, cap or collar arrangement or any other derivative product customarily
offered by banks to their customers in order to reduce the exposure of such
customers to interest rate fluctuations, as the same may be amended,
supplemented or otherwise modified from time to time.
"Issuing Bank" means BNY, in its capacity as issuer of Letters
of Credit.
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<PAGE> 13
"LC Disbursement" means a payment made by the Issuing Bank
pursuant to a Letter of Credit.
"LC Exposure" means, at any time, the sum of (a) the aggregate
undrawn amount of all outstanding Letters of Credit at such time plus (b) the
aggregate amount of all LC Disbursements that have not yet been reimbursed by or
on behalf of the Borrower at such time. The LC Exposure of any Lender at any
time shall be its Applicable Percentage of the total LC Exposure at such time.
"Lenders" means the Persons listed on Schedule 2.1 and any
other Person that shall have become a party hereto pursuant to a Revolving
Increase Supplement or an Assignment and Acceptance, other than any such Person
that ceases to be a party hereto pursuant to an Assignment and Acceptance.
Unless the context otherwise requires, the term "Lenders" includes the Swingline
Lender.
"Letter of Credit" means any letter of credit issued (and any
successive renewals thereof) pursuant to this Credit Agreement.
"Leverage Ratio" means, at any date of determination, the
ratio of (i) Total Debt on such date to (ii) Adjusted EBITDA on such date.
"LIBO Rate" means, with respect to any Eurodollar Borrowing
for any Interest Period, the rate of interest per annum as determined by the
Administrative Agent, equal to the rate, as reported by BNY to the
Administrative Agent, quoted by BNY to leading banks in the London interbank
market as the rate at which BNY is offering dollar deposits in an amount
approximately equal to its ratable share of such Eurodollar Borrowing for dollar
deposits with a maturity comparable to such Interest Period at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period.
"Lien" means, with respect to any asset, (a) any mortgage,
deed of trust, lien, pledge, hypothecation, encumbrance, charge or security
interest in, on or of such asset, (b) the interest of a vendor or a lessor under
any conditional sale agreement, capital lease or title retention agreement
relating to such asset and (c) in the case of securities, any purchase option,
call or similar right of a third party with respect to such securities.
"Loan Documents" means this Credit Agreement, the Notes, the
Guarantee Agreement and the Security Documents.
"Loan Parties" means the Borrower and the Subsidiary
Guarantors.
"Loans" means the loans made by the Lenders to the Borrower
pursuant to this Credit Agreement.
"Margin Stock" has the meaning assigned to such term in
Regulation U.
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<PAGE> 14
"Material Adverse Effect" means a material adverse effect on
(a) the business, assets, operations, prospects or condition, financial or
otherwise, of the Borrower and the Subsidiaries, taken as a whole, (b) the
ability of the Loan Parties, taken as a whole, to perform their obligations
under any Loan Document or (c) the rights of or benefits available to any Credit
Party under any Loan Document.
"Material Indebtedness" means Indebtedness (other than
Indebtedness under the Loan Documents) or obligations in respect of one or more
Hedging Agreements, of any one or more of the Borrower and the Subsidiaries in
an aggregate principal amount exceeding $5,000,000. For purposes of determining
Material Indebtedness, the "principal amount" of the obligations of the Borrower
or any Subsidiary in respect of any Hedging Agreement at any time shall be the
maximum aggregate amount (giving effect to any netting agreements) that the
Borrower or such Subsidiary, as applicable, would be required to pay if such
Hedging Agreement were terminated at such time.
"Mortgage" means a mortgage, deed of trust, assignment of
leases and rents or other security document granting a Lien on any Mortgaged
Property to secure the Obligations. Each Mortgage shall be satisfactory in form
and substance to the Administrative Agent.
"Mortgaged Property" means and includes each parcel of real
property and improvements thereto with respect to which a Mortgage is granted
pursuant to Sections 6.12 or 6.13.
"Multiemployer Plan" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Net Proceeds" means, with respect to any event, (a) the cash
proceeds received in respect of such event, including (i) any cash received in
respect of any non-cash proceeds, but only as and when received, (ii) in the
case of a casualty, insurance proceeds and (iii) in the case of a condemnation
or similar event, condemnation awards and similar payments, (b) net of the sum
of (i) all reasonable fees and out-of-pocket expenses paid by the Borrower and
the Subsidiaries to third parties in connection with such event, (ii) in the
case of a sale, transfer, lease or other disposition of an asset, the amount of
all payments required to be made by the Borrower and the Subsidiaries as a
result of such event to repay Indebtedness (other than the Loans) secured by
such asset or otherwise subject to mandatory payment as a result of such event
and (iii) the amount of all taxes paid (or reasonably estimated to be payable)
by the Borrower and the Subsidiaries, and the amount of any reserves established
by the Borrower and the Subsidiaries to fund contingent liabilities reasonably
estimated to be payable, in each case during the year that such event occurred
or the next succeeding year and that are directly attributable to such event (as
determined reasonably and in good faith by the chief financial officer of the
Borrower); provided, however, that, with respect to any sale,
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<PAGE> 15
transfer, lease or other disposition of an asset (including, subject to Section
6.11, a casualty or other insured damage or condemnation or similar proceeding),
if the Borrower shall deliver a certificate of a Financial Officer to the
Administrative Agent by the time of such sale, transfer, lease or other
disposition setting forth the Borrower's intent to use the proceeds of such
sale, transfer, lease or other disposition to replace or repair the assets that
are the subject of such sale, transfer, lease or other disposition with other
assets within 180 days of receipt of such proceeds and no Event of Default shall
have occurred and shall be continuing at the time of such certificate or at the
proposed time of the application of such proceeds, such proceeds shall not
constitute Net Proceeds except to the extent not so used at the end of such
180-day period, at which time such proceeds shall be deemed Net Proceeds.
"Notes" means, (i) with respect to each Lender, a promissory
note evidencing such Lender's Loans payable to the order of such Lender (or, if
required by such Lender, to such Lender and its registered assigns)
substantially in the form of Exhibit C-1, and (ii) with respect to the Swingline
Lender, a promissory note evidencing the Swingline Lender's Swingline Loans
payable to the order of the Swingline Lender (or, if required by the Swingline
Lender, to the Swingline Lender and its registered assigns) substantially in the
form of Exhibit C-2.
"Obligations" has the meaning assigned to such term in the
Security Agreement.
"Other Taxes" means any and all current or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made hereunder or from the execution, delivery
or enforcement of, or otherwise with respect to, the Loan Documents.
"Participant" has the meaning assigned to such term in Section
10.4(e).
"PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA and any successor entity performing similar functions.
"Perfection Certificate" means a certificate in the form of
Annex 2 to the Security Agreement or any other form approved by the
Administrative Agent.
"Permitted Encumbrances" means:
(a) Liens imposed by law for taxes that are not yet
due or are being contested in compliance with Section 6.4;
(b) landlords', vendors', carriers', warehousemen's,
mechanics', materialmen's, repairmen's and other like Liens imposed by law,
arising in the ordinary course of business and securing obligations that are not
overdue by more than 30 days or are being contested in compliance with Section
6.4;
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<PAGE> 16
(c) pledges and deposits made in the ordinary course
of business in compliance with workers' compensation, unemployment insurance and
other social security laws or regulations;
(d) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature, in each case in the ordinary
course of business;
(e) judgment liens in respect of judgments that do
not constitute an Event of Default under clause (k) of Article 8;
(f) easements, zoning restrictions, rights-of-way and
similar encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do not
materially detract from the value of the affected property or interfere with the
ordinary conduct of business of the Borrower or any Subsidiary; and
(g) Liens on Margin Stock to the extent that a
prohibition on such Liens would violate Regulation U.
"Permitted Investments" means:
(a) marketable securities (i) issued or directly and
unconditionally guaranteed as to interest and principal by the United States of
America or (ii) issued by any agency of the United States of America the
obligations of which are backed by the full faith and credit of the United
States of America, in each case maturing within one year after such date;
(b) marketable direct obligations issued by any state
of the United States of America or any political subdivision of any such state
or any public instrumentality thereof, in each case maturing within one year
after such date and having, at the time of the acquisition thereof, the highest
rating obtainable from either Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies ("S&P"), or Moody's Investors Service, Inc.
("Moody's");
(c) commercial paper maturing no more than 270 days
from the date of creation thereof and having, at the time of the acquisition
thereof, a rating of at least A-1 from S&P or at least P-1 from Moody's;
(d) certificates of deposit or bankers' acceptances
maturing within one year and issued or accepted by any Lender or by any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia that (a) is at least "adequately
capitalized" (as defined in the regulations of its primary Federal banking
regulator) and (b) has Tier 1 capital (as defined in such regulations) of not
less than $100,000,000; and
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<PAGE> 17
(e) shares of any money market mutual fund that (i)
has at least 95% of its assets invested continuously in the types of investments
referred to in clauses (a) and (b) above, (ii) has net assets of not less than
$500,000,000, and (iii) has the highest rating obtainable from either S&P or
Moody's.
"Person" means any natural person, corporation, limited
liability company, trust, joint venture, association, company, partnership,
Governmental Authority or other entity.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower,
any Subsidiary or any ERISA Affiliate is (or, if such plan were terminated,
would under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Prepayment/Reduction Event" means:
(a) any sale, transfer, lease or other disposition
(including pursuant to a sale and leaseback transaction) of any non-ordinary
course property or asset of the Borrower or any Subsidiary, other than (i)
dispositions described in clauses (a), (b) and (c) of Section 7.5, and (ii)
other dispositions resulting in aggregate Net Proceeds not exceeding $5,000,000
during any fiscal year of the Borrower;
(b) any casualty or other insured damage to, or any
taking under power of eminent domain or by condemnation or similar proceeding
of, any property or asset of the Borrower or any Subsidiary, other than
casualties, insured damage or takings resulting in aggregate Net Proceeds not
exceeding $1,000,000 during any fiscal year; and
(c) the incurrence by the Borrower or any Subsidiary
of any Indebtedness, other than Indebtedness permitted by Section 7.1(a).
"Prime Rate" means the rate of interest per annum publicly
announced from time to time by BNY as its prime commercial lending rate; each
change in the Prime Rate being effective from and including the date such change
is publicly announced as being effective. The Prime Rate is not intended to be
lowest rate of interest charged by BNY in connection with extensions of credit
to borrowers.
"Rate Change Date" means the first Business Day of the month
immediately succeeding the date a certificate required by Section 6.1(e) is
delivered to the Administrative Agent (or, if such a certificate is delivered on
the first Business Day of a month, such first Business Day).
"Register" has the meaning assigned to such term in Section
10.4(c).
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<PAGE> 18
"Regulation T" means Regulation T of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation U" means Regulation U of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation X" means Regulation X of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Related Parties" means, with respect to any specified Person,
such Person's Affiliates and the respective directors, officers, employees,
agents and advisors of such Person and such Person's Affiliates.
"Required Lenders" means, at any time, Lenders having
Revolving Credit Exposures, outstanding A Term Loans, outstanding B Term Loans
and unused Revolving Commitments representing more than 50% of the sum of the
total Revolving Credit Exposures, outstanding A Term Loans, outstanding B Term
Loans and unused Revolving Commitments at such time.
"Required Principal Payments" means, for any period, the sum
of (i) with respect to all revolving credit and line of credit facilities
(including, without limitation, the facility evidenced hereby) of the Borrower
and its Subsidiaries, determined on a consolidated basis in accordance with
GAAP, an amount equal to the excess, if any, of (a) the aggregate outstanding
principal balance of all Indebtedness thereunder at the beginning of such
period, minus (b) the aggregate amount of all commitments under such revolving
and line of credit facilities at the end of such period, plus (ii) with respect
to all other Indebtedness of the Borrower and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP, all repayments of such Indebtedness
which were required to be made during such period.
"Restricted Payment" means, as to any Person, any dividend or
other distribution by such Person (whether in cash, securities or other
property) with respect to any shares of any class of equity securities of such
Person, or any payment (whether in cash, securities or other property),
including any sinking fund or similar deposit, on account of the purchase,
redemption, retirement, acquisition, cancellation or termination of any such
shares or any option, warrant or other right to acquire any such shares.
"Revolving Commitment" means, with respect to each Lender
having a Revolving Commitment, the commitment of such Lender to make Revolving
Loans, expressed as an amount representing the maximum aggregate amount of such
Lender's Revolving Credit Exposure, as such commitment may be reduced or
increased from time to time pursuant to Section 2.5 or pursuant to assignments
by or to such Lender pursuant to Section 10.4. The initial amount of each
applicable Lender's Revolving Commitment is set forth on Schedule 2.1, or in the
Assignment and Acceptance pursuant to which such
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<PAGE> 19
Lender shall have assumed its Revolving Commitment, as applicable. The initial
aggregate amount of the Revolving Commitments is $125,000,000.
"Revolving Credit Exposure" means, with respect to any Lender
at any time, the sum of the aggregate outstanding principal amount of such
Lender's Revolving Loans, its LC Exposure and its Swingline Exposure at such
time.
"Revolving Increase Supplement" means an increase supplement
in the form of Exhibit G.
"Revolving Loan" means a Loan referred to in Section 2.1(a)
and made pursuant to Section 2.4.
"Revolving Maturity Date" means June 30, 2006.
"Secured Parties" means the "Secured Parties" as defined in
the Security Agreement.
"Security Agreement" means the Security Agreement,
substantially in the form of Exhibit E, among the Borrower, the Subsidiary
Guarantors and the Administrative Agent, for the benefit of the Secured Parties.
"Security Documents" means the Security Agreement, the
Mortgages and each other security agreement, instrument or other document
executed or delivered pursuant to Sections 6.12 or 6.13 to secure any of the
Obligations.
"Statutory Reserve Rate" means a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the Board to which the Administrative Agent is
subject for eurocurrency funding (currently referred to as "Eurocurrency
Liabilities" in Regulation D of the Board). Such reserve percentages shall
include those imposed pursuant to such Regulation D. Eurodollar Loans shall be
deemed to constitute eurocurrency funding and to be subject to such reserve
requirements without benefit of or credit for proration, exemptions or offsets
that may be available from time to time to any Lender under such Regulation D or
any comparable regulation. The Statutory Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"subsidiary" means, with respect to any Person (the "parent")
at any date, any corporation, limited liability company, partnership,
association or other entity the accounts of which would be consolidated with
those of the parent in the parent's consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership,
association or other entity of which securities or other ownership
18
<PAGE> 20
interests representing more than 50% of the equity or more than 50% of the
ordinary voting power or, in the case of a partnership, more than 50% of the
general partnership interests are, as of such date, owned, controlled or held by
the parent or one or more subsidiaries of the parent.
"Subsidiary" means any subsidiary of the Borrower.
"Subsidiary Guarantor" means any Subsidiary that executes and
delivers the Security Documents and the Guarantee Agreement, in each case in
accordance with Sections 5.1(g), 5.1(h), 6.12 and 6.13.
"Swingline Exposure" means, at any time, the aggregate
principal amount of all Swingline Loans outstanding at such time. The Swingline
Exposure of any Lender at any time shall be its Applicable Percentage of the
total Swingline Exposure at such time.
"Swingline Lender" means BNY in its capacity as lender of
Swingline Loans hereunder.
"Swingline Loan" means a Loan in dollars made pursuant to
Section 2.9.
"Taxes" means any and all current or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Term Loan" means an A Term Loan or a B Term Loan, and "Term
Loans" means all A Term Loans and all B Term Loans.
"Total Debt" means all Indebtedness that would be reflected on
the consolidated balance sheet of the Borrower in accordance with GAAP, plus the
amount available to be drawn under all Letters of Credit.
"Transactions" means (a) the execution, delivery and
performance by each Loan Party of each Loan Document to which it is a party, (b)
the borrowing of the Loans and the issuance of the Letters of Credit, and (c)
the use of the proceeds of the Loans and the Letters of Credit.
"Type", when used in reference to any Loan or Borrowing,
refers to whether the rate of interest on such Loan, or on the Loans comprising
such Borrowing, is determined by reference to the Adjusted LIBO Rate or the
Alternate Base Rate.
"Withdrawal Liability" means liability to a Multiemployer Plan
as a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
19
<PAGE> 21
Section 1.2 Classification of Loans and Borrowings
For purposes of this Credit Agreement, Loans may be classified
and referred to by Class (e.g., a "Revolving Loan") or by Type (e.g., a
"Eurodollar Loan") or by Class and Type (e.g., a "Eurodollar Revolving Loan").
Borrowings may also be classified and referred to by Class (e.g., a "Revolving
Borrowing") or by Type (e.g., a "Eurodollar Borrowing") or by Class and Type
(e.g., a "Eurodollar Revolving Borrowing").
Section 1.3 Terms Generally
The definitions of terms herein shall apply equally to the
singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include", "includes" and "including" shall be deemed to
be followed by the phrase "without limitation". The word "will" shall be
construed to have the same meaning and effect as the word "shall". Unless the
context requires otherwise, (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Credit Agreement in its entirety and
not to any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Credit Agreement and (e) the
words "asset" and "property" shall be construed to have the same meaning and
effect and to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts and contract rights. Any
reference to an "applicable Lender" shall mean (i) in the case of Revolving
Borrowings, Swingline Loans and Letters of Credit, Lenders having a Revolving
Commitment, (ii) in the case of A Term Borrowings, Lenders having an A Term
Commitment and (iii) in the case of B Term Borrowings, Lenders having a B Term
Commitment.
Section 1.4 Accounting Terms; GAAP
Except as otherwise expressly provided herein, all terms of an
accounting or financial nature shall be construed in accordance with GAAP, as in
effect from time to time, provided that, if the Borrower notifies the
Administrative Agent that the Borrower requests an amendment to any provision
hereof to eliminate the effect of any change occurring after the date hereof in
GAAP or in the application thereof on the operation of such provision (or if the
Administrative Agent notifies the Borrower that Required Lenders request an
amendment to any provision hereof for such purpose), regardless of whether any
such notice is given before or after such change in GAAP or in the
20
<PAGE> 22
application thereof, then such provision shall be interpreted on the basis of
GAAP as in effect and applied immediately before such change shall have become
effective until such notice shall have been withdrawn or such provision amended
in accordance herewith. Unless the context otherwise requires, any reference to
a fiscal period shall refer to the relevant fiscal period of the Borrower.
Section 1.5 Calculation of Certain Financial Terms
(a) In the event that any annual trade show produced
by the Borrower or any Subsidiary on a regular basis (a "Recurring Trade Show")
occurred both (i) more than once during any four fiscal quarter period (a "4Q
Period"), and (ii) during the last four weeks of such 4Q Period, then each of
EBITDA, Fixed Charges and Interest Expense shall be calculated with respect to
such 4Q Period as if all such Recurring Trade Shows that occurred during such 4Q
Period (other than the last such Recurring Trade Show) occurred instead in the
fiscal quarter immediately preceding such 4Q Period.
(b) In the event that any Recurring Trade Show did
not occur during any 4Q Period, but did occur during the four week period
immediately succeeding such 4Q Period, then each of EBITDA, Fixed Charges and
Interest Expense shall be calculated with respect to such 4Q Period as if the
Recurring Trade Show, if any, that last occurred during the fiscal quarter
immediately preceding such 4Q Period occurred instead in the last fiscal quarter
of such 4Q Period.
ARTICLE 2. THE CREDITS
Section 2.1 Commitments
(a) Subject to the terms and conditions set forth
herein, each Lender having a Revolving Commitment severally agrees to make
Revolving Loans to the Borrower from time to time during the Availability Period
in an aggregate principal amount that will not result in such Lender's Revolving
Credit Exposure exceeding such Lender's Revolving Commitment. Within the
foregoing limits and subject to the terms and conditions set forth herein, the
Borrower may borrow, prepay and reborrow Revolving Loans.
(b) Subject to the terms and conditions hereof, each
Lender having an A Term Commitment severally agrees to make an A Term Loan to
the Borrower on the Effective Date in a principal amount equal to such A Term
Commitment. A Term Loans which are prepaid or repaid, in whole or in part, may
not be reborrowed.
(c) Subject to the terms and conditions hereof, each
Lender having a B Term Commitment severally agrees to make a B Term Loan to the
Borrower on the Effective Date in a principal amount equal to such B Term
Commitment. B Term Loans which are prepaid or repaid, in whole or in part, may
not be reborrowed.
21
<PAGE> 23
Section 2.2 Loans and Borrowings
(a) Each Revolving Loan shall be made as part of a
Borrowing consisting of Revolving Loans made by the applicable Lenders ratably
in accordance with their respective Revolving Commitments, and each A Term Loan
and B Term Loan shall be made as part of a Borrowing consisting of A Term Loans
or B Term Loans, as applicable, made by the applicable Lenders in accordance
with their respective A Term Commitments or B Term Commitments, as applicable.
The failure of any applicable Lender to make any Loan required to be made by it
shall not relieve any other Lender of its obligations hereunder, provided that
the Revolving Commitments, A Term Commitments and B Term Commitments of the
applicable Lenders are several, and no Lender shall be responsible for any other
Lender's failure to make Loans as required. Subject to Section 3.4, each
Borrowing (other than a Swingline Borrowing) shall be comprised entirely of (i)
Revolving Loans, A Term Loans or B Term Loans, as applicable, and (ii) ABR Loans
or Eurodollar Loans, as applicable, in each case as the Borrower may request in
accordance herewith. Each Swingline Borrowing shall be a Swingline Loan. Each
applicable Lender at its option may make any Eurodollar Loan by causing any
domestic or foreign branch or Affiliate of such Lender to make such Loan,
provided that any exercise of such option shall not affect the obligation of the
Borrower to repay such Loan in accordance with the terms of this Credit
Agreement.
(b) At the commencement of each Interest Period for
any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is
an integral multiple of $1,000,000 and not less than $3,000,000. At the time
that each ABR Borrowing is made, such Borrowing shall be in an aggregate amount
that is an integral multiple of $1,000,000 and not less than $1,000,000,
provided that an ABR Revolving Borrowing may be in an aggregate amount that is
equal to the entire unused balance of the total Revolving Commitments or in an
aggregate amount than is required to finance the reimbursement of an LC
Disbursement as contemplated by Section 2.8(d). Borrowings of more than one Type
may be outstanding at the same time, provided that there shall not at any time
be more than a total of 10 Eurodollar Borrowings outstanding.
(c) Notwithstanding any other provision of this
Credit Agreement, the Borrower shall not be entitled to request, or to elect to
convert or continue, any Borrowing if the Interest Period requested with respect
thereto would end after (i) the Revolving Maturity Date, in the case of
Revolving Loans, (ii) the A Term Maturity Date, in the case of A Term Loans, or
(iii) the B Term Maturity Date, in the case of B Term Loans.
Section 2.3 Requests for Borrowings
To request a Borrowing, the Borrower shall notify the
Administrative Agent of such request by telephone (a) in the case of a
Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three
Business Days before the date of the
22
<PAGE> 24
proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 11:00
a.m., New York City time, one Business Day before the date of the proposed
Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall
be confirmed promptly by hand delivery or telecopy to the Administrative Agent
of a written Borrowing Request in a form approved by the Administrative Agent
signed by the Borrower. Each such telephonic and written Borrowing Request shall
specify the following information in compliance with Section 2.2:
(i) the aggregate amount of the requested Borrowing;
(ii) the date of such Borrowing, which shall be a
Business Day;
(iii) whether such Borrowing is to be a Revolving
Borrowing, an A Term Borrowing or a B Term Borrowing;
(iv) whether such Borrowing is to be an ABR Borrowing
or a Eurodollar Borrowing;
(v) in the case of a Eurodollar Borrowing, the
initial Interest Period to be applicable thereto, which shall be a
period contemplated by the definition of the term "Interest Period";
(vi) the location and number of the Borrower's
account to which funds are to be disbursed, which shall comply with the
requirements of Section 2.4; and
(vii) a reasonably detailed calculation of the
Leverage Ratio on a pro forma basis immediately after giving effect to
such Borrowing.
If no election as to the Type of Borrowing is specified, then
the requested Borrowing shall be an ABR Borrowing. If no Interest Period is
specified with respect to any requested Eurodollar Borrowing, then the Borrower
shall be deemed to have selected an Interest Period of one month's duration.
Promptly following receipt of a Borrowing Request in accordance with this
Section, the Administrative Agent shall advise each applicable Lender of the
details thereof and of the amount of such Lender's Loan to be made as part of
the requested Borrowing. Notwithstanding anything to the contrary contained in
this Section 2.3, Swingline Borrowings shall be made in accordance with Section
2.9, and not this Section 2.3.
Section 2.4 Funding of Borrowings
(a) Each Lender shall make each Loan to be made by it
hereunder on the proposed date thereof by wire transfer of immediately available
funds by 1:00 p.m., New York City time, to the account of the Administrative
Agent most recently designated by it for such purpose by notice to the Lenders,
provided that Swingline Loans shall be made
23
<PAGE> 25
only as provided in Section 2.9. Subject to Section 5.2, the Administrative
Agent will make such Loans available to the Borrower by promptly crediting or
otherwise transferring the amounts so received, in like funds, to an account of
the Borrower maintained with the Administrative Agent and designated by the
Borrower in the applicable Borrowing Request, provided that ABR Revolving Loans
made to finance the reimbursement of an LC Disbursement as provided in Section
2.8(d) shall be remitted by the Administrative Agent to the Issuing Bank,
provided further that ABR Revolving Loans made to finance the repayment of a
Swingline Loan as provided in Section 2.9(c) shall be remitted by the
Administrative Agent to the Swingline Lender.
(b) Unless the Administrative Agent shall have received notice
from a Lender prior to the proposed date of any Borrowing that such Lender will
not make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section,
paragraph (d) of Section 2.8 or paragraph (c) of Section 2.9 and may, in
reliance upon such assumption, make available to the Borrower a corresponding
amount. In such event, if a Lender has not in fact made its share of the
applicable Borrowing available to the Administrative Agent, then the applicable
Lender and the Borrower severally agree to pay to the Administrative Agent
forthwith on demand such corresponding amount with interest thereon, for each
day from and including the date such amount is made available to the Borrower to
but excluding the date of payment to the Administrative Agent, at (i) in the
case of such Lender, the greater of the Federal Funds Rate and a rate determined
by the Administrative Agent in accordance with banking industry rules on
interbank compensation or (ii) in the case of the Borrower, the interest rate
that would be otherwise applicable to such Borrowing. If such Lender pays such
amount to the Administrative Agent, then such amount shall constitute such
Lender's Loan included in such Borrowing.
Section 2.5 Termination, Reduction and Increase of Revolving
Commitments
(a) Unless previously terminated, the Revolving Commitments
shall terminate on the Revolving Maturity Date.
(b) On each date below, the Revolving Commitments shall be
automatically reduced by an amount equal to (i) the total of the Revolving
Commitments as of September 30, 2003 multiplied by (ii) the percentage set forth
below adjacent to such date:
<TABLE>
<CAPTION>
DATE PERCENTAGE
---- ----------
<S> <C>
September 30, 2003 7.5%
December 31, 2003 7.5%
</TABLE>
24
<PAGE> 26
<TABLE>
<CAPTION>
DATE PERCENTAGE
---- ----------
<S> <C>
March 31, 2004 7.5%
June 30, 2004 7.5%
September 30, 2004 7.5%
December 31, 2004 7.5%
March 31, 2005 7.5%
June 30, 2005 7.5%
September 30, 2005 10%
December 31, 2005 10%
March 31, 2006 10%
June 30, 2006 10%
</TABLE>
(c) The Borrower may at any time terminate, or from time to
time reduce, the Revolving Commitments, provided that (i) the Borrower shall not
terminate or reduce the Revolving Commitments if, after giving effect to any
concurrent prepayment of the Revolving Loans in accordance with Section 2.7, the
sum of the Revolving Credit Exposures would exceed the total Revolving
Commitments, and (ii) each such reduction shall be in an amount that is an
integral multiple of $1,000,000 and not less than $500,000.
(d) The Borrower shall notify the Administrative Agent of any
election to terminate or reduce the Revolving Commitments under paragraph (c) of
this Section at least three Business Days prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, the Administrative Agent
shall advise the Lenders of the contents thereof. Each notice delivered by the
Borrower pursuant to this Section shall be irrevocable, provided that a notice
of termination of the Revolving Commitments delivered by the Borrower may state
that such notice is conditioned upon the effectiveness of other credit
facilities, in which case such notice may be revoked by the Borrower (by notice
to the Administrative Agent on or prior to the specified effective date) if such
condition is not satisfied. Any termination or reduction of the Revolving
Commitments hereunder shall be permanent. Each reduction of the Revolving
Commitments hereunder shall be made ratably among the applicable Lenders in
accordance with their respective Revolving Commitments.
25
<PAGE> 27
(e) In addition to any termination or reduction of the
Revolving Commitments under paragraphs (a), (b) and (c) of this Section, the
Revolving Commitments shall be reduced as required under Section 2.7(b).
(f) The Borrower may at any time and from time to time prior
to September 30, 2000, at its sole cost, expense and effort, request any one or
more of the Lenders to increase its Revolving Commitment (the decision to
increase the Revolving Commitment of a Lender to be within the sole and absolute
discretion of such Lender), or any other Person reasonably satisfactory to the
Administrative Agent and the Issuing Bank to provide a new Revolving Commitment,
by submitting a Revolving Increase Supplement duly executed by the Borrower and
each such Lender or other Person, as the case may be. If such Revolving Increase
Supplement is in all respects reasonably satisfactory to the Administrative
Agent, the Administrative Agent shall execute such Revolving Increase Supplement
and deliver a copy thereof to the Borrower and each such Lender or other Person,
as the case may be. Upon execution and delivery of such Revolving Increase
Supplement by the Administrative Agent, (i) in the case of each such Lender,
such Lender's Revolving Commitment shall be increased to the amount set forth in
such Revolving Increase Supplement, (ii) in the case of each such other Person,
such other Person shall become a party hereto and shall for all purposes of the
Loan Documents be deemed a "Lender" having a Revolving Commitment as set forth
in such Revolving Increase Supplement, and (iii) in each case, the Revolving
Commitment of such Lender or such other Person, as the case may be, shall be as
set forth in the applicable Revolving Increase Supplement; provided, however,
that:
(A) immediately after giving effect thereto, the sum
of all increases in the aggregate Revolving Commitments shall
not exceed $60,000,000;
(B) each such increase shall be in an amount not less
than $10,000,000 or such amount plus an integral multiple of
$1,000,000;
(C) the Revolving Commitments shall not be increased
on more than two occasions;
(D) if Revolving Loans would be outstanding
immediately after giving effect to each such increase, then
simultaneously with such increase (1) each such Lender, each
such other Person and each other Lender (upon appropriate
notice thereof) shall be deemed to have entered into a master
assignment and acceptance agreement, in form and substance
substantially similar to Exhibit A, pursuant to which each
such other Lender shall have assigned to each such Lender and
each such other Person a portion of its Revolving Loans
necessary to reflect proportionately the Revolving Commitments
as adjusted in accordance with this subsection (f), and (2) in
connection with such assignment, each
26
<PAGE> 28
such Lender and each such other Person shall pay to the
Administrative Agent, for the account of the other Lenders,
such amount as shall be necessary to appropriately reflect the
assignment to it of Revolving Loans, and in connection with
such master assignment each such other Lender may treat the
assignment of Eurodollar Borrowings as a prepayment of such
Eurodollar Borrowings for purposes of Section 3.6;
(E) each such other Person shall have delivered to
the Administrative Agent and the Borrower all forms, if any,
that are required to be delivered by such other Person
pursuant to Section 3.7; and
(F) the Borrower shall have delivered to the
Administrative Agent and each Lender a certificate of a
Financial Officer demonstrating pro-forma compliance with the
terms of this Agreement through the Revolving Maturity Date
and the Administrative Agent shall have received such
certificates, legal opinions and other items as it shall
reasonably request in connection with such increase.
Section 2.6 Repayment of Loans; Evidence of Debt
(a) The Borrower hereby unconditionally promises to pay (i) to
the Administrative Agent for the account of each applicable Lender the then
unpaid principal amount of each Revolving Loan, A Term Loan and B Term Loan on
the Revolving Maturity Date, A Term Maturity Date and B Term Maturity Date,
respectively, and (ii) to the Swingline Lender the then unpaid principal amount
of each Swingline Loan on the earlier of (x) the maturity date selected by the
Borrower for such Swingline Loan and (y) the Revolving Maturity Date.
(b) On each date below, the aggregate unpaid principal balance
of the A Term Loans shall be due and payable in an amount equal to (i)
$140,000,000 multiplied by (ii) the percentage set forth below adjacent to such
date:
<TABLE>
<CAPTION>
DATE PERCENTAGE
---- ----------
<S> <C>
September 30, 2000 1.25%
December 31, 2000 1.25%
March 31, 2001 1.25%
June 30, 2001 1.25%
September 30, 2001 2.50%
December 31, 2001 2.50%
March 31, 2002 2.50%
June 30, 2002 2.50%
</TABLE>
27
<PAGE> 29
<TABLE>
<CAPTION>
DATE PERCENTAGE
---- ----------
<S> <C>
September 30, 2002 3.75%
December 31, 2002 3.75%
March 31, 2003 3.75%
June 30, 2003 3.75%
September 30, 2003 5.00%
December 31, 2003 5.00%
March 31, 2004 5.00%
June 30, 2004 5.00%
September 30, 2004 6.25%
December 31, 2004 6.25%
March 31, 2005 6.25%
June 30, 2005 6.25%
September 30, 2005 6.25%
December 31, 2005 6.25%
March 31, 2006 6.25%
June 30, 2006 6.25%
</TABLE>
(c) On each date below, the aggregate unpaid principal balance
of the B Term Loans shall be due and payable in an amount equal to (i)
$75,000,000 multiplied by (ii) the percentage set forth below adjacent to such
date:
<TABLE>
<CAPTION>
DATE PERCENTAGE
---- ----------
<S> <C>
September 30, 2000 0.25%
December 31, 2000 0.25%
March 31, 2001 0.25%
June 30, 2001 0.25%
September 30, 2001 0.25%
December 31, 2001 0.25%
March 31, 2002 0.25%
June 30, 2002 0.25%
September 30, 2002 0.25%
December 31, 2002 0.25%
</TABLE>
28
<PAGE> 30
<TABLE>
<CAPTION>
DATE PERCENTAGE
---- ----------
<S> <C>
March 31, 2003 0.25%
June 30, 2003 0.25%
September 30, 2003 0.25%
December 31, 2003 0.25%
March 31, 2004 0.25%
June 30, 2004 0.25%
September 30, 2004 0.25%
December 31, 2004 0.25%
March 31, 2005 0.25%
June 30, 2005 0.25%
September 30, 2005 0.25%
December 31, 2005 0.25%
March 31, 2006 0.25%
June 30, 2006 0.25%
September 30, 2006 23.5%
December 31, 2006 23.5%
March 31, 2007 23.5%
June 30, 2007 23.5%
</TABLE>
(d) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the debt of the Borrower to such
Lender resulting from each Loan made by such Lender, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder.
(e) The Administrative Agent shall maintain accounts in which
it shall record (i) the amount of each Loan made hereunder, the Class and Type
thereof and the Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) the amount of any sum received by
the Administrative Agent hereunder for the account of the Lenders and each
Lender's share thereof.
(f) The entries made in the accounts maintained pursuant to
paragraphs (d) or (e) of this Section shall, to the extent not inconsistent with
any entries made in any promissory note, be prima facie evidence of the
existence and amounts of the obligations recorded therein, provided that the
failure of any Lender or the Administrative Agent to maintain such accounts or
any error therein shall not in any manner affect the obligation
29
<PAGE> 31
of the Borrower to repay the Loans in accordance with the terms of this Credit
Agreement.
Section 2.7 Prepayment of Loans
(a) The Borrower shall have the right at any time and from
time to time to prepay any Borrowing in whole or in part, subject to the
requirements of this Section, provided that each prepayment of a Term Loan shall
be allocated to the A Term Loans and the B Term Loans, on a pro rata basis,
based on the aggregate outstanding principal balance of the Term Loans.
(b) In the event and on each occasion that any Net Proceeds
are received by or on behalf of the Borrower or any Subsidiary in respect of any
Prepayment/Reduction Event, then, immediately after such Net Proceeds are
received, (i) the Borrower shall prepay the A Term Loans and the B Term Loans,
on a pro rata basis, in an aggregate amount equal to such Net Proceeds, and (ii)
following the repayment of the A Term Loans and the B Term Loans in full, the
Revolving Commitments shall be automatically reduced by an amount equal to the
excess of such Net Proceeds over the portion thereof, if any, used to prepay the
A Term Loans and the B Term Loans. Notwithstanding anything herein to the
contrary, the Lenders having outstanding B Term Loans may elect to forfeit any
prepayment of a B Term Borrowing under this Section 2.7(b), provided that all
such Lenders make such an election with respect to such prepayment. To make such
an election, such Lenders shall notify the Administrative Agent and the Borrower
thereof by telephone not later than one Business Day after the Administrative
Agent shall have advised such Lenders of such prepayment in accordance with
Section 2.7(d). Each such telephonic election shall be irrevocable and shall be
confirmed promptly by hand delivery or telecopy to the Administrative Agent of a
written election in a form approved by the Administrative Agent and signed by
each such Lender. Promptly following receipt of such election, the
Administrative Agent shall advise each Lender of the details thereof, and any
amount that, but for this provision, would have been applied to the B Term Loans
shall instead be applied to the A Term Loans.
(c) In the event of any partial reduction or termination of
the Revolving Commitments, then (i) at or prior to the date of such reduction or
termination, the Administrative Agent shall notify the Borrower and the
applicable Lenders of the sum of the Revolving Credit Exposures after giving
effect thereto and (ii) if such sum would exceed the total Revolving Commitments
after giving effect to such reduction or termination, then the Borrower shall,
on the date of such reduction or termination, prepay Revolving Borrowings in an
amount sufficient to eliminate such excess.
(d) The Borrower shall notify the Administrative Agent by
telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New York City
time, three Business
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Days before the date of prepayment or (ii) in the case of prepayment of an ABR
Borrowing, not later than 11:00 a.m., New York City time, one Business Day
before the date of prepayment. Each such notice shall be irrevocable and shall
specify the prepayment date and the principal amount of each Borrowing or
portion thereof to be prepaid, provided that, if a notice of prepayment is given
in connection with a conditional notice of termination of the Revolving
Commitments as contemplated by Section 2.5, then such notice of prepayment may
be revoked if such notice of termination is revoked in accordance with Section
2.5. Promptly following receipt of any such notice relating to a Borrowing, the
Administrative Agent shall advise the Lenders of the contents thereof. Each
partial prepayment of any Borrowing hereunder (other than Swingline Borrowings)
shall, when added to the amount of each concurrent prepayment of other
Borrowings (other than Swingline Borrowings), be in an integral multiple of
$500,000 and not less than $2,500,000. Each prepayment of a Borrowing shall be
applied ratably to the Loans included in the prepaid Borrowing. Each prepayment
of A Term Loans or B Term Loans shall be applied ratably among the remaining
installments of principal required under Section 2.6(b) or 2.6(c), as
applicable. Prepayments shall be accompanied by accrued interest to the extent
required by Section 3.1.
Section 2.8 Letters of Credit.
(a) General. Subject to the terms and conditions set forth
herein, the Borrower may request the issuance of Letters of Credit denominated
in dollars for its own account, in a form reasonably acceptable to the
Administrative Agent and the Issuing Bank, at any time and from time to time
during the Availability Period. In the event of any inconsistency between the
terms and conditions of this Credit Agreement and the terms and conditions of
any letter of credit application or other agreement submitted by the Borrower
to, or entered into by the Borrower with, the Issuing Bank relating to any
Letter of Credit, the terms and conditions of this Credit Agreement shall
control. Notwithstanding anything to the contrary herein contained, the Issuing
Bank shall not be required to issue any Letter of Credit if prior thereto or
simultaneously therewith, the Borrower shall not have borrowed Revolving Loans.
(b) Notice of Issuance; Amendment; Renewal; Extension; Certain
Conditions. To request the issuance of a Letter of Credit (or the amendment,
renewal or extension of an outstanding Letter of Credit), the Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the Issuing Bank) to the Issuing
Bank and the Administrative Agent (reasonably in advance of the requested date
of issuance, amendment, renewal or extension) a notice requesting the issuance
of a Letter of Credit, or identifying the Letter of Credit to be amended,
renewed or extended, and specifying the date of issuance, amendment, renewal or
extension (which shall be a Business Day), the date on which such Letter of
Credit is to expire (which shall comply with paragraph (c) of this Section), the
amount of such Letter of Credit, the name and address of the beneficiary thereof
and such other information as shall be necessary to issue, amend, renew or
extend such Letter
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of Credit. If requested by the Issuing Bank, the Borrower also shall submit a
letter of credit application on the Issuing Bank's standard form in connection
with any request for, and prior to the issuance of, a Letter of Credit. A Letter
of Credit shall be issued, amended, renewed or extended only if (and, upon
issuance, amendment, renewal or extension of each Letter of Credit, the Borrower
shall be deemed to represent and warrant that), after giving effect to such
issuance, amendment, renewal or extension (i) the LC Exposure shall not exceed
$5,000,000 and (ii) the sum of the total Revolving Credit Exposures shall not
exceed the total Revolving Commitments.
(c) Expiration Date. Each Letter of Credit shall expire at or
prior to the close of business on the earlier of (i) the date that is one year
after the date of the issuance of such Letter of Credit (or, in the case of any
renewal or extension thereof, one year after such renewal or extension) and (ii)
the date that is ten Business Days prior to the Revolving Maturity Date,
provided that any Letter of Credit may provide for the renewal thereof for
additional one-year periods (which shall in no event extend beyond the date that
is ten Business Days prior to the Revolving Maturity Date).
(d) Reimbursement. If the Issuing Bank shall make any LC
Disbursement in respect of a Letter of Credit, then the Issuing Bank shall
either (1) notify the Borrower to reimburse the Issuing Bank therefor, in which
case the Borrower shall reimburse such LC Disbursement by paying to the
Administrative Agent an amount equal to such LC Disbursement and any accrued
interest thereon not later than 1:00 p.m., New York City time, on the date that
such LC Disbursement is made, if the Borrower shall have received notice of such
LC Disbursement prior to 12:00 noon, New York City time, on such date, or if
such notice has not been received by the Borrower prior to such time on such
date, then not later than 1:00 p.m., New York City time, on (i) the Business Day
that the Borrower receives such notice, if such notice is received prior to
12:00 noon, New York City time, on the day of receipt or (ii) the Business Day
immediately following the day that the Borrower receives such notice, if such
notice is not received prior to such time on the day of receipt, provided that,
if the LC Disbursement is equal to or greater than $1,000,000, the Borrower may,
subject to the conditions of borrowing set forth herein, request in accordance
with Section 2.3 or Section 2.9 that such payment be financed with an ABR
Revolving Borrowing or a Swingline Loan, as applicable, in an equivalent amount
and, to the extent so financed, the Borrower's obligation to make such payment
shall be discharged and replaced by the resulting ABR Revolving Borrowing, or
(2) notify the Administrative Agent that the Issuing Bank is requesting that the
applicable Lenders make an ABR Revolving Borrowing in an amount equal to such LC
Disbursement and any accrued interest thereon, in which case (i) the
Administrative Agent shall notify each applicable Lender of the details thereof
and of the amount of such Lender's Loan to be made as part of such ABR Revolving
Borrowing, and (ii) each Lender shall, whether or not any Default shall have
occurred and be continuing, any representation or warranty shall be accurate,
any condition to the making of any loan hereunder shall have been fulfilled, or
any other matter whatsoever, make the Loan to be made by it under this paragraph
by wire transfer of immediately available funds to the
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account of the Administrative Agent most recently designated by it for such
purpose by notice to the Lenders, (A) on such date, in the event that such
Lender shall have received notice of such ABR Revolving Borrowing prior to 12:00
noon, New York City time, or (B) if such notice has not been received by such
Lender prior to such time on such date, then not later than 1:00 p.m., New York
City time, on (X) the Business Day that such Lender receives such notice, if
such notice is received prior to 12:00 noon, New York City time, on the day of
receipt or (Y) the Business Day immediately following the day that such Lender
receives such notice, if such notice is not received prior to such time on the
day of receipt. Such Loans shall, for all purposes hereof, be deemed to be an
ABR Revolving Borrowing referred to in Section 2.1(a) and made pursuant to
Section 2.3, and the Lenders obligations to make such Loans shall be absolute
and unconditional. The Administrative Agent will make such Loans available to
the Issuing Bank by promptly crediting or otherwise transferring the amounts so
received, in like funds, to the Issuing Bank for the purpose of repaying in full
the LC Disbursement and all accrued interest thereon.
(e) Participations. By the issuance of a Letter of Credit (or
an amendment to a Letter of Credit increasing the amount thereof) and without
any further action on the part of the Issuing Bank or the applicable Lenders,
the Issuing Bank hereby grants to each Lender having a Revolving Commitment, and
each such Lender hereby acquires from the Issuing Bank, a participation in such
Letter of Credit equal to such Lender's Applicable Percentage of the aggregate
amount available to be drawn under such Letter of Credit. If the Borrower fails
to make any payment required by paragraph (d) of this Section, or if any such
sum paid by the Borrower is required to be refunded to the Borrower for any
reason, the Administrative Agent shall notify each applicable Lender of the
applicable LC Disbursement, the payment then due from the Borrower in respect
thereof and such Lender's Applicable Percentage thereof. Each applicable Lender
shall pay to the Administrative Agent its Applicable Percentage of an amount
equal to the payment then due from the Borrower, in the same manner as provided
in Section 2.4 with respect to Loans made by such Lender (and Section 2.4 shall
apply, mutatis mutandis, to the payment obligations of the applicable Lenders),
by wire transfer of immediately available funds to the account of the
Administrative Agent most recently designated by it for such purpose by notice
to the Lenders, (A) on such date, in the event that such Lender shall have
received notice thereof prior to 12:00 noon, New York City time, or (B) if such
notice has not been received by such Lender prior to such time on such date,
then not later than 1:00 p.m., New York City time, on (X) the Business Day that
such Lender receives such notice, if such notice is received prior to 12:00
noon, New York City time, on the day of receipt or (Y) the Business Day
immediately following the day that such Lender receives such notice, if such
notice is not received prior to such time on the day of receipt. The
Administrative Agent shall promptly pay to the Issuing Bank the amounts so
received by it from the applicable Lenders. Promptly following receipt by the
Administrative Agent of any payment in respect of such LC Disbursement from the
Borrower pursuant to paragraph (d) of this Section, the Administrative Agent
shall
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distribute such payment to the Issuing Bank or, to the extent that Lenders have
made payments pursuant to this paragraph to reimburse the Issuing Bank, then to
such Lenders and the Issuing Bank as their interests may appear. Any payment
made by a Lender pursuant to this paragraph to reimburse the Issuing Bank for
any LC Disbursement (other than the funding of ABR Revolving Loans or Swingline
Loans as contemplated above) shall not constitute a Loan and shall not relieve
the Borrower of its obligation to reimburse such LC Disbursement. Each Lender
acknowledges and agrees that its obligation to acquire participations pursuant
to this paragraph in respect of Letters of Credit is absolute and unconditional
and shall not be affected by any circumstance whatsoever, including any
amendment, renewal or extension of any Letter of Credit or the occurrence and
continuance of a Default or reduction or termination of the Revolving
Commitments, and that each such payment shall be made without any offset,
abatement, withholding or reduction whatsoever; provided, however, that no
Lender shall be obligated to make any payment to the Administrative Agent for
any wrongful LC Disbursement made by the Issuing Bank as a result of acts or
omissions constituting willful misconduct or gross negligence on the part of the
Issuing Bank.
(f) Obligations Absolute. The Borrower's obligations to
reimburse LC Disbursements as provided in paragraph (d) of this Section shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Credit Agreement under any and all
circumstances whatsoever and irrespective of (i) any lack of validity or
enforceability of any Letter of Credit or this Credit Agreement, or any term or
provision therein or herein, (ii) any draft or other document presented under a
Letter of Credit proving to be forged, fraudulent or invalid in any respect or
any statement therein being untrue or inaccurate in any respect, (iii) payment
by the Issuing Bank under a Letter of Credit against presentation of a draft or
other document that does not comply with the terms of such Letter of Credit or
(iv) any other event or circumstance whatsoever, whether or not similar to any
of the foregoing, that might, but for the provisions of this Section, constitute
a legal or equitable discharge of, or provide a right of setoff against, the
Borrower's obligations hereunder. Neither any Credit Party nor any of their
respective Related Parties shall have any liability or responsibility by reason
of or in connection with the issuance or transfer of any Letter of Credit or any
payment or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of the
Issuing Bank; provided that the foregoing shall not be construed to excuse the
Issuing Bank from liability to the Borrower to the extent of any direct damages
(as opposed to consequential damages, claims in respect of which are hereby
waived by the Borrower to the extent permitted by applicable law) suffered by
the Borrower that are caused by the Issuing Bank's failure to exercise care when
determining whether drafts and other documents presented under a
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Letter of Credit comply with the terms thereof. The parties hereto expressly
agree that, in the absence of gross negligence or willful misconduct on the part
of the Issuing Bank (as finally determined by a court of competent
jurisdiction), the Issuing Bank shall be deemed to have exercised care in each
such determination. In furtherance of the foregoing and without limiting the
generality thereof, the parties agree that, with respect to documents presented
that appear on their face to be in substantial compliance with the terms of a
Letter of Credit, the Issuing Bank may, in its sole discretion, either accept
and make payment upon such documents without responsibility for further
investigation, regardless of any notice or information to the contrary, or
refuse to accept and make payment upon such documents if such documents are not
in strict compliance with the terms of such Letter of Credit.
(g) Disbursement Procedures. The Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Issuing Bank shall promptly
notify the Administrative Agent and the Borrower by telephone (confirmed by
telecopy) of such demand for payment and whether the Issuing Bank has made or
will make an LC Disbursement thereunder; provided that any failure to give or
delay in giving such notice shall not relieve the Borrower of its obligation to
reimburse the Issuing Bank and the applicable Lenders with respect to any such
LC Disbursement.
(h) Interim Interest. If the Issuing Bank shall make any LC
Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in
full on the date such LC Disbursement is made, the unpaid amount thereof shall
bear interest, for each day from and including the date such LC Disbursement is
made to but excluding the date that the Borrower reimburses such LC
Disbursement, at the rate per annum then applicable to ABR Revolving Loans;
provided that, if the Borrower fails to reimburse such LC Disbursement when due
pursuant to paragraph (d) of this Section, then Section 3.1(c) shall apply.
Interest accrued pursuant to this paragraph shall be for the account of the
Issuing Bank, except that interest accrued on and after the date of payment by
any Lender pursuant to paragraph (e) of this Section to reimburse the Issuing
Bank shall be for the account of such Lender to the extent of such payment.
(i) Cash Collateralization. If any Event of Default shall
occur and be continuing, on the Business Day that the Borrower receives notice
from the Administrative Agent or the Required Lenders (or, if the maturity of
the Loans has been accelerated, Lenders with LC Exposure representing greater
than 50% of the total LC Exposure) demanding the deposit of cash collateral
pursuant to this paragraph, the Borrower shall deposit in an account with the
Administrative Agent, in the name of the Administrative Agent and for the
benefit of the applicable Lenders, an amount in cash equal to the LC Exposure
with respect to Letters of Credit as of such date plus any accrued and unpaid
interest thereon; provided that the obligation to deposit such cash collateral
shall become effective immediately, and such deposit shall become immediately
due and payable, without demand or other notice of any kind, upon the
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occurrence of any Event of Default with respect to the Borrower described in
clause (h) or (i) of Article 8. Such deposit shall be held by the Administrative
Agent as collateral for the payment and performance of the obligations of the
Borrower under this Credit Agreement. The Administrative Agent shall have
exclusive dominion and control, including the exclusive right of withdrawal,
over such account. Other than any interest earned on the investment of such
deposit, which investments shall be in direct short-term obligations of, or
short-term obligations the principal of and interest on which are
unconditionally guaranteed by, the United States of America, in each case
maturing no later than the expiry date of the Letter of Credit giving rise to
the relevant LC Exposure, such deposit shall not bear interest. Interest or
profits, if any, on such investments shall accumulate in such account. Moneys in
such account shall be applied by the Administrative Agent to reimburse the
Issuing Bank for LC Disbursements for which it has not been reimbursed and, to
the extent not so applied, shall be held for the satisfaction of the
reimbursement obligations of the Borrower for the LC Exposure at such time or,
if the maturity of the Loans has been accelerated (but subject to the consent of
Lenders with LC Exposure representing greater than 50% of the total LC
Exposure), be applied to satisfy other obligations of the Borrower under this
Credit Agreement. If the Borrower is required to provide an amount of cash
collateral hereunder as a result of the occurrence of an Event of Default, such
amount (to the extent not applied as aforesaid) shall be returned to the
Borrower within three Business Days after all Events of Default have been cured
or waived.
Section 2.9 Swingline Loans
(a) Subject to the terms and conditions set forth herein, the
Swingline Lender agrees to make Swingline Loans to the Borrower in dollars from
time to time on any Business Day during the period from the Effective Date to
the tenth Business Day preceding the Revolving Maturity Date in an aggregate
principal amount at any time outstanding that will not result in the Swingline
Exposure exceeding $5,000,000 or result in the sum of the total Revolving Credit
Exposures exceeding the total Revolving Commitments, provided that the Swingline
Lender shall not be obligated to make a Swingline Loan to refinance an
outstanding Swingline Loan. Notwithstanding the foregoing, the Swingline Lender
shall not be required to make a Swingline Loan if (i) prior thereto or
simultaneously therewith the Borrower shall not have borrowed Revolving Loans,
(ii) any applicable Lender shall be in default of its obligations under this
Credit Agreement or (iii) any Credit Party shall have notified the Swingline
Lender and the Borrower in writing at least one Business Day prior to the
Borrowing Date with respect to such Swingline Loan, that the conditions set
forth in Section 5.2 have not been satisfied and such conditions remain
unsatisfied as of the requested time of the making of such Swingline Loan. Each
Swingline Loan shall be due and payable on the maturity thereof, provided that
in no event shall such maturity be later than the tenth Business Day preceding
the Revolving Maturity Date. Notwithstanding anything to the contrary herein
contained, all Swingline Loans shall at all times consist of ABR Borrowings.
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(b) To request a Swingline Loan, the Borrower shall notify the
Administrative Agent and the Swingline Lender by telephone (confirmed by
telecopy) no later than 12:00 noon, New York City time, on the day of the
relevant Swingline Loan. Each such notice shall be irrevocable and shall specify
(i) the aggregate principal amount to be borrowed, (ii) the requested date
(which shall be a Business Day) and (iii) the maturity date of the requested
Swingline Loan which shall be not later than seven Business Days after the
making of such Swingline Loan. The Swingline Lender will make the requested
amount available promptly on that same day, to the Administrative Agent (for the
account of the Borrower as set forth in Section 2.4) who, thereupon, will
promptly make such amount available to the Borrower in like funds as provided
therein or, in the case of a Swingline Loan made to finance the reimbursement of
an LC Disbursement as provided in Section 2.8(d) by remittance to the Issuing
Bank. Each Swingline Loan shall be in an aggregate amount that is an integral
multiple of $100,000 and not less than $100,000.
(c) The Swingline Lender may by written notice given to the
Administrative Agent not later than 10:00 a.m., New York City time, on any
Business Day notify the Administrative Agent that the Swingline Lender is
requesting that the applicable Lenders make an ABR Revolving Borrowing in an
amount equal to the outstanding principal balance and accrued interest on the
Swingline Loans, in which case (i) the Administrative Agent shall notify each
applicable Lender of the details thereof and of the amount of such Lender's Loan
to be made as part of such ABR Revolving Borrowing, and (ii) each Lender shall,
regardless of whether any Default shall have occurred and be continuing, any
representation or warranty shall be accurate, any condition to the making of any
loan hereunder shall have been fulfilled, or any other matter whatsoever, make
the Loan to be made by it under this paragraph by wire transfer of immediately
available funds to the account of the Administrative Agent most recently
designated by it for such purpose by notice to the Lenders, (A) on such date, in
the event that such Lender shall have received notice of such ABR Revolving
Borrowing prior to 12:00 noon, New York City time, or (B) if such notice has not
been received by such Lender prior to such time on such date, then not later
than 1:00 p.m., New York City time, on (X) the Business Day that such Lender
receives such notice, if such notice is received prior to 12:00 noon, New York
City time, on the day of receipt or (Y) the Business Day immediately following
the day that such Lender receives such notice, if such notice is not received
prior to such time on the day of receipt. Such Loans shall, for all purposes
hereof, be deemed to be an ABR Revolving Borrowing referred to in Section 2.1(a)
and made pursuant to Section 2.3, and the Lenders obligations to make such Loans
shall be absolute and unconditional. The Administrative Agent will make such
Loans available to the Swingline Lender by promptly crediting or otherwise
transferring the amounts so received, in like funds, to the Swingline Lender for
the purpose of repaying in full the Swingline Loans and all accrued interest
thereon.
(d) If the Borrower fails to make any payment with respect to
a Swingline Loan, or if any such sum paid by the Borrower is required to be
refunded to the Borrower
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for any reason, the Administrative Agent shall notify each applicable Lender of
the applicable Swingline Loan, the payment then due from the Borrower in respect
thereof and such Lender's Applicable Percentage thereof. Each applicable Lender
shall purchase a participation in such Swingline Loan by paying to the
Administrative Agent its Applicable Percentage of an amount equal to the payment
then due from the Borrower, in the same manner as provided in Section 2.4 with
respect to Loans made by such Lender (and Section 2.4 shall apply, mutatis
mutandis, to the payment obligations of the applicable Lenders), by wire
transfer of immediately available funds to the account of the Administrative
Agent most recently designated by it for such purpose by notice to the Lenders,
(A) on such date, in the event that such Lender shall have received notice
thereof prior to 12:00 noon, New York City time, or (B) if such notice has not
been received by such Lender prior to such time on such date, then not later
than 1:00 p.m., New York City time, on (X) the Business Day that such Lender
receives such notice, if such notice is received prior to 12:00 noon, New York
City time, on the day of receipt or (Y) the Business Day immediately following
the day that such Lender receives such notice, if such notice is not received
prior to such time on the day of receipt. The Administrative Agent shall
promptly pay to the Swingline Lender the amounts so received by it from the
applicable Lenders. Promptly following receipt by the Administrative Agent of
any payment in respect of such Swingline Loan from the Borrower, the
Administrative Agent shall distribute such payment to the Swingline Lender or,
to the extent that Lenders have made payments pursuant to this paragraph to
reimburse the Swingline Lender, then to such Lenders and the Swingline Lender as
their interests may appear. Each Lender acknowledges and agrees that its
obligation to acquire participations pursuant to this paragraph in respect of
Swingline Loans is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including the occurrence and continuance of a Default
or reduction or termination of the Revolving Commitments, and that each such
payment shall be made without any offset, abatement, withholding or reduction
whatsoever.
Section 2.10 Payments Generally; Pro Rata Treatment; Sharing of Setoffs
(a) Each Loan Party shall make each payment required to be
made by it hereunder or under any other Loan Document (whether of principal of
Loans, LC Disbursements, interest or fees, or of amounts payable under Sections
3.5, 3.6, 3.7 or 10.3, or otherwise) prior to 12:00 noon, New York City time, on
the date when due, in immediately available funds, without setoff or
counterclaim. Any amounts received after such time on any date may, in the
discretion of the Administrative Agent, be deemed to have been received on the
next succeeding Business Day for purposes of calculating interest thereon. All
such payments shall be made to the Administrative Agent at its office at One
Wall Street, New York, New York, or such other office as to which the
Administrative Agent may notify the other parties hereto, except payments to be
made to the Issuing Bank or Swingline Lender as expressly provided herein and
except that payments pursuant to Sections 3.5, 3.6, 3.7 and 10.3 shall be made
directly to the Persons entitled thereto. The Administrative Agent shall
distribute any such payments received by
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it for the account of any other Person to the appropriate recipient promptly
following receipt thereof. If any payment hereunder shall be due on a day that
is not a Business Day, the date for payment shall be extended to the next
succeeding Business Day, and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension. All payments
hereunder shall be made in dollars.
(b) If at any time insufficient funds are received by and
available to the Administrative Agent to pay fully all amounts of principal of
Loans, unreimbursed LC Disbursements, interest, fees and commissions then due
hereunder, such funds shall be applied (i) first, towards payment of interest,
fees and commissions then due hereunder, ratably among the parties entitled
thereto in accordance with the amounts of interest, fees and commissions then
due to such parties and (ii) second, towards payment of principal of Loans and
unreimbursed LC Disbursements then due hereunder, ratably among the parties
entitled thereto in accordance with the amounts of principal of Loans and
unreimbursed LC Disbursements then due to such parties.
(c) If any Lender shall, by exercising any right of setoff or
counterclaim or otherwise, obtain payment in respect of any principal of, or
interest on, any of its Loans or participations in LC Disbursements or Swingline
Loans resulting in such Lender receiving payment of a greater proportion of the
aggregate amount of its Loans and participations in LC Disbursements or
Swingline Loans and accrued interest thereon than the proportion received by any
other applicable Lender, then the applicable Lender receiving such greater
proportion shall purchase (for cash at face value) participations in the Loans
and participations in LC Disbursements or Swingline Loans of other applicable
Lenders to the extent necessary so that the benefit of all such payments shall
be shared by the applicable Lenders ratably in accordance with the aggregate
amount of principal of, and accrued interest on, their respective Loans and
participations in LC Disbursements or Swingline Loans, provided that (i) if any
such participations are purchased and all or any portion of the payment giving
rise thereto is recovered, such participations shall be rescinded and the
purchase price restored to the extent of such recovery, without interest, and
(ii) the provisions of this paragraph shall not be construed to apply to any
payment made by the Borrower pursuant to and in accordance with the express
terms of this Credit Agreement or any payment obtained by a Lender as
consideration for the assignment of or sale of a participation in any of its
Loans or participations in LC Disbursements or Swingline Loans to any assignee
or participant, other than to the Borrower or any Subsidiary or Affiliate
thereof (as to which the provisions of this paragraph shall apply). Each Loan
Party consents to the foregoing and agrees, to the extent it may effectively do
so under applicable law, that any Lender acquiring a participation pursuant to
the foregoing arrangements may exercise against such Loan Party rights of setoff
and counterclaim with respect to such participation as fully as if such Lender
were a direct creditor of such Loan Party in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice
from a Loan Party prior to the date on which any payment is due to the
Administrative Agent for
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the account of the applicable Credit Parties hereunder that such Loan Party will
not make such payment, the Administrative Agent may assume that such Loan Party
has made such payment on such date in accordance herewith and may, in reliance
upon such assumption, distribute to such Credit Parties the amount due. In such
event, if such Loan Party has not in fact made such payment, then each such
Credit Party severally agrees to repay to the Administrative Agent forthwith on
demand the amount so distributed to such Credit Party with interest thereon, for
each day from and including the date such amount is distributed to it to but
excluding the date of payment to the Administrative Agent, at the greater of the
Federal Funds Rate and a rate determined by the Administrative Agent in
accordance with banking industry rules on interbank compensation.
(e) If any Credit Party shall fail to make any payment
required to be made by it pursuant to Sections 2.4(b), 2.8(e) or 2.9(d), then
the Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the Administrative
Agent for the account of such Credit Party to satisfy such Credit Party's
obligations under such Sections until all such unsatisfied obligations are fully
paid.
ARTICLE 3. INTEREST, FEES, YIELD PROTECTION, ETC.
Section 3.1 Interest
(a) The Loans comprising each ABR Borrowing shall bear
interest at the Alternate Base Rate plus the Applicable Margin.
(b) The Loans comprising each Eurodollar Borrowing shall bear
interest at the Adjusted LIBO Rate for the Interest Period in effect for such
Borrowing plus the Applicable Margin.
(c) Notwithstanding the foregoing, if an Event of Default has
occurred and is continuing under paragraphs (a) or (b) of Article 8, then, so
long as such Event of Default is continuing, all principal of and interest on
each Loan and each fee and other amount payable by the Borrower hereunder shall
bear interest, after as well as before judgment, at a rate per annum equal to
(i) in the case of principal of any Loan, 2% plus the rate otherwise applicable
to such Loan as provided in the preceding paragraphs of this Section or (ii) in
the case of any other amount, 2% plus the Alternate Base Rate plus the
Applicable Margin relating to ABR B Term Loan Borrowings.
(d) Accrued interest on each Loan shall be payable in arrears
on each Interest Payment Date for such Loan, provided that (i) interest accrued
pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in
the event of any repayment or prepayment of any Loan (other than the prepayment
of an ABR Revolving Loan prior to the end of the Availability Period), accrued
interest on the principal amount
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repaid or prepaid shall be payable on the date of such repayment or prepayment,
and (iii) in the event of any conversion of any Eurodollar Loan prior to the end
of the current Interest Period therefor, accrued interest on such Loan shall be
payable on the effective date of such conversion.
(e) All interest hereunder shall be computed on the basis of a
year of 360 days, except that interest computed by reference to the Alternate
Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall
be computed on the basis of a year of 365 days (or 366 days in a leap year), and
in each case shall be payable for the actual number of days elapsed (including
the first day but excluding the last day). The applicable Alternate Base Rate,
Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent,
and such determination shall be conclusive absent clearly demonstrable error.
Section 3.2 Interest Elections
(a) Each Borrowing (other than a Swingline Loan) initially
shall be of the Type specified in the applicable Borrowing Request and, in the
case of a Eurodollar Borrowing, shall have an initial Interest Period as
specified in such Borrowing Request. Thereafter, the Borrower may elect to
convert such Borrowing to a different Type or to continue such Borrowing and, in
the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as
provided in this Section. The Borrower may elect different options with respect
to different portions of the affected Borrowing, in which case each such portion
shall be allocated ratably among the applicable Lenders holding the Loans
comprising such Borrowing, and the Loans comprising each such portion shall be
considered a separate Borrowing. This Section shall not apply to Swingline
Borrowings which may not be converted or continued.
(b) To make an election pursuant to this Section, the Borrower
shall notify the Administrative Agent of such election by telephone by the time
that a Borrowing Request would be required under Section 2.3 if the Borrower
were requesting a Borrowing of the Type resulting from such election to be made
on the effective date of such election. Each such telephonic Interest Election
Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Interest Election Request in a
form approved by the Administrative Agent and signed by the Borrower.
(c) Each telephonic and written Interest Election Request
shall specify the following information in compliance with Section 2.2:
(i) the Borrowing to which such Interest Election
Request applies and, if different options are being elected with
respect to different portions thereof, the portions thereof to be
allocated to each resulting Borrowing (in which
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case the information to be specified pursuant to clauses (iii) and (iv)
of this paragraph shall be specified for each resulting Borrowing);
(ii) the effective date of the election made pursuant
to such Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR
Borrowing or a Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar
Borrowing, the Interest Period to be applicable thereto after giving
effect to such election, which shall be a period contemplated by the
definition of the term "Interest Period".
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election
Request, the Administrative Agent shall advise each applicable Lender of the
details thereof and of such Lender's portion of each resulting Borrowing. (e) If
the Borrower fails to deliver a timely Interest Election Request prior to the
end of the Interest Period applicable thereto, then, unless such Borrowing is
repaid as provided herein, at the end of such Interest Period, such Borrowing
shall be converted to an ABR Borrowing. Notwithstanding any contrary provision
hereof, if an Event of Default has occurred and is continuing and the
Administrative Agent, at the request of the Required Lenders, so notifies the
Borrower, then, so long as an Event of Default is continuing, (i) no outstanding
Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii)
unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing
at the end of the Interest Period applicable thereto.
Section 3.3 Fees
(a) The Borrower agrees to pay to the Administrative Agent for
the account of each Lender having a Revolving Commitment, a commitment fee,
which shall accrue at a rate per annum equal to the Commitment Fee Margin on the
daily amount of the unused Revolving Commitment plus the Swingline Exposure of
such Lender during the period from and including the date on which this Credit
Agreement shall have become effective in accordance with Section 10.6 to but
excluding the date on which such Revolving Commitment terminates. Accrued
commitment fees shall be payable in arrears on the last day of March, June,
September and December of each year, each date on which the Revolving
Commitments are permanently reduced and on the date on which the Revolving
Commitments terminate, commencing on the first such date to occur after the date
hereof. All commitment fees shall be computed on the basis of a year of 365
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days (or 366 days in a leap year) and shall be payable for the actual number of
days elapsed (including the first day but excluding the last day).
(b) The Borrower agrees to pay (i) to the Administrative Agent
for the account of each Lender a participation fee with respect to its
participations in Letters of Credit, which shall accrue at rate per annum equal
to the Applicable Margin on the average daily amount of such Lender's LC
Exposure (excluding any portion thereof attributable to unreimbursed LC
Disbursements) during the period from and including the date on which this
Credit Agreement shall become effective in accordance with Section 10.6 to but
excluding the later of the date on which such Lender's Revolving Commitment
terminates and the date on which such Lender ceases to have any LC Exposure and
(ii) to the Issuing Bank for its own account a fronting fee, which shall accrue
at the rate or rates per annum separately agreed upon between the Borrower and
the Issuing Bank on the average daily amount of the LC Exposure attributable to
Letters of Credit (excluding any portion thereof attributable to unreimbursed LC
Disbursements) during the period from and including the date on which this
Credit Agreement shall become effective in accordance with Section 10.6 to but
excluding the later of the date of termination of the Revolving Commitments and
the date on which there ceases to be any such LC Exposure, as well as the
Issuing Bank's standard fees with respect to the issuance, amendment, renewal or
extension of any Letter of Credit or processing of drawings thereunder. Accrued
participation fees and fronting fees shall be payable in arrears on the last day
of March, June, September and December of each year, commencing on the first
such date to occur after the date hereof; provided that all such fees shall be
payable on the date on which the Revolving Commitments terminate and any such
fees accruing after the date on which the Revolving Commitments terminate shall
be payable on demand. Any other fees payable to the Issuing Bank pursuant to
this paragraph shall be payable within ten days after demand. All participation
fees and fronting fees shall be computed on the basis of a year of 360 days and
shall be payable for the actual number of days elapsed (including the first day
but excluding the last day).
(c) The Borrower agrees to pay to each Credit Party, for its
own account, fees and other amounts payable in the amounts and at the times
separately agreed upon between the Borrower and such Credit Party.
(d) All fees and other amounts payable hereunder shall be paid
on the dates due, in immediately available funds, to the Administrative Agent
(or to the Issuing Bank, in each case of fees payable to it) for distribution,
in the case of commitment and Letter of Credit participation fees, to the
Lenders. Fees and other amounts paid shall not be refundable under any
circumstances.
Section 3.4 Alternate Rate of Interest
If prior to the commencement of any Interest Period for a
Eurodollar Borrowing:
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(a) the Administrative Agent determines (which determination
shall be conclusive absent manifest error) that adequate and reasonable means do
not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as
applicable, for such Interest Period; or
(b) the Administrative Agent is advised by any applicable
Lender that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such
Interest Period will not adequately and fairly reflect the cost to such Lender
of making or maintaining its Loan included in such Borrowing for such Interest
Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
applicable Lenders by telephone or telecopy as promptly as practicable
thereafter and, until the Administrative Agent notifies the Borrower and the
applicable Lenders that the circumstances giving rise to such notice no longer
exist, (i) any Interest Election Request that requests the conversion of any
Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall
be ineffective, and (ii) if any Borrowing Request requests a Eurodollar
Borrowing, such Borrowing shall be made as an ABR Borrowing.
Section 3.5 Increased Costs; Illegality
(a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve,
special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by,
any Credit Party (except any such reserve requirement
reflected in the Adjusted LIBO Rate); or
(ii) impose on any Credit Party or the London
interbank market any other condition affecting this Credit
Agreement, any Eurodollar Loans made by such Credit Party or
any participation therein or any Letter of Credit or
participation therein,
and the result of any of the foregoing shall be to increase the cost to such
Credit Party of making or maintaining any Eurodollar Loan or the cost to such
Credit Party of issuing, participating in or maintaining any Letter of Credit
hereunder or to increase the cost to such Credit Party or to reduce the amount
of any sum received or receivable by such Credit Party hereunder (whether of
principal, interest or otherwise), then, subject to Section 3.5(c), the Borrower
will pay to such Credit Party such additional amount or amounts as will
compensate such Credit Party for such additional costs incurred or reduction
suffered.
(b) If any Credit Party determines that any Change in Law
regarding capital requirements has or would have the effect of reducing the rate
of return on such Credit Party's capital or on the capital of such Credit
Party's holding company, if any, as
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a consequence of this Credit Agreement or the Loans made, the Letters of Credit
issued or participations therein held by such Credit Party to a level below that
which such Credit Party or such Credit Party's holding company could have
achieved but for such Change in Law (taking into consideration such Credit
Party's policies and the policies of such Credit Party's holding company with
respect to capital adequacy), then, subject to Section 3.5(c), from time to time
the Borrower will pay to such Credit Party such additional amount or amounts as
will compensate such Credit Party or such Credit Party's holding company for any
such reduction suffered.
(c) A certificate of a Credit Party setting forth the amount
or amounts necessary to compensate such Credit Party or its holding company, as
applicable, as specified in paragraph (a) or (b) of this Section shall be
delivered to the Borrower and shall be conclusive absent manifest error. The
Borrower shall pay such Credit Party the amount shown as due on any such
certificate within 10 days after receipt thereof. Notwithstanding anything to
the contrary contained in Section 3.5(a) or Section 3.5(b), in no event shall
the Borrower have any obligation to reimburse any Lender pursuant to such
Sections for any additional costs incurred or reductions suffered by such Lender
more than 90 days prior to receipt by the Borrower of such certificate.
(d) Subject to the limitation set forth in Section 3.5(c),
failure or delay on the part of any Credit Party to demand compensation pursuant
to this Section shall not constitute a waiver of such Credit Party's right to
demand such compensation.
(e) Notwithstanding any other provision of this Credit
Agreement, if, after the date of this Credit Agreement, any Change in Law shall
make it unlawful for any Lender to make or maintain any Eurodollar Loan or to
give effect to its obligations as contemplated hereby with respect to any
Eurodollar Loan, then, by written notice to the Borrower and to the
Administrative Agent:
(i) such Lender may declare that Eurodollar Loans
will not thereafter (for the duration of such unlawfulness) be
made by such Lender hereunder (or be continued for additional
Interest Periods and ABR Loans will not thereafter (for such
duration) be converted into Eurodollar Loans), whereupon any
request for a Eurodollar Borrowing or to convert an ABR
Borrowing to a Eurodollar Borrowing or to continue a
Eurodollar Borrowing, as applicable, for an additional
Interest Period shall, as to such Lender only, be deemed a
request for an ABR Loan (or a request to continue an ABR Loan
as such for an additional Interest Period or to convert a
Eurodollar Loan into an ABR Loan, as applicable), unless such
declaration shall be subsequently withdrawn; and
(ii) such Lender may require that all outstanding
Eurodollar Loans made by it be converted to ABR Loans, in
which event all such Eurodollar Loans shall be automatically
converted to ABR Loans, as of the effective date of such
notice as provided in the last sentence of this paragraph.
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In the event any Lender shall exercise its rights under (i) or (ii) of this
paragraph, all payments and prepayments of principal that would otherwise have
been applied to repay the Eurodollar Loans that would have been made by such
Lender or the converted Eurodollar Loans of such Lender shall instead be applied
to repay the ABR Loans made by such Lender in lieu of, or resulting from the
conversion of, such Eurodollar Loans, as applicable. For purposes of this
paragraph, a notice to the Borrower by any Lender shall be effective as to each
Eurodollar Loan made by such Lender, if lawful, on the last day of the Interest
Period currently applicable to such Eurodollar Loan; in all other cases such
notice shall be effective on the date of receipt by the Borrower.
Section 3.6 Break Funding Payments
In the event of (a) the payment or prepayment (voluntary or
otherwise) of any principal of any Eurodollar Loan other than on the last day of
an Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of any Eurodollar Loan other than on the last day
of the Interest Period applicable thereto, (c) the failure to borrow, convert,
continue or prepay any Eurodollar Loan on the date specified in any notice
delivered pursuant hereto (regardless of whether such notice may be revoked
under Section 2.7(d) and is revoked in accordance therewith), or (d) the
assignment of any Eurodollar Loan other than on the last day of the Interest
Period or maturity date applicable thereto as a result of a request by any
Borrower pursuant to Section 3.8(b), then, in any such event, the Borrower shall
compensate each Lender for the loss, cost and expense attributable to such
event. Such loss, cost or expense to any Lender shall be deemed to include an
amount determined by such Lender to be the excess, if any, of (i) the amount of
interest that would have accrued on the principal amount of such Loan had such
event not occurred, at the Adjusted LIBO Rate that would have been applicable to
such Loan, for the period from the date of such event to the last day of the
then current Interest Period therefor (or, in the case of a failure to borrow,
convert or continue, for the period that would have been the Interest Period for
such Loan), over (ii) the amount of interest that would accrue on such principal
amount for such period at the interest rate that such Lender would bid were it
to bid, at the commencement of such period, for dollar deposits of a comparable
amount and period from other banks in the eurodollar market. A certificate of
any Lender setting forth any amount or amounts that such Lender is entitled to
receive pursuant to this Section shall be delivered to the Borrower and shall be
conclusive absent manifest error. The Borrower shall pay such Lender the amount
shown as due on any such certificate within 10 days after receipt thereof.
Section 3.7 Taxes
(a) Any and all payments by or on account of any obligation of
any Loan Party hereunder and under any other Loan Document shall be made free
and clear of and without deduction for any Indemnified Taxes or Other Taxes,
provided that, if such Loan Party shall be required to deduct any Indemnified
Taxes or Other Taxes from such
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payments, then (i) the sum payable shall be increased as necessary so that,
after making all required deductions (including deductions applicable to
additional sums payable under this Section), the applicable Credit Party
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) such Loan Party shall make such deductions and (iii)
such Loan Party shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.
(b) In addition, the Loan Parties shall pay any Other Taxes to
the relevant Governmental Authority in accordance with applicable law.
(c) Each Loan Party shall indemnify each Credit Party, within
ten days after written demand therefor, for the full amount of any Indemnified
Taxes or Other Taxes paid by such Credit Party on or with respect to any payment
by or on account of any obligation of such Loan Party under the Loan Documents
(including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) and any penalties, interest
and reasonable expenses arising therefrom or with respect thereto, whether or
not such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority. A certificate as to the amount
of such payment or liability delivered to the Borrower by a Credit Party, or by
the Administrative Agent on its own behalf or on behalf of a Credit Party, shall
be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified
Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower
shall deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from
or reduction of withholding tax under the law of the jurisdiction in which the
relevant Loan Party is located, or any treaty to which such jurisdiction is a
party, with respect to payments under the Loan Documents shall deliver to the
Borrower (with a copy to the Administrative Agent), at the time or times
prescribed by applicable law, such properly completed and executed documentation
prescribed by applicable law or reasonably requested by the Borrower as will
permit such payments to be made without withholding or at a reduced rate.
Section 3.8 Mitigation Obligations
(a) If any Lender requests compensation under Section 3.5, or
if the Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 3.7,
then such Lender shall use reasonable efforts to designate a different lending
office for funding or booking its
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Loans or Letters of Credit (or any participation therein) hereunder or to assign
its rights and obligations hereunder to another of its offices, branches or
affiliates, if, in the judgment of such Lender, such designation or assignment
(i) would eliminate or reduce amounts payable pursuant to Sections 3.5 or 3.7,
as applicable, in the future and (ii) would not subject such Lender to any
unreimbursed cost or expense and would not otherwise be disadvantageous to such
Lender. The Borrower hereby agrees to pay all reasonable costs and expenses
incurred by any Lender in connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 3.5, or
if the Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 3.7, in
an aggregate amount in excess of $25,000, then the Borrower may, at its sole
expense (including the fees referred to in Section 10.4(b)) and effort, upon
notice to such Lender and the Administrative Agent, require such Lender to
assign and delegate, without recourse (in accordance with and subject to the
restrictions contained in Section 10.4), all its interests, rights and
obligations under the Loan Documents to an assignee that shall assume such
obligations (which assignee may be another Lender, if a Lender accepts such
assignment); provided that (i) the Borrower shall have received the prior
written consent of the Administrative Agent (and, if a Revolving Commitment is
being assigned, the Issuing Bank and the Swingline Lender), which consent shall
not unreasonably be withheld, (ii) such Lender shall have received payment of an
amount equal to the outstanding principal of its Loans and participations in LC
Disbursements and Swingline Loans, accrued interest thereon, accrued fees and
all other amounts payable to it hereunder, from the assignee (to the extent of
such outstanding principal and accrued interest and fees) or the Borrower (in
the case of all other amounts) and (iii) in the case of any such assignment
resulting from a claim for compensation under Section 3.5 or payments required
to be made pursuant to Section 3.7, such assignment will result in a reduction
in such compensation or payments. A Lender shall not be required to make any
such assignment and delegation if, prior thereto, as a result of a waiver by
such Lender or otherwise, the circumstances entitling the Borrower to require
such assignment and delegation cease to apply.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Credit Parties
that:
Section 4.1 Organization; Powers
Each of the Borrower and the Subsidiaries is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, has all requisite power and authority to carry on its business as
now conducted and, except where the failure to do so, individually or in the
aggregate, could not reasonably be
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expected to result in a Material Adverse Effect, is qualified to do business in,
and is in good standing in, every jurisdiction where such qualification is
required.
Section 4.2 Authorization; Enforceability
The Transactions are within the corporate, partnership or
other analogous powers of each of the Borrower and the Subsidiaries to the
extent it is a party thereto and have been duly authorized by all necessary
corporate, partnership or other analogous and, if required, equityholder action.
Each Loan Document has been duly executed and delivered by each of the Borrower
and the Subsidiaries to the extent it is a party thereto and constitutes a
legal, valid and binding obligation thereof, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors' rights generally.
Section 4.3 Governmental Approvals; No Conflicts
The Transactions (a) do not require any consent or approval
of, registration or filing with, or any other action by, any Governmental
Authority, except such as have been obtained or made and are in full force and
effect, (b) will not violate any applicable law or regulation or the charter,
by-laws or other organizational documents of the Borrower or any of the
Subsidiaries or any order of any Governmental Authority, (c) will not violate or
result in a default under any indenture, agreement or other instrument binding
upon the Borrower or any of the Subsidiaries or its assets, or give rise to a
right thereunder to require any payment to be made by the Borrower or any of the
Subsidiaries, and (d) will not result in the creation or imposition of any Lien
on any asset of the Borrower or any of the Subsidiaries (other than Liens
permitted by Section 7.2).
Section 4.4 Financial Condition; No Material Adverse Change
(a) The Borrower has heretofore furnished to the Credit
Parties (i) its Form 10-K for the fiscal year ended December 31, 1998 containing
the consolidated balance sheet and statements of income, stockholders equity and
cash flows of the Borrower and the Subsidiaries as of and for the fiscal year
ended December 31, 1998, reported on by PricewaterhouseCoopers LLP, independent
public accountants, and (ii) its Form 10-Q for the fiscal quarter ended March
31, 1999 containing the consolidated balance sheet and statements of income and
cash flows of the Borrower and the Subsidiaries as of and for the fiscal quarter
and the portion of the fiscal year then ended certified by its chief financial
officer. The consolidated financial statements referred to in clauses (i) and
(ii) above present fairly, in all material respects, the financial position and
results of operations and cash flows of the Borrower and consolidated
Subsidiaries as of such dates and for the indicated periods in accordance with
GAAP and are consistent with the books and records of the Borrower (which books
and records are correct and
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complete), subject to year-end audit adjustments and the absence of footnotes in
the case of the statements referred to in clause (ii) above.
(b) Except for the Disclosed Matters, the Borrower is unaware
that the Borrower or any Subsidiary has any material undisclosed liability
(contingent or otherwise). Since December 31, 1998, there has been no material
adverse change in the business, assets, operations, prospects or condition,
financial or otherwise, of the Borrower and the Subsidiaries, taken as a whole.
Section 4.5 Properties
(a) Each of the Borrower and the Subsidiaries has good title
to, or valid leasehold interests in, all its real and personal property material
to its business, except for minor defects in title that do not interfere with
its ability to conduct its business as currently conducted or to utilize such
properties for their intended purposes.
(b) Each of the Borrower and the Subsidiaries owns, or is
entitled to use, all trademarks, tradenames, copyrights, patents and other
intellectual property material to its business, and the use thereof by the
Borrower and the Subsidiaries does not infringe upon the rights of any other
Person, except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
(c) Schedule 4.5 sets forth the address of each real property
that is owned or leased by the Borrower or any of the Subsidiaries.
(d) Neither the Borrower nor any of the Subsidiaries have
received notice of, or have knowledge of, any pending or contemplated
condemnation proceeding affecting any Mortgaged Property or any sale or
disposition thereof in lieu of condemnation. Neither any Mortgaged Property nor
any interest therein is subject to any right of first refusal, option or other
contractual right to purchase such Mortgaged Property or interest therein.
Section 4.6 Litigation and Environmental Matters
(a) There are no actions, suits or proceedings by or before
any arbitrator or Governmental Authority pending against or, to the knowledge of
the Borrower, threatened against or affecting the Borrower or any of the
Subsidiaries (i) that, if adversely determined, could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect (other
than the Disclosed Matters) or (ii) that involve any Loan Document or any
Transaction.
(b) Except for the Disclosed Matters, and except with respect
to any other matters that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, neither the
Borrower nor any of its Subsidiaries (i) have
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failed to comply with any Environmental Law or to obtain, maintain or comply
with any permit, license or other approval required under any Environmental Law,
(ii) have become subject to any Environmental Liability, (iii) have received
notice of any claim with respect to any Environmental Liability or (iv) know of
any basis for any Environmental Liability.
(c) Since the date of this Credit Agreement, there has been no
change in the status of the Disclosed Matters that, individually or in the
aggregate, has resulted in, or materially increased the likelihood of, a
Material Adverse Effect.
Section 4.7 Compliance with Laws and Agreements
Each of the Borrower and the Subsidiaries is in compliance
with all laws, regulations and orders of any Governmental Authority applicable
to it or its property and all indentures, agreements and other instruments
binding upon it or its property, except where the failure to do so, individually
or in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect. No Default has occurred and is continuing.
Section 4.8 Investment and Holding Company Status
Neither the Borrower nor any of the Subsidiaries are (a) an
"investment company" as defined in, or subject to regulation under, the
Investment Company Act of 1940 or (b) a "holding company" as defined in, or
subject to regulation under, the Public Utility Holding Company Act of 1935.
Section 4.9 Taxes
Each of the Borrower and the Subsidiaries has timely filed or
caused to be filed all Tax returns and reports required to have been filed and
has paid or caused to be paid all Taxes required to have been paid by it, except
(a) Taxes that are being contested in good faith by appropriate proceedings and
for which the Borrower or such Subsidiary, as applicable, has set aside on its
books adequate reserves or (b) to the extent that the failure to do so could not
reasonably be expected to result in a Material Adverse Effect.
Section 4.10 ERISA
No ERISA Event has occurred or is reasonably expected to occur
that, when taken together with all other such ERISA Events for which liability
is reasonably expected to occur, could reasonably be expected to result in a
Material Adverse Effect. The present value of all accumulated benefit
obligations under each Plan (based on the assumptions used for purposes of
Statement of Financial Accounting Standards No. 87) did not, as of the date of
the most recent financial statements reflecting such amounts, exceed by more
than $8,000,000 the fair market value of the assets of such Plan, and the
present value of all accumulated benefit obligations of all underfunded Plans
(based on
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the assumptions used for purposes of Statement of Financial Accounting Standards
No. 87) did not, as of the date of the most recent financial statements
reflecting such amounts, exceed by more than $8,000,000 the fair market value of
the assets of all such underfunded Plans.
Section 4.11 Disclosure
The Borrower has disclosed to the Credit Parties all
agreements, instruments and corporate or other restrictions to which it or any
of the Subsidiaries is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. None of the reports, financial statements, certificates
or other information furnished by or on behalf of the Borrower or any Subsidiary
to any Credit Party in connection with the negotiation of the Loan Documents or
delivered thereunder (as modified or supplemented by other information so
furnished) contains any material misstatement of fact or omits to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, provided that, with
respect to projected financial information, the Borrower represents only that
such information was prepared in good faith based upon assumptions believed to
be reasonable at the time.
Section 4.12 Subsidiaries
Schedule 4.12 sets forth the name of, and the ownership
interest of the Borrower in, each Subsidiary and identifies each Subsidiary that
is a Subsidiary Guarantor, in each case as of the Effective Date.
Section 4.13 Insurance
Schedule 4.13 sets forth a description of all insurance
maintained by or on behalf of the Borrower and the Subsidiaries as of the
Effective Date. As of the Effective Date, all premiums in respect of such
insurance that are due and payable have been paid.
Section 4.14 Labor Matters
As of the Effective Date, there are no strikes, lockouts or
slowdowns against the Borrower or any Subsidiary pending or, to the knowledge of
the Borrower, threatened. The hours worked by and payments made to employees of
the Borrower and the Subsidiaries have not been in violation of the Fair Labor
Standards Act or any other applicable Federal, state, local or foreign law
dealing with such matters, except where any such violations, individually and in
the aggregate, would not be reasonably likely to result in a Material Adverse
Effect. All material payments due from the Borrower or any Subsidiary, or for
which any claim may be made against the Borrower or any Subsidiary, on account
of wages and employee health and welfare insurance and other benefits, have been
paid or accrued as a liability on the books of the Borrower or such Subsidiary.
The
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consummation of the Transactions will not give rise to any right of termination
or right of renegotiation on the part of any union under any collective
bargaining agreement to which the Borrower or any Subsidiary is bound.
Section 4.15 Solvency
Immediately after the consummation of each Transaction and
immediately following the making of each Loan, if any, and the issuance of each
Letter of Credit, if any, made or issued on the date thereof and after giving
effect to the application of the proceeds of such Loan and such Letter of
Credit, (a) the fair value of the assets of the Borrower and the Subsidiaries,
taken as a whole, at a fair valuation, will exceed their debts and liabilities,
subordinated, contingent or otherwise; (b) the present fair saleable value of
the property of the Borrower and the Subsidiaries, taken as a whole, will be
greater than the amount that will be required to pay the probable liability of
their debts and other liabilities, subordinated, contingent or otherwise, as
such debts and other liabilities become absolute and matured; (c) each of the
Borrower and the Subsidiary Guarantors will be able to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and (d) each of the Borrower and the
Subsidiary Guarantors will not have unreasonably small capital with which to
conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted following such date.
Section 4.16 Security Documents
(a) The Security Agreement is effective to create in favor of
the Administrative Agent, for the ratable benefit of the Secured Parties, a
legal, valid and enforceable security interest in the Collateral (as defined in
the Security Agreement) and, when (i) the pledged property constituting such
Collateral is delivered to the Administrative Agent, (ii) the financing
statements in appropriate form are filed in the offices specified on Schedule 6
to the Perfection Certificate and (iii) all other applicable filings under the
Uniform Commercial Code or otherwise that are required under the Loan Documents
are made, the Security Agreement shall constitute a fully perfected Lien on, and
security interest in, all right, title and interest of the grantors thereunder
in such Collateral (other than the Intellectual Property (as defined in the
Security Agreement)), in each case prior and superior in right to any other
Person, other than with respect to Liens expressly permitted by Section 7.2.
(b) When the Security Agreement is filed in the United States
Patent and Trademark Office and the United States Copyright Office, the Security
Agreement shall constitute a fully perfected Lien on, and security interest in,
all right, title and interest of the Borrower and the Subsidiary Guarantors in
the Intellectual Property (as defined in the Security Agreement) in which a
security interest may be perfected by filing, recording or registering a
security agreement, financing statement or analogous document in the United
States Patent and Trademark Office or the United States Copyright Office, as
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applicable, in each case prior and superior in right to any other Person, other
than with respect to Liens expressly permitted by Section 7.2 (it being
understood that subsequent recordings in the United States Patent and Trademark
Office and the United States Copyright Office may be necessary to perfect a Lien
on registered trademarks, trademark applications and copyrights acquired by the
Borrower and the Subsidiary Guarantors after the date hereof).
(c) The Mortgages, if any, are effective to create, subject to
the exceptions listed in each title insurance policy covering such Mortgage, in
favor of the Administrative Agent, for the ratable benefit of the Secured
Parties, a legal, valid and enforceable Lien on all of the right, title and
interest of the Borrower and the Subsidiary Guarantors in and to the Mortgaged
Properties thereunder and the proceeds thereof, and when such Mortgages are
filed in the appropriate offices, such Mortgages shall constitute a Lien on, and
security interest in, all right, title and interest of the Borrower and the
Subsidiary Guarantors in such Mortgaged Properties and the proceeds thereof, in
each case prior and superior in right to any other Person, other than with
respect to the rights of Persons pursuant to Liens expressly permitted by
Section 7.2.
Section 4.17 Federal Reserve Regulations
(a) Neither the Borrower nor any of the Subsidiaries are
engaged principally, or as one of their important activities, in the business of
extending credit for the purpose of buying or carrying Margin Stock.
(b) No part of the proceeds of any Loan will be used, whether
directly or indirectly, and whether immediately, incidentally or ultimately, to
purchase, acquire or carry any Margin Stock or for any purpose that entails a
violation of, or that is inconsistent with, the provisions of the regulations of
the Board, including Regulation T, U or X.
Section 4.18 Year 2000
(a) Any reprogramming required to permit the proper
functioning, in and following the year 2000, of the Borrower's and the
Subsidiaries' computer systems (including, without limitation, software) and
equipment (whether owned by, leased to or otherwise under the control of, the
Borrower or any Subsidiary) containing embedded microchips and the testing of
all such systems and equipment, as so reprogrammed, will be completed by
September 30, 1999. The Borrower and each Subsidiary has identified its
significant vendor-supplied computer systems (including, without limitation,
software) and equipment (whether owned by, leased to or otherwise under the
control of, the Borrower or any Subsidiary) containing embedded microchips.
These vendor-supplied systems and equipment have been internally certified by
the Borrower and the Subsidiaries as "Year 2000" compliant in accordance with
the Borrower's internal
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certification procedures, which internal certification procedures are reasonable
in all respects.
(b) The cost to the Borrower and the Subsidiaries of such
reprogramming and testing and of the reasonably foreseeable consequences of year
2000 to the Borrower and the Subsidiaries (including reprogramming errors, but
excluding the failure of others' systems or equipment) will not result in a
Material Adverse Effect. Except for such of the reprogramming referred to in the
preceding sentence as may be necessary, the computer and management information
systems of the Borrower and the Subsidiaries are and, with ordinary course
upgrading and maintenance, will continue for the term of this Credit Agreement
to be, sufficient to permit the Borrower and the Subsidiaries to conduct their
business without Material Adverse Effect.
ARTICLE 5. CONDITIONS
Section 5.1 Effective Date
The obligations of the Lenders to make Loans and of the
Issuing Bank to issue Letters of Credit hereunder shall not become effective
until the date on which each of the following conditions is satisfied (or waived
in accordance with Section 10.2):
(a) The Administrative Agent (or its counsel) shall have
received from each party hereto either (i) a counterpart of this Credit
Agreement signed on behalf of such party or (ii) written evidence satisfactory
to the Administrative Agent (which may include telecopy transmission of a signed
signature page of this Credit Agreement) that such party has signed a
counterpart of this Credit Agreement.
(b) The Administrative Agent shall have received a Note for
each Lender signed on behalf of the Borrower.
(c) The Administrative Agent shall have received a favorable
written opinion (addressed to the Credit Parties and dated the Effective Date)
from Jones, Day, Reavis & Pogue on behalf of the Loan Parties, substantially in
the form of Exhibit B, and covering such other matters relating to the Loan
Parties, the Loan Documents and the Transactions as the Required Lenders shall
reasonably request. The Borrower hereby requests such counsel to deliver such
opinion.
(d) The Administrative Agent shall have received such
documents and certificates as the Administrative Agent or its counsel may
reasonably request relating to the organization, existence and good standing of
each Loan Party, the authorization of the Transactions and any other legal
matters relating to the Loan Parties, the Loan Documents or the Transactions,
all in form and substance satisfactory to the Administrative Agent and its
counsel.
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(e) The Administrative Agent shall have received a
certificate, dated the Effective Date and signed by the President, a Vice
President or a Financial Officer of the Borrower, confirming compliance with the
conditions set forth in paragraphs (a) and (b) of Section 5.2.
(f) The Administrative Agent shall have received all fees and
other amounts due and payable on or prior to the Effective Date, including, to
the extent invoiced, reimbursement or payment of all out-of-pocket expenses
required to be reimbursed or paid by the Borrower hereunder.
(g) The Administrative Agent shall have received counterparts
of the Security Agreement signed on behalf of the Borrower and each Subsidiary
party thereto, together with the following:
(i) any stock certificates representing shares of
capital stock owned by or on behalf of any Loan Party as of
the Effective Date, excluding shares of IDC (except that stock
certificates representing shares of common stock of a
Subsidiary that is not a Domestic Subsidiary may be limited to
65% of the outstanding shares of common stock of such
Subsidiary);
(ii) any promissory notes and other instruments
evidencing all loans, advances and other debt owed or owing to
any Loan Party as of the Effective Date;
(iii) stock powers and instruments of transfer,
endorsed in blank, with respect to such stock certificates,
promissory notes and other instruments;
(iv) all instruments and other documents, including
Uniform Commercial Code financing statements, required by law
or reasonably requested by the Administrative Agent to be
filed, registered or recorded to create or perfect the Liens
intended to be created under the Security Agreement; and
(v) a completed Perfection Certificate, dated the
Effective Date and signed by the President, a Vice President
or a Financial Officer and the chief legal officer of the
Borrower, together with all attachments contemplated thereby,
including the results of a search of the Uniform Commercial
Code (or equivalent) filings made with respect to the Loan
Parties in the jurisdictions contemplated by the Perfection
Certificate and copies of the financing statements (or similar
documents) disclosed by such search and evidence reasonably
satisfactory to the Administrative Agent that the Liens
indicated by such financing statements (or similar documents)
are permitted by Section 7.2 or have been released.
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(h) The Administrative Agent shall have received counterparts
of the Guarantee Agreement signed on behalf of each Domestic Subsidiary that
exists on the Effective Date.
(i) The Administrative Agent shall have received evidence
satisfactory to it that the insurance required by Section 6.10 is in effect.
(j) The performance by each Loan Party of its obligations
under each Loan Document shall not (i) violate any applicable law, statute, rule
or regulation or (ii) conflict with, or result in a default or event of default
under, any material agreement of any Loan Party or any other Subsidiary, and the
Administrative Agent shall have received one or more legal opinions and/or
officer's certificates to such effect, satisfactory to the Agents.
(k) The Lenders shall be reasonably satisfied as to the amount
and nature of any environmental and employee health and safety exposures to
which the Borrower and the Subsidiaries may be subject, and with the plans of
the Borrower with respect thereto.
(l) The Lenders shall be reasonably satisfied (i) that there
shall be no litigation or administrative proceeding, or regulatory development,
that would reasonably be expected to have a material adverse effect on (a) the
business, assets, operations, prospects, condition (financial or otherwise) or
material agreements of the Borrower and the Subsidiaries, taken as a whole, (b)
the ability of any Loan Party to perform any of its obligations under any Loan
Document or (c) the rights of or benefits available to any Credit Party under
any Loan Document and (ii) with the current status of, and the terms of any
settlement or other resolution of, any litigation or other proceedings brought
against the Borrower or any Subsidiary by or on behalf of its subscribers or by
any Governmental Authority relating to its business.
(m) After giving effect to the Transactions occurring on the
Effective Date, none of the Borrower or any of the Subsidiaries shall have
outstanding any shares of preferred equity securities or any Indebtedness, other
than (i) Indebtedness incurred under the Loan Documents and (ii) Indebtedness
set forth on Schedule 7.1.
(n) The Lenders shall be reasonably satisfied in all respects
with the tax position and the contingent tax and other liabilities of, and with
any tax sharing agreements among, the Borrower and the Subsidiaries, and with
the plans of the Borrower with respect thereto.
(o) The Administrative Agent shall not have received written
notice from a Lender that a material adverse change or material adverse
condition in the business, assets, operations, properties, condition (financial
or otherwise), liabilities (including
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contingent liabilities), prospects or material agreements of the Borrower and
the Subsidiaries, taken as a whole, has occurred since December 31, 1998.
(p) The Administrative Agent shall have received a
certificate, dated the Effective Date and signed by a Financial Officer of the
Borrower, setting forth reasonably detailed calculations demonstrating
compliance with Sections 7.13, 7.14 and 7.15 on a pro forma basis immediately
after giving effect to the Transactions occurring on the Effective Date.
The Administrative Agent shall notify the Borrower and the Credit Parties of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans and the Issuing Bank
to issue Letters of Credit hereunder shall not become effective unless each of
the foregoing conditions is satisfied (or waived pursuant to Section 10.2) at or
prior to 3:00 p.m., New York City time, on September 30, 1999 (and, in the event
such conditions are not so satisfied or waived, the Revolving Commitments shall
terminate at such time).
Section 5.2 Each Credit Event
The obligation of each Lender to make a Loan on the occasion
of any Borrowing, and of the Issuing Bank to issue, amend, renew or extend a
Letter of Credit, is subject to the satisfaction of the following conditions:
(a) The representations and warranties of the Borrower set
forth in this Credit Agreement shall be true and correct on and as of the date
of such Borrowing or the date of such issuance, amendment, renewal or extension,
as applicable.
(b) At the time of and immediately after giving effect to such
Borrowing or such issuance, amendment, renewal or extension, as applicable, (i)
no Default shall have occurred and be continuing, and (ii) such Borrowing or
such issuance, amendment, renewal or extension, as applicable, is permitted by
each indenture relating to Approved Subordinated Debt to be incurred.
(c) The Administrative Agent shall have received such other
documentation and assurances as shall be reasonably required by it in connection
therewith.
Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in paragraphs (a) and
(b) of this Section.
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ARTICLE 6. AFFIRMATIVE COVENANTS
Until the Revolving Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees and other amounts payable
under the Loan Documents shall have been paid in full and all Letters of Credit
have expired and all LC Disbursements have been reimbursed, the Borrower
covenants and agrees with the Lenders that:
Section 6.1 Financial Statements and Other Information
The Borrower will furnish to the Administrative Agent and,
provided that the Administrative Agent shall have furnished to the Borrower the
name and address of each Lender promptly after any written request by the
Borrower therefor (which the Administrative Agent hereby agrees to do), each
Lender:
(a) within 90 days after the end of each fiscal year, its Form
10-K containing its audited consolidated balance sheet and related statements of
income, stockholders' equity and cash flows as of the end of and for such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all reported on by PricewaterhouseCoopers LLP or other independent
public accountants of recognized national standing (without a "going concern" or
like qualification or exception and without any qualification or exception as to
the scope of such audit) to the effect that such consolidated financial
statements present fairly in all material respects the financial condition and
results of operations of the Borrower and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied;
(b) within 90 days after the end of each fiscal year, (i) its
consolidating balance sheets and related statements of income, stockholders'
equity and cash flows as of the end of and for such year, setting forth in each
case in comparative form the figures for the previous fiscal year and (ii) an
unaudited income statement for each of the Borrower's business lines, all
certified by one of its Financial Officers as presenting fairly in all material
respects the results of operations of the Borrower on a consolidating basis in
accordance with GAAP consistently applied, subject to normal year-end audit
adjustments and the absence of footnotes;
(c) within 45 days after the end of each of the first three
fiscal quarters of each fiscal year, its Form 10-Q containing its consolidated
balance sheet and related statements of income, stockholders' equity and cash
flows as of the end of and for such fiscal quarter and the then elapsed portion
of the fiscal year, setting forth in each case in comparative form the figures
for the corresponding period or periods of (or, in the case of the balance
sheet, as of the end of) the previous fiscal year;
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(d) within 45 days after the end of each of the first three
fiscal quarters of each fiscal year, (i) its consolidating balance sheet and
related statements of income, stockholders' equity and cash flows as of the end
of and for such fiscal quarter and the then elapsed portion of the fiscal year,
setting forth in each case in comparative form the figures for the corresponding
period or periods of (or, in the case of the balance sheet, as of the end of)
the previous fiscal year and (ii) an unaudited income statement for each of the
Borrower's business lines, all certified by one of its Financial Officers as
presenting fairly in all material respects the results of operations of the
Borrower on a consolidating basis in accordance with GAAP consistently applied,
subject to normal year-end audit adjustments and the absence of footnotes;
(e) concurrently with any delivery of financial statements
under clauses (a) or (c) above, a certificate of a Financial Officer of the
Borrower (i) certifying as to whether a Default has occurred and, if a Default
has occurred, specifying the details thereof and any action taken or proposed to
be taken with respect thereto, (ii) setting forth (A) reasonably detailed
calculations demonstrating compliance with Sections 7.13, 7.14 and 7.15, and (B)
the Subsidiary Guarantors as of the date of such certificate and (iii) stating
whether any change in GAAP or in the application thereof has occurred since the
date of the audited financial statements referred to in Section 4.4 and, if any
such change has occurred, specifying the effect of such change on the financial
statements accompanying such certificate;
(f) concurrently with any delivery of financial statements
under clause (a) above, a certificate of the accounting firm that reported on
such financial statements stating whether they obtained knowledge during the
course of their examination of such financial statements of any Default (which
certificate may be limited to the extent required by accounting rules or
guidelines);
(g) by no later than December 31 of each fiscal year, a budget
and business plan for the immediately succeeding fiscal year in the form
approved by the Borrower's board of directors, together with a business forecast
for such succeeding fiscal year, all in form, scope and detail satisfactory to
the Administrative Agent and on a quarterly basis for each fiscal quarter of
such succeeding fiscal year;
(h) promptly after the same become publicly available, copies
of all periodic and other reports, proxy statements and other materials filed by
the Borrower or any Subsidiary with the Securities and Exchange Commission, or
any Governmental Authority succeeding to any or all of the functions of said
Commission, or with any national securities exchange, or distributed by the
Borrower to its shareholders generally, as the case may be; and
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(i) promptly following any request therefor, such other
information regarding the operations, business affairs and financial condition
of the Borrower or any Subsidiary, or compliance with the terms of the Loan
Documents, as the Administrative Agent or any Lender may reasonably request.
Section 6.2 Notices of Material Events
The Borrower will furnish to the Administrative Agent and each
Lender prompt written notice of the following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or
proceeding by or before any arbitrator or Governmental Authority against or
affecting the Borrower or any Affiliate thereof that, if adversely determined,
could in the good faith opinion of the Borrower reasonably be expected to result
in a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together
with any other ERISA Events that have occurred, could reasonably be expected to
result in liability of the Borrower and the Subsidiaries in an aggregate amount
exceeding $3,000,000; and
(d) any other development that results in, or could reasonably
be expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.
Section 6.3 Existence; Conduct of Business
The Borrower will, and will cause each of the Subsidiary
Guarantors to, do or cause to be done all things necessary to preserve, renew
and keep in full force and effect (a) its legal existence, and (b) the rights,
licenses, permits, privileges and franchises material to the conduct of its
business, provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 7.3.
Section 6.4 Payment of Obligations
The Borrower will, and will cause each of the Subsidiaries to,
pay its obligations, including Tax liabilities, that, if not paid, could result
in a Material Adverse Effect before the same shall become delinquent or in
default, except where (a) the
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validity or amount thereof is being contested in good faith by appropriate
proceedings, (b) the Borrower or such Subsidiary has set aside on its books
adequate reserves with respect thereto in accordance with GAAP and (c) the
failure to make payment pending such contest could not reasonably be expected to
result in a Material Adverse Effect.
Section 6.5 Maintenance of Properties
The Borrower will, and will cause each of the Subsidiaries to,
keep and maintain all property material to the conduct of its business in good
working order and condition, ordinary wear and tear excepted.
Section 6.6 Books and Records; Inspection Rights
The Borrower will, and will cause each of the Subsidiaries to,
keep proper books of record and account in which full, true and correct entries
are made of all dealings and transactions in relation to its business and
activities. The Borrower will, and will cause each of the Subsidiaries to,
permit any representatives designated by the Administrative Agent or any Lender,
upon reasonable prior notice, to visit and inspect its properties, to examine
and make extracts from its books and records, and to discuss its affairs,
finances and condition with its officers and independent accountants, all at
such reasonable times and as often as reasonably requested.
Section 6.7 Compliance with Laws
The Borrower will, and will cause each of the Subsidiaries to,
comply with all laws, rules, regulations and orders of any Governmental
Authority applicable to it or its property, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.
Section 6.8 Use of Proceeds
The proceeds of the Loans and the Letters of Credit will be
used only (a) to refinance certain existing Indebtedness, (b) to make
acquisitions and investments not inconsistent with the terms hereof, and (c) for
working capital and other general corporate purposes not inconsistent with the
terms hereof. No part of the proceeds of any Loan or any Letter of Credit will
be used, whether directly or indirectly, and whether immediately, incidentally
or ultimately, to purchase, acquire or carry any Margin Stock or for any purpose
that entails a violation of any of the regulations of the Board, including
Regulations T, U and X.
Section 6.9 Information Regarding Collateral
(a) The Borrower will furnish to the Administrative Agent prompt written notice
of any change in (i) the legal name of any Loan Party or in any trade name used
to identify it in the conduct of its business or in the ownership of its
properties, (ii)
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the location of the chief executive office of any Loan Party, its principal
place of business, any office in which it maintains books or records relating to
Collateral owned or held by it or on its behalf or any office or facility at
which Collateral owned or held by it or on its behalf with an aggregate book
value in excess of $50,000 is located (including the establishment of any such
new office or facility), (iii) the identity or organizational structure of any
Loan Party such that a filed financing statement becomes misleading or (iv) the
Federal Taxpayer Identification Number of any Loan Party. The Borrower agrees
not to effect or permit any change referred to in the preceding sentence unless
all filings have been made under the Uniform Commercial Code or otherwise that
are required in order for the Administrative Agent to continue at all times
following such change to have a valid, legal and perfected security interest in
all the Collateral. The Borrower also agrees promptly to notify the
Administrative Agent if any material portion of the Collateral is damaged or
destroyed.
(b) Each year, at the time of delivery of annual financial
statements with respect to the preceding fiscal year pursuant to paragraphs (a)
and (b) of Section 6.1, the Borrower shall deliver to the Administrative Agent a
certificate of a Financial Officer and the chief legal officer of the Borrower,
(i) setting forth the information required pursuant to Section 5 of the
Perfection Certificate or confirming that there has been no change in such
information since the date of the Perfection Certificate or the date of the most
recent certificate delivered pursuant to this Section and (ii) certifying that
all Uniform Commercial Code financing statements or other appropriate filings,
recordings or registrations, including all refilings, rerecordings and
reregistrations, containing a description of the Collateral have been filed of
record in each governmental, municipal or other appropriate office in each
jurisdiction identified pursuant to clause (i) above, and all other actions have
been taken, to the extent necessary to protect and perfect the security
interests under the Security Agreement for a period of not less than 18 months
after the date of such certificate (except as noted therein with respect to any
continuation statements to be filed within such period).
Section 6.10 Insurance
(a) The Borrower will, and will cause each of the Subsidiaries
to, maintain, with financially sound and reputable insurance companies, (a)
adequate insurance for its insurable properties, all to such extent and against
such risks, including fire, casualty, business interruption and other risks
insured against by extended coverage, as is customary with companies in the same
or similar businesses operating in the same or similar locations and (b) such
other insurance as is required pursuant to the terms of any Security Document.
Section 6.11 Casualty and Condemnation
(a) The Borrower will furnish to the Administrative Agent and
the Lenders prompt written notice of any casualty or other insured damage to any
portion of
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any Collateral or the commencement of any action or proceeding for the taking of
any Collateral or any part thereof or interest therein under power of eminent
domain or by condemnation or similar proceeding.
(b) If any event described in paragraph (a) of this Section
results in Net Proceeds (whether in the form of insurance proceeds, condemnation
award or otherwise), the Administrative Agent is authorized to collect such Net
Proceeds and, if received by the Borrower or any Subsidiary, such Net Proceeds
shall be paid over to the Administrative Agent, provided that (i) to the extent
that the Borrower or any of the Subsidiaries intends to use any such Net
Proceeds to repair, restore, reinvest or replace assets of the Borrower or any
of the Subsidiaries as provided in the proviso of the definition of the term
"Net Proceeds", the Administrative Agent shall, subject to the provision of such
proviso, deliver such Net Proceeds to the Borrower, (ii) otherwise, the
Administrative Agent shall, and the Borrower hereby authorizes the
Administrative Agent to, apply such Net Proceeds, to the extent that they are
Net Proceeds, to prepay the Loans in accordance with Section 2.7 and (iii) all
proceeds of business interruption insurance shall be paid over to the Borrower
unless a Default has occurred and is continuing.
(c) If any Net Proceeds retained by or paid over to the
Administrative Agent as provided in paragraphs (a) and (b) of this Section
continue to be held by the Administrative Agent on the date that is 180 days
after the receipt of such Net Proceeds, then such Net Proceeds shall be applied
to prepay Borrowings as provided in Section 2.7(b).
Section 6.12 Additional Subsidiaries
If any Domestic Subsidiary is formed or acquired after the
Effective Date, the Borrower will notify the Administrative Agent and the
Lenders in writing thereof within ten Business Days after the date on which such
Domestic Subsidiary is formed or acquired and the Borrower will cause such
Domestic Subsidiary to (i) execute and deliver the Guarantee Agreement (or
otherwise become a party thereto in the manner provided therein) and become a
party to each applicable Security Document in the manner provided therein, in
each case within ten Business Days after the date on which such Domestic
Subsidiary is formed or acquired, and (ii) promptly take such actions to create
and perfect Liens on such Subsidiary's assets to secure the Obligations as the
Administrative Agent or the Required Lenders shall reasonably request.
Section 6.13 Further Assurances
(a) The Borrower will, and will cause each Subsidiary
Guarantor to, execute any and all further documents, financing statements,
agreements and instruments, and take all such further actions (including the
filing and recording of financing statements, fixture filings, Mortgages and
other documents), that may be required under
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any applicable law, or which the Administrative Agent or the Required Lenders
may reasonably request, to effectuate the transactions contemplated by the Loan
Documents or to grant, preserve, protect or perfect the Liens created or
intended to be created by the Security Documents or the validity or priority of
any such Lien, all at the expense of the Borrower and the Subsidiary Guarantors.
The Borrower also agrees to provide to the Administrative Agent, from time to
time upon request, evidence reasonably satisfactory to the Administrative Agent
as to the perfection and priority of the Liens created or intended to be created
by the Security Documents.
(b) If any material assets (including any real property or
improvements thereto or any interest therein (other than a leasehold interest))
are acquired by the Borrower or any Subsidiary Guarantor after the Effective
Date (other than assets constituting Collateral under the Security Agreement
that become subject to the Lien of the Security Agreement upon acquisition
thereof), the Borrower will notify the Administrative Agent and the Lenders
thereof. If requested by the Administrative Agent or the Required Lenders, the
Borrower will cause such assets (or any other assets or property (whether
currently owned or hereafter acquired) of the Borrower or any Subsidiary) to be
subjected to a Lien securing the Obligations and will take, and cause the
Subsidiary Guarantors to take, such actions as shall be necessary or reasonably
requested by the Administrative Agent to grant and perfect such Liens, including
actions described in paragraph (a) of this Section, all at the expense of the
Borrower and the Subsidiary Guarantors, provided that nothing herein shall
obligate the Borrower or any Subsidiary to grant any leasehold mortgage.
(c) If the Administrative Agent or the Required Lenders shall
have requested any mortgage or other lien on real property (or any interest
therein) pursuant to paragraph (b) of this Section (other than a leasehold
mortgage), the Borrower shall promptly deliver to the Administrative Agent (i)
counterparts of a Mortgage with respect to each Mortgaged Property signed on
behalf of the record owner/leasehold owner of such Mortgaged Property, (ii) a
policy or policies of title insurance issued by a nationally recognized title
insurance company, insuring the Lien of each such Mortgage as a valid first Lien
on the Mortgaged Property described therein, free of any other Liens except as
permitted by Section 7.2, in form and substance reasonably acceptable to the
Administrative Agent, together with such endorsements, coinsurance and
reinsurance as the Administrative Agent or the Required Lenders may reasonably
request, (iii) such surveys as may be required pursuant to such Mortgages or as
the Administrative Agent or the Required Lenders may reasonably request, (iv) a
copy of the original permanent certificate or temporary certificate of occupancy
as the same may have been amended or issued from time to time, covering each
improvement located upon the Mortgaged Properties, that were required to have
been issued by the appropriate Governmental Authority for such improvement and
have been provided to the Borrower, (v) if requested by the Administrative
Agent, a phase I environmental report for each Mortgaged Property, each such
report to be reasonably satisfactory to the Administrative Agent, (vii) such
opinions of local counsel to the Borrower and the Subsidiaries with respect to
the
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Mortgages as the Administrative Agent shall require and (viii) such other
customary documentation with respect to the Mortgages and the Mortgaged Property
as the Administrative Agent or the Required Lenders may reasonably request.
Section 6.14 Environmental Compliance
The Borrower shall, and shall cause each of its Subsidiaries
to, use and operate all of its facilities and property in compliance with all
Environmental Laws, keep all necessary permits, approvals, certificates,
licenses and other authorizations relating to environmental matters in effect
and remain in compliance therewith, and handle all Hazardous Materials in
compliance with all applicable Environmental Laws, except where noncompliance
with any of the foregoing could not reasonably be expected to have a Material
Adverse Effect.
Section 6.15 Interest Rate Protection Arrangements
Commencing no later than 60 days after the Effective Date, and
on each date thereafter, maintain Interest Rate Protection Arrangements, each in
form and substance satisfactory to the Administrative Agent, covering at least
50% of the aggregate outstanding principal amount of the Term Loans, which
agreements shall have an initial term of at least 3 years.
ARTICLE 7. NEGATIVE COVENANTS
Until the Revolving Commitments have expired or been
terminated and the principal of and interest on each Loan and all fees and other
amounts payable under the Loan Documents shall have been paid in full and all
Letters of Credit have expired and all LC Disbursements have been reimbursed,
the Borrower covenants and agrees with the Lenders that:
Section 7.1 Indebtedness
(a) The Borrower will not, and will not permit any Subsidiary
to, create, incur, assume or permit to exist any Indebtedness, except:
(i) Indebtedness under the Loan Documents;
(ii) Indebtedness existing on the date hereof and set
forth in Schedule 7.1, including any extensions, renewals or
replacements of any such Indebtedness that (A) do not increase the
principal amount of such Indebtedness, and (B) are on terms not
otherwise more disadvantageous to the Lenders;
(iii) Indebtedness of the Borrower or any Subsidiary
incurred to finance the acquisition, construction or improvement of any
fixed or capital
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assets, including Capital Lease Obligations and any Indebtedness
assumed in connection with the acquisition of any such assets or
secured by a Lien on any such assets prior to the acquisition thereof,
and extensions, renewals and replacements of any such Indebtedness that
do not increase the outstanding principal amount thereof, provided that
(A) such Indebtedness is incurred prior to or within 90 days after such
acquisition or the completion of such construction or improvement and
(B) the aggregate principal amount of Indebtedness permitted by this
clause (iii) shall not exceed $3,000,000 at any time outstanding;
(iv) Indebtedness of any Person that becomes a
Subsidiary after the date hereof, provided that (A) such Indebtedness
exists at the time such Person becomes a Subsidiary and is not created
in contemplation of or in connection with such Person becoming a
Subsidiary and (B) the aggregate principal amount of Indebtedness
permitted by this clause (iv) shall not exceed $5,000,000 at any time
outstanding;
(v) Indebtedness of the Borrower to any Subsidiary
Guarantor and of any Subsidiary Guarantor to the Borrower or any other
Subsidiary Guarantor;
(vi) Guarantees by the Borrower of Indebtedness
(other than Approved Subordinated Debt) of any Subsidiary Guarantor and
by any Subsidiary Guarantor of Indebtedness (other than Approved
Subordinated Debt) of the Borrower or any other Subsidiary Guarantor;
and
(vii) Approved Subordinated Debt.
(b) The Borrower will not, and it will not permit any
Subsidiary to, (i) issue any preferred equity securities or (ii) be or become
liable in respect of any obligation (contingent or otherwise) to purchase,
redeem, retire, acquire or make any other payment in respect of any shares of
equity securities of the Borrower or any Subsidiary or any option, warrant or
other right to acquire any such shares of equity securities, except as permitted
under Section 7.8.
(c) The Borrower will not, and it will not permit any
Subsidiary to, be or become liable in respect of any Contingent Obligation if,
immediately after giving effect thereto, the aggregate unpaid amount of all
Contingent Obligations incurred or assumed by the Borrower and the Subsidiaries
would exceed $50,000,000. For purposes hereof, "Contingent Obligation" means any
obligation for the deferred purchase price of property under, or incurred in
connection with, any asset purchase agreement, stock purchase agreement, joint
venture agreement or other similar agreement, provided that "Contingent
Obligation" shall not include any such obligation to the extent payable solely
and exclusively in shares of common stock of the Borrower.
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Section 7.2 Liens
The Borrower will not, and will not permit any Subsidiary to, create,
incur, assume or permit to exist any Lien on any property or asset now owned or
hereafter acquired by it, or assign or sell any income or revenues (including
accounts receivable) or rights in respect of any thereof, except:
(a) Liens created under the Loan Documents;
(b) Permitted Encumbrances;
(c) any Lien on any property or asset of the Borrower or any
Subsidiary existing on the date hereof and set forth in Schedule 7.2, provided
that (i) such Lien shall not apply to any other property or asset of the
Borrower or any Subsidiary and (ii) such Lien shall secure only those
obligations which it secures on the date hereof and any extensions, renewals and
replacements thereof that do not increase the outstanding principal amount
thereof; and
(d) security interests on fixed or capital assets acquired,
constructed or improved by the Borrower or any Subsidiary, provided that (i)
such security interests secure only Indebtedness permitted by clause (iii) of
Section 7.1, (ii) such security interests and the Indebtedness secured thereby
are incurred prior to or within 90 days after such acquisition or the completion
of such construction or improvement, (iii) the Indebtedness secured thereby does
not exceed the cost of acquiring, constructing or improving such fixed or
capital assets and (iv) such security interests shall not apply to any other
property or assets of the Borrower or any Subsidiary.
Section 7.3 Fundamental Changes
(a) The Borrower will not, and will not permit any Subsidiary
to, merge into or consolidate with any other Person, or permit any other Person
to merge into or consolidate with it, or sell, transfer, lease or otherwise
dispose of (in one transaction or in a series of transactions) all or
substantially all of its assets, or all or substantially all of the equity
securities of any of the Subsidiaries (in each case, whether now owned or
hereafter acquired), or liquidate or dissolve, except that, if at the time
thereof and immediately after giving effect thereto, no Default shall have
occurred and be continuing:
(i) any Subsidiary may merge into the Borrower in a
transaction in which the Borrower is the surviving entity, any
Subsidiary may merge into any Subsidiary Guarantor in a transaction in
which such Subsidiary Guarantor is the surviving entity;
(ii) any Subsidiary may merge with any Person in a
transaction that is not permitted by clause (i) of this Section 7.3(a),
provided that such merger is permitted by Sections 7.4 or 7.5, as
applicable;
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(iii) any Subsidiary may sell, transfer, lease or
otherwise dispose of its assets to the Borrower or to any Subsidiary
Guarantor;
(iv) the Borrower or any Subsidiary may sell,
transfer, lease or otherwise dispose of its assets in a transaction
that is not permitted by clause (iii) of this Section 7.3(a), provided
that such sale, transfer, lease or other disposition is also permitted
by Section 7.5;
(v) any Subsidiary (other than a Subsidiary
Guarantor) may liquidate or dissolve if the Borrower determines in good
faith that such liquidation or dissolution is in the best interests of
the Borrower and is not materially disadvantageous to the Lenders.
(b) The Borrower will not, and will not permit any of the
Subsidiaries to, engage to any material extent in any business other than
businesses of the type conducted by the Borrower and the Subsidiaries on the
date of execution of this Credit Agreement and businesses directly related
thereto.
Section 7.4 Investments, Loans, Advances, Guarantees and Acquisitions
The Borrower will not, and will not permit any of the
Subsidiaries to, purchase, hold or acquire (including pursuant to any merger)
any capital stock, evidences of indebtedness or other securities (including any
option, warrant or other right to acquire any of the foregoing) of, make or
permit to exist any loans or advances to, make or permit to exist any Guarantee
of any obligations of, or make or permit to exist any investment or any other
interest in, any other Person, or purchase or otherwise acquire (in one
transaction or a series of transactions (including pursuant to any merger)) any
assets of any other Person constituting a business unit, except:
(a) Permitted Investments;
(b) investments existing on the date hereof and set forth in
Schedule 7.4;
(c) investments made by the Borrower in the equity securities
of any Subsidiary Guarantor and made by any Subsidiary Guarantor in the equity
securities of any other Subsidiary Guarantor;
(d) loans or advances made by the Borrower to any Subsidiary
Guarantor and made by any Subsidiary to the Borrower or any Subsidiary
Guarantor, provided that any such loans and advances made by a Loan Party shall
be evidenced by a promissory note which shall be pledged pursuant to the
Security Agreement;
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(e) acquisitions made by the Borrower from any Subsidiary
Guarantor and made by any Subsidiary Guarantor from the Borrower or any other
Subsidiary Guarantor;
(f) Guarantees permitted by Section 7.1;
(g) investments existing on the date hereof in the common
shares of internet.com Corporation or any successor thereto ("IDC");
(h) other acquisitions and investments (other than investments
in the aggregate in excess of $1,000,000 in Margin Stock) made by the Borrower
or any Subsidiary, provided that (i) no such acquisition or investment shall be
"hostile" (whether in contemplation or consummation thereof), and (ii)
immediately after giving effect to each such acquisition (A) all of the
representations and warranties of the Borrower set forth in this Credit
Agreement shall be true and correct (except to the extent relating solely to an
earlier time), and (B) the Borrower shall be in pro-forma compliance with all of
the terms and conditions of this Credit Agreement; and
(i) other investments (other than investments in the aggregate
in excess of $1,000,000 in Margin Stock), loans, advances, Guarantees and
"non-hostile" acquisitions, provided that (1) the sum of (A) the aggregate
consideration paid by the Borrower or any Subsidiary in connection with all
acquisitions made pursuant to this paragraph (i), (B) the aggregate amount of
all such other investments, loans and advances outstanding and (C) the amount of
obligations and liabilities outstanding in the aggregate that is Guaranteed
pursuant to all such other Guarantees shall not exceed $3,000,000 at any time,
and (2) at the time thereof and immediately after giving effect thereto no
Default shall have occurred and be continuing.
Section 7.5 Asset Sales
The Borrower will not, and will not permit any of the
Subsidiaries to, sell, transfer, lease or otherwise dispose (including pursuant
to a merger) of any asset, including any equity securities, nor will the
Borrower permit any of the Subsidiaries to issue any additional shares of its
equity securities, except:
(a) sales, transfers, leases and other dispositions of
inventory, used or surplus equipment and Permitted Investments, in each case in
the ordinary course of business;
(b) sales, transfers, leases and other dispositions made by
the Borrower to any Subsidiary Guarantor and made by any Subsidiary Guarantor to
the Borrower or any other Subsidiary Guarantor;
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(c) the sale, transfer, lease or other disposition by the
Borrower and the Subsidiaries of (i) the capital stock of, or all or
substantially all of the assets of, Curtin & Pease/Peneco, Inc., a Florida
corporation, (ii) the Borrower's fee interest in certain real property located
in Berea, Ohio, together with all or substantially all of the property, plant
and equipment therein located, and/or (iii) the common shares of IDC; and
(d) other sales, transfers, leases and other dispositions of
assets, provided that (i) the aggregate fair market value of all assets, sold,
transferred, leased or otherwise disposed of in reliance upon this clause (d)
shall not exceed $20,000,000 in the aggregate at any time, (ii) all sales,
transfers, leases and other dispositions permitted by this clause (d) shall be
made for fair value and solely for cash consideration, and (iii) at the time
thereof and immediately after giving effect thereto no Default shall have
occurred and be continuing.
Section 7.6 Sale and Lease-Back Transactions
The Borrower will not, and will not permit any of the
Subsidiaries to, enter into any arrangement, directly or indirectly, with any
Person whereby it shall sell or transfer any property, real or personal, used or
useful in its business, whether now owned or hereafter acquired, and thereafter
rent or lease such property or other property that it intends to use for
substantially the same purpose or purposes as the property being sold or
transferred.
Section 7.7 Hedging Agreements
The Borrower will not, and will not permit any of the
Subsidiaries to, enter into any Hedging Agreement, other than Hedging Agreements
entered into in the ordinary course of business to hedge or mitigate risks to
which the Borrower or any Subsidiary is exposed in the conduct of its business
or the management of its liabilities.
Section 7.8 Restricted Payments
The Borrower will not, and will not permit any of the
Subsidiaries to, declare or make, or agree to pay for or make, directly or
indirectly, any Restricted Payment, except that (a) the Borrower may declare and
pay dividends with respect to its equity securities payable solely in additional
shares of its equity securities, (b) any Subsidiary may declare and pay
dividends with respect to its equity securities to the Borrower or any other
Subsidiary, (c) the Borrower may declare and pay cash dividends on its common
stock and the Borrower may repurchase shares of its issued and outstanding
common stock, provided that, in each such case under this clause (c), (i)
immediately before and after giving effect thereto, no Default shall or would
exist, and (ii) the aggregate sum paid in any fiscal year pursuant to this
clause (c) shall not exceed $10,000,000.
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Section 7.9 Transactions with Affiliates
The Borrower will not, and will not permit any of the
Subsidiaries to, sell, transfer, lease or otherwise dispose (including pursuant
to a merger) any property or assets to, or purchase, lease or otherwise acquire
(including pursuant to a merger) any property or assets from, or otherwise
engage in any other transactions with, any of its Affiliates, except in the
ordinary course of business at prices and on terms and conditions not less
favorable to the Borrower or such Subsidiary than could be obtained on an
arms-length basis from unrelated third parties, provided that this Section shall
not apply to any transaction that is permitted under Sections 7.1, 7.3, 7.4, 7.5
or 7.8 between or among the Loan Parties and not involving any other Affiliate.
Section 7.10 Restrictive Agreements
The Borrower will not, and will not permit any of the
Subsidiaries to, directly or indirectly, enter into, incur or permit to exist
any agreement or other arrangement that prohibits, restricts or imposes any
condition upon (a) the ability of the Borrower or any Subsidiary to create,
incur or permit to exist any Lien upon any of its property or assets or (b) the
ability of any Subsidiary to pay dividends or other distributions with respect
to any shares of its equity securities or to make or repay loans or advances to
the Borrower or any other Subsidiary or to Guarantee Indebtedness of the
Borrower or any other Subsidiary, provided that (i) the foregoing shall not
apply to restrictions and conditions imposed by law or by this Credit Agreement,
(ii) the foregoing shall not apply to restrictions and conditions existing on
the date hereof identified on Schedule 7.10 (but shall apply to any extension or
renewal of, or any amendment or modification expanding the scope of, any such
restriction or condition), (iii) the foregoing shall not apply to customary
restrictions and conditions contained in agreements relating to the sale of a
Subsidiary pending such sale, provided that such restrictions and conditions
apply only to the Subsidiary that is to be sold and such sale is permitted
hereunder, (iv) clause (a) of this Section shall not apply to restrictions or
conditions imposed by any agreement relating to secured Indebtedness permitted
by this Credit Agreement if such restrictions or conditions apply only to the
property or assets securing such Indebtedness and (v) clause (a) of this Section
shall not apply to customary provisions in leases restricting the assignment
thereof.
Section 7.11 Line of Business
The Borrower will not engage, or permit any Subsidiary to
engage, whether directly or indirectly, through interests in one or more
Subsidiaries, in any business other than businesses that the Borrower and the
Subsidiaries engage in as of the Effective Date.
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Section 7.12 Prepayments of Indebtedness
The Borrower will not prepay or obligate itself to prepay, in
whole or in part, any Indebtedness, or permit any of its Subsidiaries so to do,
other than Indebtedness under the Loan Documents.
Section 7.13 Interest Coverage Ratio
The Borrower will not permit the Interest Coverage Ratio as of
the end of any fiscal quarter during any period set forth below to be less than
the ratio set forth below with respect to such period:
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
<S> <C>
Effective Date through September 29, 2001 2.50:1.00
September 30, 2001 through September 29, 2002 2.75:1.00
September 30, 2002 and thereafter 3.00:1.00
</TABLE>
Section 7.14 Fixed Charge Coverage Ratio
The Borrower will not permit the Fixed Charge Coverage Ratio
as of the end of any fiscal quarter to be less than 1.10:1.00.
Section 7.15 Leverage Ratio
The Borrower will not permit the Leverage Ratio at any time
during any period set forth below to be greater than the ratio set forth below
with respect to such period:
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
<S> <C>
Effective Date through September 29, 2000 5.00:1.00
September 30, 2000 through September 29, 2001 4.50:1.00
September 30, 2001 through September 29, 2002 4.00:1.00
September 30, 2002 through September 29, 2003 3.50:1.00
September 30, 2003 and thereafter 3.00:1.00
</TABLE>
ARTICLE 8. EVENTS OF DEFAULT
If any of the following events ("Events of Default") shall occur:
(a) the Borrower shall fail to pay any principal of any Loan
or any reimbursement obligation in respect of any LC Disbursement when and as
the same shall
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become due and payable, whether at the due date thereof or at a date fixed for
prepayment thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan or
on any reimbursement obligation in respect of any LC Disbursement or any fee,
commission or any other amount (other than an amount referred to in clause (a)
of this Article) payable under any Loan Document, when and as the same shall
become due and payable, and such failure shall continue unremedied for a period
of three Business Days;
(c) any representation or warranty made or deemed made by or
on behalf of any Loan Party or any other Subsidiary in or in connection with any
Loan Document or any amendment or modification hereof or waiver thereunder, or
in any report, certificate, financial statement or other document furnished
pursuant to or in connection with any Loan Document or any amendment or
modification hereof or waiver thereunder, shall prove to have been incorrect
when made or deemed made;
(d) the Borrower shall fail to observe or perform any
covenant, condition or agreement contained in Sections 6.2, 6.3(a), 6.8, 6.12 or
6.13 or in Article 7, or any Loan Party shall fail to observe or perform any
covenant, condition or agreement contained in any other Loan Document;
(e) any Loan Party shall fail to observe or perform any
covenant, condition or agreement contained in any Loan Document to which it is a
party (other than those specified in clause (a), (b) or (d) of this Article),
and such failure shall continue unremedied for a period of 30 days after such
Loan Party shall have obtained knowledge thereof;
(f) the Borrower or any Subsidiary shall fail to make any
payment (whether of principal or interest and regardless of amount) in respect
of any Material Indebtedness, when and as the same shall become due and payable;
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables or
permits the holder or holders of any Material Indebtedness or any trustee or
agent on its or their behalf to cause any Material Indebtedness to become due,
or to require the prepayment, repurchase, redemption or defeasance thereof,
prior to its scheduled maturity, provided that this clause (g) shall not apply
to secured Indebtedness that becomes due solely as a result of the voluntary
sale or transfer of the property or assets securing such Indebtedness;
(h) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed seeking (i) liquidation, reorganization or
other relief in respect of the Borrower or any Subsidiary or its debts, or of a
substantial part of its assets, under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or
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hereafter in effect or (ii) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Borrower or any Subsidiary
or for a substantial part of its assets, and, in any such case, such proceeding
or petition shall continue undismissed for 60 days or an order or decree
approving or ordering any of the foregoing shall be entered;
(i) the Borrower or any Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation, reorganization
or other relief under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in clause (h) of this Article, (iii) apply for
or consent to the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower or any Subsidiary or for a
substantial part of its assets, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors or (vi) take any action for the
purpose of effecting any of the foregoing;
(j) the Borrower or any Subsidiary shall become unable, admit
in writing its inability or fail generally to pay its debts as they become due;
(k) one or more judgments for the payment of money in an
aggregate amount in excess of $3,500,000 shall be rendered against the Borrower
or any Subsidiary or any combination thereof and the same shall remain
undischarged for a period of 60 consecutive days during which execution shall
not be effectively stayed, or any action shall be legally taken by a judgment
creditor to attach or levy upon any assets of the Borrower or any Subsidiary to
enforce any such judgment;
(l) an ERISA Event shall have occurred that, in the opinion of
the Required Lenders, when taken together with all other ERISA Events that have
occurred, could reasonably be expected to result in liability of the Borrower
and the Subsidiaries in an aggregate amount exceeding (i) $2,000,000 in any year
or (ii) $4,000,000 for all periods;
(m) any Loan Document shall cease, for any reason (other than
any omission or commission by any Credit Party), to be in full force and effect,
or any Loan Party shall so assert in writing or shall disavow any of its
obligations thereunder;
(n) any Lien purported to be created under any Security
Document shall cease to be, or shall be asserted by any Loan Party not to be, a
valid and perfected Lien on any Collateral, with the priority required by the
applicable Security Document, except (i) as a result of the sale or other
disposition of the applicable Collateral in a transaction permitted under the
Loan Documents or (ii) as a result of the Administrative Agent's failure to
maintain possession of any stock certificates, promissory notes or other
instruments delivered to it under the Security Agreement; or
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(o) a Change in Control shall occur;
then, and in every such event (other than an event described in clause (h) or
(i) of this Article), and at any time thereafter during the continuance of such
event, the Administrative Agent may, and at the request of the Required Lenders
shall, by notice to the Borrower, take either or both of the following actions,
at the same or different times: (i) terminate the Revolving Commitments, and
thereupon the Revolving Commitments shall terminate immediately and (ii) declare
the Loans then outstanding to be due and payable in whole (or in part, in which
case any principal not so declared to be due and payable may thereafter be
declared to be due and payable), and thereupon the principal of the Loans so
declared to be due and payable, together with accrued interest thereon and all
fees and other obligations of each Loan Party accrued under the Loan Documents,
shall become due and payable immediately, without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Borrower; and
in case of any event described in clause (h) or (i) of this Article, the
Revolving Commitments shall automatically terminate and the principal of the
Loans then outstanding, together with accrued interest thereon and all fees and
other obligations of each Loan Party accrued under the Loan Documents, shall
automatically become due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower.
ARTICLE 9. THE ADMINISTRATIVE AGENT
Each Credit Party hereby irrevocably appoints the
Administrative Agent as its agent and authorizes the Administrative Agent to
take such actions on its behalf and to exercise such powers as are delegated to
the Administrative Agent by the terms hereof, together with such actions and
powers as are reasonably incidental thereto.
The Person serving as the Administrative Agent hereunder shall
have the same rights and powers in its capacity as a Lender as any other Lender
and may exercise the same as though it were not the Administrative Agent, and
such Person and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower or any Subsidiary or
other Affiliate thereof as if it were not the Administrative Agent hereunder.
The Administrative Agent shall not have any duties or
obligations except those expressly set forth herein. Without limiting the
generality of the foregoing, (a) the Administrative Agent shall not be subject
to any fiduciary or other implied duties, regardless of whether a Default has
occurred and is continuing, (b) the Administrative Agent shall not have any duty
to take any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated by the Loan Documents
that the Administrative Agent is required to exercise in writing by the Required
Lenders (or such other number or percentage of the Credit Parties as shall
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be necessary under the circumstances as provided in Section 10.2), and (c)
except as expressly set forth herein, the Administrative Agent shall not have
any duty to disclose, and shall not be liable for the failure to disclose, any
information relating to the Borrower, any of the Subsidiaries or any other Loan
Party that is communicated to or obtained by the Person serving as
Administrative Agent or any of its Affiliates in any capacity. The
Administrative Agent shall not be liable for any action taken or not taken by it
with the consent or at the request of the Required Lenders (or such other number
or percentage of the Credit Parties as shall be necessary under the
circumstances as provided in Section 10.2) or in the absence of its own gross
negligence or willful misconduct. The Administrative Agent shall be deemed not
to have knowledge of any Default unless and until written notice thereof is
given to the Administrative Agent by the Borrower or a Credit Party (and,
promptly after its receipt of any such notice, it shall give each Credit Party
and the Borrower notice thereof), and the Administrative Agent shall not be
responsible for or have any duty to ascertain or inquire into (i) any statement,
warranty or representation made in or in connection with any Loan Document, (ii)
the contents of any certificate, report or other document delivered thereunder
or in connection therewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth therein, (iv) the
validity, enforceability, effectiveness or genuineness thereof or any other
agreement, instrument or other document or (v) the satisfaction of any condition
set forth in Article 5 or elsewhere herein, other than to confirm receipt of
items expressly required to be delivered to the Administrative Agent.
The Administrative Agent shall be entitled to rely upon, and
shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other writing believed
by it to be genuine and to have been signed or sent by the proper Person. The
Administrative Agent also may rely upon any statement made to it orally or by
telephone and believed by it to be made by the proper Person, and shall not
incur any liability for relying thereon. The Administrative Agent may consult
with legal counsel (who may be counsel for the Borrower), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts.
The Administrative Agent may perform any and all its duties
and exercise its rights and powers by or through any one or more sub-agents
appointed by the Administrative Agent, provided that no such delegation shall
serve as a release of the Administrative Agent or waiver by the Borrower of any
rights hereunder. The Administrative Agent and any such sub-agent may perform
any and all its duties and exercise its rights and powers through their
respective Related Parties. The exculpatory provisions of the preceding
paragraphs shall apply to any such sub-agent and to the Related Parties of the
Administrative Agent and any such sub-agent, and shall apply to their respective
activities in connection with the syndication of the credit facilities provided
for herein as well as activities as Administrative Agent.
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Subject to the appointment and acceptance of a successor
Administrative Agent as provided in this paragraph, the Administrative Agent may
resign at any time by notifying the Credit Parties and the Borrower. Upon any
such resignation, the Required Lenders shall have the right, in consultation
with the Borrower, to appoint a successor (a) from among the Lenders, or (b)
with the consent of the Borrower (which consent shall not be unreasonably
withheld or delayed or, if an Event of Default shall have occurred and be
continuing, required), other than a Lender. If no successor shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring Administrative Agent gives notice of its
resignation, then the retiring Administrative Agent may, on behalf of the Credit
Parties, appoint a successor Administrative Agent which shall be a bank with an
office in New York, New York, or an Affiliate of any such bank. Upon the
acceptance of its appointment as Administrative Agent hereunder by a successor,
such successor shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder. The fees payable by the Borrower to a successor Administrative Agent
shall be the same as those payable to its predecessor unless otherwise agreed
between the Borrower and such successor. After the Administrative Agent's
resignation hereunder, the provisions of this Article and Section 10.3 shall
continue in effect for the benefit of such retiring Administrative Agent, its
sub-agents and their respective Related Parties in respect of any actions taken
or omitted to be taken by any of them while it was acting as Administrative
Agent.
Each Credit Party acknowledges that it has, independently and
without reliance upon the Administrative Agent or any other Credit Party and
based on such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Credit Agreement. Each
Credit Party also acknowledges that it will, independently and without reliance
upon the Administrative Agent or any other Credit Party and based on such
documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or based
upon any Loan Document, any related agreement or any document furnished
thereunder.
Notwithstanding anything in any Loan Document to the contrary,
no Agent acting in such capacity other than the Administrative Agent shall have
any duty or obligation under the Loan Documents.
ARTICLE 10. MISCELLANEOUS
Section 10.1 Notices
Except in the case of notices and other communications expressly
permitted to be given by telephone, all notices and other communications
provided for herein shall be in
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writing and shall be delivered by hand or overnight courier service, mailed by
certified or registered mail or sent by telecopy, as follows:
(a) if to the Borrower, to it at Penton Media, Inc., 1100
Superior Avenue, Cleveland, Ohio 44114, Attention of Joseph NeCastro (Telephone
No. (216) 696-7000); Telecopy No. (216) 931-9891);
(b) if to the Administrative Agent, or BNY as Issuing Bank to
it at One Wall Street, New York, New York 10286, Attention of: Sandra Morgan
(Telephone No. (212) 635-4692); Telecopy No. (212) 635-6365 or 6366 or 6367,
with a copy to The Bank of New York, at One Wall Street, New York, New York
10286, Attention of: Benjamin B. Todres (Telephone No. (212) 635-8745; Telecopy
No. (212) 635-8593);
(c) if to any other Credit Party, to it at its address (or
telecopy number) set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Credit Agreement shall be deemed to have been given on the date of
receipt.
Section 10.2 Waivers; Amendments
(a) No failure or delay by any Credit Party in exercising any
right or power under any Loan Document shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Credit Parties under the Loan
Documents are cumulative and are not exclusive of any rights or remedies that
they would otherwise have. No waiver of any provision of any Loan Document or
consent to any departure by any Loan Party therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) of this Section,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. Without limiting the generality of the
foregoing, the making of a Loan or the issuance, amendment, extension or renewal
of a Letter of Credit shall not be construed as a waiver of any Default,
regardless of whether any Credit Party may have had notice or knowledge of such
Default at the time.
(b) Neither this Credit Agreement nor any provision hereof may
be waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Borrower and the Required Lenders or by the Borrower
and the Administrative Agent with the consent of the Required Lenders, provided
that no such agreement shall (i) increase any Commitment of any Lender without
the written consent of such Lender, (ii) reduce the principal amount of any Loan
or any LC Disbursement, or
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reduce the rate of interest thereon, or reduce any fees or other amounts payable
under the Loan Documents, or reduce the amount of any scheduled reduction of the
Revolving Commitments, without the written consent of each Credit Party affected
thereby, (iii) postpone the scheduled date of payment of the principal amount of
any Loan or any LC Disbursement, or any interest thereon, or any fees or other
amounts payable under the Loan Documents, or reduce the amount of, waive or
excuse any such payment, postpone the scheduled date of reduction or expiration
of the Revolving Commitments, or postpone the final expiration date of any
Letter of Credit beyond the Revolving Maturity Date, without the written consent
of each Credit Party affected thereby, (iv) change any provision hereof in a
manner that would alter the pro rata sharing of payments required by any Loan
Document, without the written consent of each Credit Party, (v) change any of
the provisions of this Section or the definition of "Required Lenders" or any
other provision hereof specifying the number or percentage of Lenders required
to waive, amend or modify any rights hereunder or make any determination or
grant any consent hereunder, without the written consent of each Lender, (vi)
release any Subsidiary Guarantor from its Guarantee under the Guarantee
Agreement (except as expressly provided in the Guarantee Agreement or as a
result of the termination of the existence of such Subsidiary Guarantor in a
transaction permitted by Section 7.3), or limit its liability in respect of such
Guarantee, without the written consent of each Lender, or (vii) release any of
the Collateral from the Liens of the Loan Documents (except as expressly
provided in the Security Agreement or in connection with a transaction permitted
by Section 7.3), without the consent of each Lender, and provided, further, that
no such agreement shall amend, modify or otherwise affect the rights or duties
of the Administrative Agent, the Swingline Lender or the Issuing Bank hereunder
without the prior written consent of the Administrative Agent, the Swingline
Lender or the Issuing Bank, as the case may be.
Section 10.3 Expenses; Indemnity; Damage Waiver
(a) The Borrower shall pay (i) all reasonable out-of-pocket
expenses incurred by the Administrative Agent and its Affiliates, including the
reasonable fees, charges and disbursements of counsel for the Administrative
Agent, in connection with the syndication of the credit facilities provided for
herein, the preparation and administration of this Credit Agreement or any
amendments, modifications or waivers of the provisions of any Loan Document
(whether or not the transactions contemplated thereby shall be consummated),
(ii) all out-of-pocket expenses incurred by the Issuing Bank in connection with
the issuance, amendment, renewal or extension of any Letter of Credit or any
demand for payment thereunder and (iii) all out-of-pocket expenses incurred by
any Credit Party, including the fees, charges and disbursements of any counsel
for any Credit Party, in connection with the enforcement or protection of its
rights in connection with the Loan Documents, including its rights under this
Section, or in connection with the Loans made or Letters of Credit issued
hereunder, including all such out-of-pocket expenses incurred during any
workout, restructuring or negotiations in respect of such Loans or Letters of
Credit.
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(b) The Borrower shall indemnify each Credit Party and each
Related Party thereof (each such Person being called an "Indemnitee") against,
and hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including the fees, charges and disbursements
of any counsel for any Indemnitee, incurred by or asserted against any
Indemnitee arising out of, in connection with, or as a result of (i) the
execution or delivery of any Loan Document or any agreement or instrument
contemplated thereby, the performance by the parties to the Loan Documents of
their respective obligations thereunder or the consummation of the Transactions
or any other transactions contemplated thereby, (ii) any Loan or Letter of
Credit or the use of the proceeds thereof including any refusal of the Issuing
Bank to honor a demand for payment under a Letter of Credit if the documents
presented in connection with such demand do not strictly comply with the terms
of such Letter of Credit, (iii) any actual or alleged presence or release of
Hazardous Materials on or from any property owned or operated by the Borrower or
any of the Subsidiaries, or any Environmental Liability related in any way to
the Borrower or any of the Subsidiaries or (iv) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory and regardless of whether
any Indemnitee is a party thereto, provided that such indemnity shall not, as to
any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee.
(c) To the extent that the Borrower fails to pay any amount
required to be paid by it to the Administrative Agent or the Issuing Bank under
paragraphs (a) or (b) of this Section, each Lender severally agrees to pay to
the Administrative Agent or the Issuing Bank, as applicable, an amount equal to
the product of such unpaid amount multiplied by a fraction, the numerator of
which is the sum of such Lender's Revolving Commitment plus the outstanding
principal balance of such Lender's A Term Loan plus the outstanding principal
balance of such Lender's B Term Loan and the denominator of which is the sum of
the total of all Lenders' Revolving Commitments plus the outstanding principal
balance of all Lenders' A Term Loans plus the outstanding principal balance of
all Lenders' B Term Loans (in each case determined as of the time that the
applicable unreimbursed expense or indemnity payment is sought) of, provided
that the unreimbursed expense or indemnified loss, claim, damage, liability or
related expense, as applicable, was incurred by or asserted against the
Administrative Agent or the Issuing Bank in its capacity as such.
(d) To the extent permitted by applicable law, the Borrower
shall not assert, and hereby waives, any claim against any Indemnitee, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or
as a result of, any Loan Document or any agreement, instrument or other document
contemplated thereby, the Transactions or any Loan or any Letter of Credit or
the use of the proceeds thereof.
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(e) All amounts due under this Section shall be payable
promptly but in no event later than ten days after written demand therefor.
Section 10.4 Successors and Assigns
(a) The provisions of this Credit Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns permitted hereby, except that the Borrower may not assign
or otherwise transfer any of its rights or obligations hereunder without the
prior written consent of each Credit Party (and any attempted assignment or
transfer by the Borrower without such consent shall be null and void). Nothing
in this Credit Agreement, expressed or implied, shall be construed to confer
upon any Person (other than the parties hereto, their respective successors and
assigns permitted hereby and, to the extent expressly contemplated hereby, the
Related Parties of each Credit Party) any legal or equitable right, remedy or
claim under or by reason of any Loan Document.
(b) Any Lender may assign to one or more assignees all or a
portion of its rights and obligations under this Credit Agreement (including all
or a portion of its Revolving Commitment, A Term Commitment and/or B Term
Commitment and the Loans at the time owing to it), provided that (i) except in
the case of an assignment to a Lender or an Affiliate or an Approved Fund of a
Lender, each of the Borrower and the Administrative Agent (and, in the case of
an assignment of all or any portion of a Revolving Commitment or obligations in
respect of its LC Exposure or Swingline Exposure, the Issuing Bank and/or the
Swingline Lender, as the case may be), must give its prior written consent to
such assignment (which consent shall not be unreasonably withheld or delayed),
(ii) except in the case of an assignment to a Lender or an Affiliate or an
Approved Fund of a Lender or an assignment of the entire remaining amount of the
assigning Lender's Revolving Commitment, A Term Commitment and/or B Term
Commitment, as applicable, the amount of the Revolving Commitment, A Term
Commitment and/or B Term Commitment, as applicable, of the assigning Lender
subject to each such assignment (determined as of the date the Assignment and
Acceptance with respect to such assignment is delivered to the Administrative
Agent) shall not be less than $5,000,000 unless the Borrower and the
Administrative Agent otherwise consent, (iii) the parties to each assignment
shall execute and deliver to the Administrative Agent an Assignment and
Acceptance together with, unless otherwise agreed by the Administrative Agent, a
processing and recordation fee of $3,500, and (iv) the assignee, if it shall not
be a Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire, and provided further, that any consent of the Borrower otherwise
required under this paragraph shall not be required if a Default has occurred
and is continuing. Subject to acceptance and recording thereof pursuant to
paragraph (d) of this Section, from and after the effective date specified in
each Assignment and Acceptance, the assignee thereunder shall be a party hereto
and, to the extent of the interest assigned by such Assignment and Acceptance,
have the rights and obligations of a Lender under the Loan Documents, and the
assigning Lender thereunder shall, to the extent of the interest
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assigned by such Assignment and Acceptance, be released from its obligations
under the Loan Documents (and, in the case of an Assignment and Acceptance
covering all of the assigning Lender's rights and obligations under the Loan
Documents, such Lender shall cease to be a party hereto but shall continue to be
entitled to the benefits of Sections 3.5, 3.6, 3.7 and 10.3). Any assignment or
transfer by a Lender of rights or obligations under the Loan Documents that does
not comply with this paragraph shall be treated for purposes of the Loan
Documents as a sale by such Lender of a participation in such rights and
obligations in accordance with paragraph (e) of this Section.
(c) The Administrative Agent, acting for this purpose as an
agent of the Borrower, shall maintain at one of its offices in New York City a
copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
and principal amount of the Revolving Loans and LC Disbursements owing to, each
Lender pursuant to the terms hereof from time to time (the "Register"). The
entries in the Register shall be conclusive absent clearly demonstrable error,
and the Borrower and each Credit Party may treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Credit Agreement, notwithstanding notice to the contrary.
The Register shall be available for inspection by the Borrower and any Credit
Party, at any reasonable time and from time to time upon reasonable prior
notice.
(d) Upon its receipt of a duly completed Assignment and
Acceptance executed by an assigning Lender and an assignee, the assignee's
completed Administrative Questionnaire (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in paragraph
(b) of this Section and any written consent to such assignment required by
paragraph (b) of this Section, the Administrative Agent shall accept such
Assignment and Acceptance and record the information contained therein in the
Register. No assignment shall be effective for purposes of this Credit Agreement
unless it has been recorded in the Register as provided in this paragraph.
(e) Any Lender may, without the consent of the Borrower or any
Credit Party, sell participations to one or more banks or other entities (each
such bank or other entity being called a "Participant") in all or a portion of
such Lender's rights and obligations under the Loan Documents (including all or
a portion of its Commitment and the Loans and LC Disbursements owing to it),
provided that (i) such Lender's obligations under the Loan Documents shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations and (iii) the Loan
Parties and the Credit Parties shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations under the
Loan Documents. Any agreement or instrument pursuant to which a Lender sells
such a participation shall provide that such Lender shall retain the sole right
to enforce the Loan Documents and to approve any amendment, modification or
waiver of any provision of any Loan Documents, provided that such agreement
or instrument may provide that such
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Lender will not, without the consent of the Participant, agree to any amendment,
modification or waiver described in the first proviso to Section 10.2(b) that
affects such Participant. Subject to paragraph (f) of this Section, the Borrower
agrees that each Participant shall be entitled to the benefits of Sections 3.5,
3.6 and 3.7 to the same extent as if it were a Lender and had acquired its
interest by assignment pursuant to paragraph (b) of this Section. To the extent
permitted by law, each Participant also shall be entitled to the benefits of
Section 10.8 as though it were a Lender, provided that such Participant agrees
to be subject to Section 2.10(c) as though it were a Lender.
(f) A Participant shall not be entitled to receive any greater
payment under Sections 3.5, 3.6 or 3.7 than the Lender would have been entitled
to receive with respect to the participation sold to such Participant, unless
the sale of the participation to such Participant is made with the Borrower's
prior written consent. A Participant that would be a Foreign Lender if it were a
Lender shall not be entitled to the benefits of Section 3.7 unless the Borrower
is notified of the participation sold to such Participant and such Participant
agrees, for the benefit of the Borrower, to comply with Section 3.7(e) as though
it were a Lender.
(g) Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under the Loan Documents to secure
obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section shall not apply to any
such pledge or assignment of a security interest, provided that no such pledge
or assignment of a security interest shall release a Lender from any of its
obligations under the Loan Documents or substitute any such pledgee or assignee
for such Lender as a party hereto.
Section 10.5 Survival
All covenants, agreements, representations and warranties made
by the Borrower herein and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Credit Agreement or any other
Loan Document shall be considered to have been relied upon by the other parties
hereto and shall survive the execution and delivery of any Loan Document and the
making of any Loans and the issuance of any Letter of Credit, regardless of any
investigation made by any such other party or on its behalf and notwithstanding
that any Credit Party may have had notice or knowledge of any Default or
incorrect representation or warranty at the time any credit is extended
hereunder, and shall continue in full force and effect as long as the principal
of or any accrued interest on any Loan or any LC Disbursement or any fee or any
other amount payable under the Loan Documents is outstanding and unpaid or any
Letter of Credit is outstanding and so long as the Commitments have not expired
or terminated. The provisions of Sections 3.5, 3.6, 3.7 and 10.3 and Article 9
shall survive and remain in full force and effect regardless of the consummation
of the transactions contemplated hereby, the repayment of the Loans and the LC
Disbursements, the expiration or
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termination of the Letters of Credit and the termination of the Commitments or
the termination of this Credit Agreement or any provision hereof.
Section 10.6 Counterparts; Integration; Effectiveness
This Agreement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which, when taken together, shall constitute
but one contract. This Agreement and any separate letter agreements with respect
to fees payable to any Credit Party constitute the entire contract among the
parties relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof. Except as provided in Section 5.1, this Credit Agreement shall become
effective when it shall have been executed by the Administrative Agent and when
the Administrative Agent shall have received counterparts hereof which, when
taken together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Delivery of an executed counterpart
of this Credit Agreement by facsimile transmission shall be effective as
delivery of a manually executed counterpart of this Credit Agreement.
Section 10.7 Severability
In the event any one or more of the provisions contained in
this Credit Agreement should be held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby (it being
understood that the invalidity of a particular provision in a particular
jurisdiction shall not in and of itself affect the validity of such provision in
any other jurisdiction). The parties shall endeavor in good-faith negotiations
to replace the invalid, illegal or unenforceable provisions with valid
provisions the economic effect of which comes as close as possible to that of
the invalid, illegal or unenforceable provisions.
Section 10.8 Right of Setoff
If an Event of Default shall have occurred and be continuing,
each of the Lenders and their respective Affiliates is hereby authorized at any
time and from time to time, to the fullest extent permitted by applicable law,
to setoff and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other obligations at any time owing
by it to or for the credit or the account of the Borrower against any of and all
the obligations of the Borrower now or hereafter existing under this Credit
Agreement held by it, irrespective of whether or not it shall have made any
demand under this Credit Agreement and although such obligations may be
unmatured. The rights of each the Lenders and their respective Affiliates under
this
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Section are in addition to other rights and remedies (including other rights of
setoff) that it may have.
Section 10.9 Governing Law; Jurisdiction; Consent to Service of Process
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
(b) The Borrower hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of any
New York State court or Federal court of the United States of America sitting in
New York City, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Credit Agreement or the other Loan
Documents, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that, to the extent
permitted by applicable law, all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by applicable law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Credit Agreement shall
affect any right that the Administrative Agent or any other Credit Party may
otherwise have to bring any action or proceeding relating to this Credit
Agreement or the other Loan Documents against the Borrower, or any of its
property, in the courts of any jurisdiction.
(c) The Borrower hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Credit Agreement or the
other Loan Documents in any court referred to in paragraph (b) of this Section.
Each of the parties hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(d) Each party to this Credit Agreement irrevocably consents
to service of process in the manner provided for notices in Section 10.1.
Nothing in this Credit Agreement will affect the right of any party to this
Credit Agreement to serve process in any other manner permitted by law.
Section 10.10 WAIVER OF JURY TRIAL
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS
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AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION.
Section 10.11 Headings
Article and Section headings and the Table of Contents used
herein are for convenience of reference only, are not part of this Credit
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Credit Agreement.
Section 10.12 Interest Rate Limitation
Notwithstanding anything herein to the contrary, if at any
time the interest rate applicable to any Loan, together with all fees, charges
and other amounts that are treated as interest on such Loan under applicable law
(collectively the "charges"), shall exceed the maximum lawful rate (the "maximum
rate") that may be contracted for, charged, taken, received or reserved by the
Lender holding such Loan in accordance with applicable law, the rate of interest
payable in respect of such Loan hereunder, together with all of the charges
payable in respect thereof, shall be limited to the maximum rate and, to the
extent lawful, the interest and the charges that would have been payable in
respect of such Loan but were not payable as a result of the operation of this
Section shall be cumulated, and the interest and the charges payable to such
Lender in respect of other Loans or periods shall be increased (but not above
the maximum rate therefor) until such cumulated amount, together with interest
thereon at the Federal Funds Rate to the date of repayment, shall have been
received by such Lender.
Section 10.13 Treatment of Certain Information
Each Credit Party agrees to use reasonable precautions to keep
confidential, in accordance with their customary procedures for handling
confidential information of the same nature, all information supplied by the
Borrower or any Subsidiary pursuant to this Credit Agreement that (a) is clearly
identified by such Person as being confidential at the time the same is
delivered to such Credit Party, or (b) constitutes any financial statement,
financial projections or forecasts, budget, compliance certificate, audit
report, management letter or accountants' certification delivered hereunder
("Information"), provided, however, that nothing herein shall limit the
disclosure of any such Information (i) to such of their respective Related
Parties as need to know such Information, (ii) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process, or
requested by any bank regulatory authority,
87
<PAGE> 89
(iii) on a confidential basis, to prospective lenders or their counsel, (iv) to
auditors or accountants, and any analogous counterpart thereof, (v) to any other
Credit Party, (vi) in connection with any litigation to which any one or more of
the Credit Parties is a party, (vii) to the extent such Information (A) is or
becomes publicly available other than as a result of a breach of this Credit
Agreement, (B) is or becomes available to any of the Credit Parties on a
non-confidential basis from a source other than the Borrower or any Subsidiary,
or (C) was, is or becomes available to the Credit Parties on a non-confidential
basis prior to its disclosure to any of them by the Borrower or any Subsidiary;
and (viii) to the extent the Borrower shall have consented to such disclosure in
writing.
88
<PAGE> 90
PENTON MEDIA, INC.
CREDIT AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
PENTON MEDIA, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE> 91
PENTON MEDIA INC.
CREDIT AGREEMENT
THE BANK OF NEW YORK,
as Administrative Agent
By:
--------------------------------
Name: Benjamin B. Todres
------------------------------
Title: Vice President
-----------------------------
<PAGE> 92
PENTON MEDIA, INC.
CREDIT AGREEMENT
BANK OF AMERICA, N.A.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE> 93
PENTON MEDIA, INC.
CREDIT AGREEMENT
THE FIRST NATIONAL BANK OF CHICAGO
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE> 94
PENTON MEDIA, INC.
CREDIT AGREEMENT
ALLFIRST BANK
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE> 95
PENTON MEDIA, INC.
CREDIT AGREEMENT
BANK OF MONTREAL, CHICAGO BRANCH
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE> 96
PENTON MEDIA, INC.
CREDIT AGREEMENT
BANKBOSTON, N.A.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE> 97
PENTON MEDIA, INC.
CREDIT AGREEMENT
CITY NATIONAL BANK
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE> 98
PENTON MEDIA, INC.
CREDIT AGREEMENT
CREDIT AGRICOLE INDOSUEZ
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE> 99
PENTON MEDIA, INC.
CREDIT AGREEMENT
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE> 100
PENTON MEDIA, INC.
CREDIT AGREEMENT
FLEET NATIONAL BANK
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE> 101
PENTON MEDIA, INC.
CREDIT AGREEMENT
THE HUNTINGTON NATIONAL BANK
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE> 102
PENTON MEDIA, INC.
CREDIT AGREEMENT
NATIONAL BANK OF CANADA
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE> 103
PENTON MEDIA, INC.
CREDIT AGREEMENT
NATIONAL CITY BANK
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE> 104
PENTON MEDIA, INC.
CREDIT AGREEMENT
PARIBAS S.A.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE> 105
PENTON MEDIA, INC.
CREDIT AGREEMENT
STATE STREET BANK AND TRUST COMPANY
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE> 106
PENTON MEDIA, INC.
CREDIT AGREEMENT
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE> 107
PENTON MEDIA, INC.
CREDIT AGREEMENT
VAN KAMPEN SENIOR INCOME TRUST
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE> 108
PENTON MEDIA, INC.
CREDIT AGREEMENT
VAN KAMPEN SENIOR FLOATING RATE FUND
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE> 109
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1. DEFINITIONS................................................................................. 1
SECTION 1.1 DEFINED TERMS........................................................................... 1
SECTION 1.2 CLASSIFICATION OF LOANS AND BORROWINGS.................................................. 20
SECTION 1.3 TERMS GENERALLY......................................................................... 20
SECTION 1.4 ACCOUNTING TERMS; GAAP.................................................................. 20
SECTION 1.5 CALCULATION OF CERTAIN FINANCIAL TERMS.................................................. 21
ARTICLE 2. THE CREDITS................................................................................. 21
SECTION 2.1 COMMITMENTS............................................................................. 21
SECTION 2.2 LOANS AND BORROWINGS.................................................................... 22
SECTION 2.3 REQUESTS FOR BORROWINGS................................................................. 22
SECTION 2.4 FUNDING OF BORROWINGS................................................................... 23
SECTION 2.5 TERMINATION, REDUCTION AND INCREASE OF REVOLVING COMMITMENTS............................ 24
SECTION 2.6 REPAYMENT OF LOANS; EVIDENCE OF DEBT.................................................... 27
SECTION 2.7 PREPAYMENT OF LOANS..................................................................... 30
SECTION 2.8 LETTERS OF CREDIT....................................................................... 31
SECTION 2.9 SWINGLINE LOANS......................................................................... 36
SECTION 2.10 PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING OF SETOFFS............................. 38
ARTICLE 3. INTEREST, FEES, YIELD PROTECTION, ETC....................................................... 40
SECTION 3.1 INTEREST................................................................................ 40
SECTION 3.2 INTEREST ELECTIONS...................................................................... 41
SECTION 3.3 FEES.................................................................................... 42
SECTION 3.4 ALTERNATE RATE OF INTEREST.............................................................. 43
SECTION 3.5 INCREASED COSTS; ILLEGALITY............................................................. 44
SECTION 3.6 BREAK FUNDING PAYMENTS.................................................................. 46
SECTION 3.7 TAXES................................................................................... 46
SECTION 3.8 MITIGATION OBLIGATIONS.................................................................. 47
ARTICLE 4. REPRESENTATIONS AND WARRANTIES.............................................................. 48
SECTION 4.1 ORGANIZATION; POWERS.................................................................... 48
SECTION 4.2 AUTHORIZATION; ENFORCEABILITY........................................................... 49
SECTION 4.3 GOVERNMENTAL APPROVALS; NO CONFLICTS.................................................... 49
SECTION 4.4 FINANCIAL CONDITION; NO MATERIAL ADVERSE CHANGE......................................... 49
SECTION 4.5 PROPERTIES.............................................................................. 50
SECTION 4.6 LITIGATION AND ENVIRONMENTAL MATTERS.................................................... 40
SECTION 4.7 COMPLIANCE WITH LAWS AND AGREEMENTS..................................................... 51
SECTION 4.8 INVESTMENT AND HOLDING COMPANY STATUS................................................... 51
SECTION 4.9 TAXES................................................................................... 51
SECTION 4.10 ERISA.................................................................................. 51
SECTION 4.11 DISCLOSURE............................................................................. 52
SECTION 4.12 SUBSIDIARIES........................................................................... 52
SECTION 4.13 INSURANCE.............................................................................. 52
SECTION 4.14 LABOR MATTERS.......................................................................... 52
SECTION 4.15 SOLVENCY............................................................................... 53
SECTION 4.16 SECURITY DOCUMENTS..................................................................... 53
SECTION 4.17 FEDERAL RESERVE REGULATIONS............................................................ 54
</TABLE>
i
<PAGE> 110
<TABLE>
<CAPTION>
<S> <C>
SECTION 4.18 YEAR 2000.............................................................................. 54
ARTICLE 5. CONDITIONS.................................................................................. 55
SECTION 5.1 EFFECTIVE DATE.......................................................................... 55
SECTION 5.2 EACH CREDIT EVENT....................................................................... 58
ARTICLE 6. AFFIRMATIVE COVENANTS....................................................................... 59
SECTION 6.1 FINANCIAL STATEMENTS AND OTHER INFORMATION.............................................. 59
SECTION 6.2 NOTICES OF MATERIAL EVENTS.............................................................. 61
SECTION 6.3 EXISTENCE; CONDUCT OF BUSINESS.......................................................... 61
SECTION 6.4 PAYMENT OF OBLIGATIONS.................................................................. 61
SECTION 6.5 MAINTENANCE OF PROPERTIES............................................................... 62
SECTION 6.6 BOOKS AND RECORDS; INSPECTION RIGHTS.................................................... 62
SECTION 6.7 COMPLIANCE WITH LAWS.................................................................... 62
SECTION 6.8 USE OF PROCEEDS......................................................................... 62
SECTION 6.9 INFORMATION REGARDING COLLATERAL........................................................ 62
SECTION 6.10 INSURANCE.............................................................................. 63
SECTION 6.11 CASUALTY AND CONDEMNATION.............................................................. 63
SECTION 6.12 ADDITIONAL SUBSIDIARIES................................................................ 64
SECTION 6.13 FURTHER ASSURANCES..................................................................... 64
SECTION 6.14 ENVIRONMENTAL COMPLIANCE............................................................... 66
SECTION 6.15 INTEREST RATE PROTECTION ARRANGEMENTS.................................................. 66
ARTICLE 7. NEGATIVE COVENANTS.......................................................................... 66
SECTION 7.1 INDEBTEDNESS............................................................................ 66
SECTION 7.2 LIENS................................................................................... 68
SECTION 7.3 FUNDAMENTAL CHANGES..................................................................... 68
SECTION 7.4 INVESTMENTS, LOANS, ADVANCES, GUARANTEES AND ACQUISITIONS............................... 69
SECTION 7.5 ASSET SALES............................................................................. 70
SECTION 7.6 SALE AND LEASE-BACK TRANSACTIONS........................................................ 71
SECTION 7.7 HEDGING AGREEMENTS...................................................................... 71
SECTION 7.8 RESTRICTED PAYMENTS..................................................................... 71
SECTION 7.9 TRANSACTIONS WITH AFFILIATES............................................................ 72
SECTION 7.10 RESTRICTIVE AGREEMENTS................................................................. 72
SECTION 7.11 LINE OF BUSINESS....................................................................... 72
SECTION 7.12 PREPAYMENTS OF INDEBTEDNESS............................................................ 73
SECTION 7.13 INTEREST COVERAGE RATIO................................................................ 73
SECTION 7.14 FIXED CHARGE COVERAGE RATIO............................................................ 73
SECTION 7.15 LEVERAGE RATIO......................................................................... 73
ARTICLE 8. EVENTS OF DEFAULT........................................................................... 73
ARTICLE 9. THE ADMINISTRATIVE AGENT.................................................................... 76
ARTICLE 10. MISCELLANEOUS.............................................................................. 78
SECTION 10.1 NOTICES................................................................................ 78
SECTION 10.2 WAIVERS; AMENDMENTS.................................................................... 79
SECTION 10.3 EXPENSES; INDEMNITY; DAMAGE WAIVER..................................................... 80
SECTION 10.4 SUCCESSORS AND ASSIGNS................................................................. 82
SECTION 10.5 SURVIVAL............................................................................... 84
SECTION 10.6 COUNTERPARTS; INTEGRATION; EFFECTIVENESS............................................... 85
</TABLE>
<PAGE> 111
<TABLE>
<S> <C>
SECTION 10.7 SEVERABILITY........................................................................... 5
SECTION 10.8 RIGHT OF SETOFF........................................................................ 5
SECTION 10.9 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS............................. 6
SECTION 10.10 WAIVER OF JURY TRIAL.................................................................. 6
SECTION 10.11 HEADINGS.............................................................................. 7
SECTION 10.12 INTEREST RATE LIMITATION.............................................................. 7
SECTION 10.13 TREATMENT OF CERTAIN INFORMATION...................................................... 7
</TABLE>
SCHEDULES:
Schedule 2.1 Commitments
Schedule 4.5 Real Property
Schedule 4.6 Disclosed Matters
Schedule 4.12 Subsidiaries
Schedule 4.13 Insurance
Schedule 7.1 Existing Indebtedness
Schedule 7.2 Existing Liens
Schedule 7.4 Existing Investments
Schedule 7.10 Existing Restrictions
EXHIBITS:
Exhibit A Form of Assignment and Acceptance
Exhibit B Form of Opinion of Borrower's Counsel
Exhibit C-1 Form of Note
Exhibit C-2 Form of Swingline Note
Exhibit D Form of Guarantee Agreement
Exhibit E Form of Security Agreement
Exhibit F Terms of Approved Subordinated Debt
Exhibit G Form of Revolving Increase Supplement
<PAGE> 1
Exhibit 10.8
PENTON MEDIA, INC.
SENIOR EXECUTIVE BONUS PLAN
1. PURPOSE. The purpose of the Senior Executive Bonus Plan (the "Plan")
is to attract and retain key executives for Penton Media, Inc., a Delaware
corporation (the "Company"), and its Subsidiaries and to provide such persons
with incentives for superior performance. Incentive Bonus payments made under
the Plan are intended to constitute qualified "performance-based compensation"
for purposes of Section 162(m) of the Code, and Section 1.162-27 of the
Regulations, and the Plan shall be construed consistently with such intention.
2. DEFINITIONS. As used in this Plan,
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended
from time to time.
"COMMITTEE" means the Compensation Committee of the Board or
any other committee appointed by the Board to administer the
Plan; provided, however, that in any event the Committee shall
be comprised of not less than two directors of the Company,
each of whom shall qualify as an "outside director" for
purposes of Section 162(m) of the Code and Section
1.162-27(e)(3) of the Regulations.
"COMMON STOCK" means (i) shares of the common stock, par value
$.01, of the Company and (ii) any security into which Common
Stock may be converted by reason of any corporate capital
transaction.
"ELIGIBLE EXECUTIVE" means the Company's Chief Executive
Officer and each other executive officer of the Company that
the Committee determines is, or is likely to become, a
"covered employee" of the Company within the meaning of
Section 162(m) of the Code and Section 1.162-27(c)(2) of the
Regulations.
"INCENTIVE BONUS" shall mean, for each Eligible Executive, a
bonus opportunity amount determined by the Committee pursuant
to Section 5 below.
"MANAGEMENT OBJECTIVES" means the achievement of a performance
objective or objectives established pursuant to this Plan for
Eligible Executives. Management Objectives may be described in
terms of Company-wide objectives or objectives that are
related to the performance of the individual Eligible
1
<PAGE> 2
Executive or of the Subsidiary, division, department or
function within the Company or Subsidiary in which the
Eligible Executive is employed. The Management Objectives
shall be limited to specified levels of or growth in:
(i) return on invested capital;
(ii) earnings per share;
(iii) net earnings;
(iv) operating profit;
(v) pre-tax profit;
(vi) after-tax cash flow per share;
(vii) business unit contribution profit;
(viii) earnings before interest expense, income tax
expense, depreciation and amortization;
(ix) total shareholder return (including relative
to an index);
(x) return on assets;
(xi) return on equity;
(xii) sales growth; and/or
(xiii) productivity improvement.
"REGULATIONS" mean the Treasury Regulations promulgated under
the Code, as amended from time to time.
"SUBSIDIARY" means a corporation, partnership, joint venture,
unincorporated association or other entity in which the
Company has a direct or indirect ownership or other equity
interest.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Committee, which shall have full power and authority to construe, interpret and
administer the Plan and shall have the exclusive right to establish Management
Objectives and the amount of Incentive Bonus payable to each Eligible Executive
upon the achievement of the specified Management Objectives.
4. ELIGIBILITY. Eligibility under this Plan is limited to Eligible
Executives designated by the Committee in its sole and absolute discretion.
5. AWARDS.
(a) Not later than the 90th day of each fiscal year of the
Company, the Committee shall establish the Management Objectives for
each Eligible Executive and the amount of Incentive Bonus payable (or
formula for determining such amount) upon full achievement of the
specified Management Objectives. The Committee may further specify in
respect of the specified Management Objectives a minimum acceptable
level of achievement below which no Incentive Bonus payment will be
made and shall set forth a formula for determining the amount of any
payment to be made if performance is at or above the minimum acceptable
level but falls short of full achievement of the specified Management
Objectives. The Committee may not modify any terms of awards
2
<PAGE> 3
established pursuant to this section, except to the extent that after
such modification the Incentive Bonus would continue to constitute
qualified "performance-based compensation" for purposes of Section
162(m) of the Code.
(b) The Committee retains the discretion to reduce the amount
of any Incentive Bonus that would be otherwise payable to an Eligible
Executive (including a reduction in such amount to zero).
(c) Notwithstanding any other provision of the Plan to the
contrary, in no event shall the Incentive Bonus paid to an Eligible
Executive under the Plan for a year exceed $2,000,000.
6. COMMITTEE CERTIFICATION. As soon as reasonably practicable after the
end of each fiscal year of the Company, the Committee shall determine whether
the Management Objective has been achieved and the amount of the Incentive Bonus
to be paid to each Eligible Executive for such fiscal year and shall certify
such determinations in writing. The Committee at such time shall further
specify, at its discretion, whether the amount of Incentive Bonus shall be paid
in cash, shares of Common Stock or a combination thereof. To the extent an
Incentive Bonus is paid in shares of Common Stock, the number of shares of
Common Stock shall be based on the closing price of Common Stock on the New York
Stock Exchange on the date of Committee certification. The Company shall not be
required to issue any fractional shares of Common Stock pursuant to this Plan,
and any fractional shares of Common Stock shall be settled in cash.
7. PAYMENT OF INCENTIVE BONUSES. Subject to a valid election made by an
Eligible Executive with respect to the deferral of all or a portion of his or
her Incentive Bonus, including any such deferral into the Company's Management
Stock Purchase Plan, Incentive Bonuses shall be paid within 30 days after
written certification pursuant to Section 6.
8. NO RIGHT TO BONUS OR CONTINUED EMPLOYMENT. Neither the establishment
of the Plan, the provision for or payment of any amounts hereunder nor any
action of the Company, the Board or the Committee with respect to the Plan shall
be held or construed to confer upon any person (a) any legal right to receive,
or any interest in, an Incentive Bonus or any other benefit under the Plan or
(b) any legal right to continue to serve as an officer or employee of the
Company or any Subsidiary of the Company.
9. WITHHOLDING. The Company shall have the right to withhold, or
require an Eligible Executive to remit to the Company, an amount sufficient to
satisfy any applicable federal, state, local or foreign withholding tax
requirements imposed with respect to the payment of any Incentive Bonus.
10. NONTRANSFERABILITY. Except as expressly provided by the Committee,
the rights and benefits under the Plan shall not be transferable or assignable
other than by will or the laws of descent and distribution.
3
<PAGE> 4
11. EFFECTIVE DATE. Subject to its approval by the shareholders, this
Plan shall become effective for bonuses earned in years beginning with the year
2000 and shall remain effective until the fifth anniversary of the date of such
approval, subject to any further shareholder approvals (or reapprovals) mandated
for performance-based compensation under Section 162(m) of the Code, and subject
to the right of the Board to terminate the Plan, on a prospective basis only, at
any time.
4
<PAGE> 1
Exhibit 10.9
PENTON MEDIA, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(As Amended and Restated Effective as of January 1, 2000)
SECTION 1
Introduction
1.1 The Plan and Its Effective Date. This Penton Media, Inc. Supplemental
Executive Retirement Plan (As Amended and Restated Effective as of January 1,
2000, 1999) (the "Plan") was first established by Penton Media, Inc. (the
"Company") effective August 7, 1998 (the "Effective Date").
1.2 Purpose. The Company maintains the Penton Media, Inc. Retirement Plan (as
the same may hereafter be amended, the "Retirement Plan"), which is intended to
meet the requirements of a "qualified plan" under the Internal Revenue Code of
1986, as amended (the "Code"). For purposes of this Plan, the Retirement Plan
shall be deemed to include the Pittway Corporation Retirement Plan (the "Pittway
Plan"), to which the Retirement Plan is a successor. While the Code places
limitations on the maximum benefits which may be paid from a qualified plan and
the maximum amount of an employee's compensation that may be taken into account
for determining benefits payable under a qualified plan, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), permits the payment under an
"unfunded plan" of benefits which may not be paid under a qualified plan because
of such limitations. The purpose of the Plan is to provide certain key employees
of the Company and its subsidiaries with certain benefits which may not be
provided under the Retirement Plan because of the maximum compensation
limitation of the Code.
SECTION 2
Eligibility and Benefits
2.1 Eligibility. Each key employee of the Company or a subsidiary of the Company
who participates in the Retirement Plan and who is designated by the Committee
(as defined in section 3.1 below) shall participate in the Plan (a
"Participant"), subject to the conditions and limitations of the Plan.
2.2 Accrued Benefit.
(a) Subject to subsections (b) and (c) of this Section, for each
full calendar year and any final fraction of a calendar year
of a Participant's duration of employment with the Company
and, prior to the Effective Date, with the Pittway Companies
(as such term is defined in the Pittway Plan) (the "Employment
Period"), the Participant shall accrue a benefit under the
Plan equal to the benefit that he would
<PAGE> 2
have received under the Retirement Plan but for the Maximum
Dollar Limitation and the Maximum Benefit Limitation (as
defined below) and if the definition of "earnings" under the
Retirement Plan was as set forth in section 2.3 below, reduced
by the benefit that the Participant actually accrues under the
Retirement Plan. For purposes of the Plan, (i) "Maximum Dollar
Limitation" means, for any year or fraction of a year, the
greater of $150,000 or the dollar amount of any higher maximum
limitation on annual compensation taken into account under a
qualified plan for such year or fraction of a year determined
by the Secretary of Treasury or his delegate or by law under
section 401(a) (17) of the Code; it being understood that
annual compensation for purposes of such limitation is
computed differently from Earnings for purposes of the Plan;
and (ii) "Maximum Benefit Limitation" means the limitation
imposed by Section 415 of the Code on benefits payable under
the Retirement Plan. A Participant's accrued benefits under
the Plan shall be referred to hereinafter as the Participant's
"Supplemental Retirement Benefits."
(b) The Committee may specify as to any Participant a date
subsequent to the commencement of the Participant's employment
with the Company and the Pittway Companies as the date as of
which the Participant shall begin to accrue a benefit under
the Plan, and only periods after such date shall be treated as
employment with the Company and the Pittway Companies for
purposes of subsection (a) of this Section.
(c) Notwithstanding anything herein to the contrary, any
Participant who ceases to be an employee of the Company
without a vested benefit under the Retirement Plan shall not
be eligible to receive any benefit under the Plan.
2.3 Earnings. For purposes of the Plan, a Participant's "Earnings" for any year
or fraction means his total, regular cash compensation paid for such year or
fraction for services rendered to any Penton Company (as such term is defined in
the Retirement Plan) or, prior to the Effective Date, to the Pittway Companies
(as such term is defined in the Pittway Plan) during such year or fraction,
consisting solely of his salary and his annual discretionary cash bonus, if any,
for such year. The Committee may specify as to any Participant or as to all
Participants a maximum dollar amount of Earnings that may be taken into account
under the Plan. It is expressly understood that a Participant's Earnings do not
include any other compensation, including, without limitation, any of the
following:
(a) Long-term incentive compensation;
(b) Unused vacation pay;
(c) Special cash bonuses;
(d) Any income realized for Federal income tax purposes as a
result of the grant or exercise of an option or options to
acquire shares of common stock of a Pittway Company or the
Company, the receipt or exercise of any stock appreciation
right
2
<PAGE> 3
or payment, or the disposition of shares acquired by the
exercise of such an option or right;
(e) Any noncash compensation, including any amounts contributed by
the Participant's employer(s) for his benefit under the
Retirement Plan or any other retirement or benefit plan,
arrangement, or policy maintained by his employer(s);
(f) Any reimbursements for medical, dental or travel expenses,
automobile allowances, relocation allowances, educational
assistance allowances, awards and other special allowances;
(g) Any income realized for Federal income tax purpose as a result
of (i) group life insurance, (ii) the personal use of an
employer-owned automobile, or (iii) the transfer of restricted
shares of stock or restricted property of a Pittway Company or
the Company, or the removal of any such restrictions;
(h) Any severance pay paid as a result of the Participant's
termination of employment (it being expressly understood that
any amount(s) taken into account pursuant to the final
sentence of section 2.8 below shall not be deemed severance
pay for purposes hereof); or
(i) Any compensation paid or payable to the Participant, or to any
governmental body or agency on account of the Participant,
under the terms of any state, Federal or foreign law requiring
the payment of such compensation because of the Participant's
voluntary or involuntary termination of employment with the
Company.
Notwithstanding the foregoing, a Participant's Earnings do include (i) any
salary reduction amount elected by the Participant and credited to a cafeteria
plan (as defined in section 125(c) of the Code) or a qualified cash or deferred
arrangement (as defined in section 401(k) of the Code) and (ii) the initial
value ascribed to any performance shares, deferred shares, restricted shares or
similar award the Participant elects to receive in lieu of a portion of his
annual discretionary cash bonus.
2.4 Payment of Benefits. Subject to the conditions and limitations of the Plan,
upon a Participant's attainment of age 65 years, he shall be entitled to a
monthly benefit payable for his life commencing upon his attainment of age 65
years (or upon his retirement, if later) in an amount equal to one-twelfth
(1/12) of the sum of the Participant's accrued Supplemental Retirement Benefits.
A Participant's Supplemental Retirement Benefits shall be paid to him in the
form described below that applies to the Participant; provided, however, that in
lieu of payment in the normal form described below, the Participant may
irrevocably elect, within thirty (30) days after his commencement of
participation in the Plan, to receive his Supplemental Retirement Benefits in a
single lump sum as soon as practicable after his attainment of age 65 years. A
Participant's "Supplemental Retirement Benefit Commencement Date" means the date
as of which the initial payment (or, in the case of a single lump sum, full
payment) of the Supplemental Retirement Benefits to which the Participant is
entitled is payable. Subject to the
3
<PAGE> 4
conditions and limitations of the Plan, a Participant's Supplemental Retirement
Benefit Commencement Date shall normally be the first day of the calendar month
coincident with or next following the Participant's attainment of age 65 years.
Notwithstanding the immediately preceding sentence, if a Participant's
Employment Period terminates prior to his attainment of age 65 years and he is
eligible, and elects, to receive early retirement benefits under the Retirement
Plan, and if the Participant requests a Supplemental Retirement Benefit
Commencement Date prior to his attainment of age 65 years, then with (but only
with) the consent of the Committee, the Participant's Supplemental Retirement
Benefit Commencement Date shall be such earlier date, if any, selected by the
Committee. Supplemental Retirement Benefits that are paid in a lump sum, or
commence, before the Participant's attainment of age 65 years, if any, shall be
subject to actuarial reduction in accordance with section 2.5 below.
(a) Life Annuity. If a Participant does not have a Spouse (as
defined in section 2.7 below) on his Supplemental Retirement
Benefit Commencement Date, and if he has not elected pursuant
to the preceding provisions of this section 2.4 to receive his
Supplemental Retirement Benefits in a single lump sum, payment
of his Supplemental Retirement Benefits shall be during his
lifetime on a life annuity basis.
(b) Joint and Survivor Annuity. If a Participant has a Spouse on
his Supplemental Retirement Benefit Commencement Date, payment
of his Supplemental Retirement Benefits shall be in the form
of a joint and 50 percent survivor annuity unless the
Participant has theretofore elected pursuant to the preceding
provisions of this section 2.4 to have his benefits provided
in a single lump sum.
Such joint and 50 percent survivor annuity shall consist of a
reduced monthly benefit continuing during the Participant's
lifetime, and if such Spouse is living at the time of the
Participant's death, payment of 50 percent of such monthly
benefit shall be made to such Spouse until such Spouse's death
occurs. The amount of the Participant's and such Spouse's
benefits under this subsection shall be calculated so that it
is the actuarial equivalent of the Supplemental Retirement
Benefits to which the Participant would otherwise be entitled
under the Plan. If such Spouse predeceases the Participant, or
if the Participant and such Spouse cease to be married after
the Participant's Supplemental Retirement Benefit Commencement
Date, there shall be no adjustment to the Participant's
monthly payments and no Supplemental Retirement Benefits shall
be payable to any person after the Participant's death.
2.5 Actuarial Equivalent. A benefit shall be actuarially equivalent to another
benefit if the actuarial reserve required to provide such benefit is equal to
the actuarial reserve required to provide such other benefit, computed on the
basis of the same actuarial assumptions, interest rates, tables, methods and
procedures, including reduction factors for commencement of payments prior to
attainment of age 65 years, that are used for purposes of the Retirement Plan as
in effect on the applicable date that a benefit payment amount is determined.
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<PAGE> 5
2.6 Pre-Retirement Surviving Spouse Benefit. If a Participant dies prior to his
Supplemental Retirement Benefit Commencement Date, no Supplemental Retirement
Benefits under the Plan shall be paid or payable with respect to the
Participant; provided, however, that if the Participant has a Spouse at the time
of his death, such Spouse shall be entitled to receive a monthly benefit for
such Spouse's lifetime equal to 50 percent of the amount of monthly benefit that
would have been payable to the Participant in the form of a joint and 50 percent
survivor annuity if he had terminated employment as of the date of his death
with entitlement to Supplemental Retirement Benefits under the Plan and the
Committee had permitted his Supplemental Retirement Benefit Commencement Date to
occur on the first day of the calendar month coincident with or next following
the date of his death, taking into account actuarial reduction for commencement
prior to the Participant's attainment of age 65 years. The first payment to the
Spouse shall be made as of the first day of the calendar month coincident with
or next following the date of the Participant's death and the final payment
shall be made as of the first day of the calendar month during which the
Spouse's death occurs. If, prior to the Participant's death, the Participant had
elected pursuant to section 2.4 above to receive his Supplemental Retirement
Benefits in a single lump sum, in lieu of the monthly payments described above,
such Spouse shall be entitled to receive a single lump sum equal to 50 percent
of the lump sum value of the Participant's Supplemental Retirement Benefits as
of the date of his death, taking into account actuarial factors for payment
prior to the Participant's attainment of age 65 years. Such lump sum payment
shall be made to such Spouse as soon as practicable following the Participant's
death.
2.7 Spouse. For purposes of the Plan, a person will be considered the "Spouse"
of a Participant as of any date if and only if such person and the Participant
have been married in a religious or civil ceremony recognized under the laws of
the nation or state where the marriage was contracted and the marriage remains
legally effective. Any person who is not, or who has ceased to be, a
Participant's Spouse on the Participant's Supplemental Retirement Benefit
Commencement Date (or, in the event of the Participant's death prior to his
Supplemental Retirement Benefit Commencement Date, the date of his death) shall
not be considered the Participant's Spouse for purposes of the Plan.
2.8 Forfeiture; Early Termination of Employment Period. If the Participant's
Employment Period ends on account of a Termination for Cause (as defined below),
the Participant shall forfeit all of his Supplemental Retirement Benefits, if
any, under the Plan, no benefit under the Plan shall thereafter be payable to or
with respect to the Participant or his Spouse, and any benefit under the Plan
theretofore paid to or with respect to the Participant or his Spouse must be
repaid to the Company by the Participant or his Spouse promptly upon demand.
For purposes of the Plan, "Termination for Cause" shall mean termination of a
Participant's employment because of:
(a) the commission by the Participant of a felony or a
crime involving moral turpitude;
(b) the commission by the Participant of a fraud;
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<PAGE> 6
(c) the commission by the Participant 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;
(d) conduct by the Participant that brings the Company or
any of its subsidiaries or affiliates into
substantial public disgrace or disrepute; or
(e) gross negligence or willful misconduct by the
Participant with respect to the Company or any of its
subsidiaries or affiliates.
2.9 Funding. The Plan is intended to be non-qualified for purposes of the Code
and unfunded for purposes of the Code and ERISA. Benefits payable under the Plan
to a Participant and/or his Spouse, as the case may be, shall be paid directly
by the Company. The Company shall not be required to segregate on its books or
otherwise any amount to be used for payment of Supplemental Retirement Benefits
under the Plan. Each Participant and Spouse is solely an unsecured creditor of
the Company with respect to any benefit payable with respect to a Participant
hereunder.
SECTION 3
General Provisions
3.1 Committee. The Plan shall be administered by the administrative committee of
the Retirement Plan (the "Committee"). The Committee shall have, to the extent
appropriate, the same powers, rights, duties and obligations with respect to the
Plan as it has with respect to the Retirement Plan. Each determination provided
for in the Plan shall be made by the Committee under such procedure as may from
time to time be prescribed by the Committee and shall be made in the absolute
discretion of the Committee. Any determination so made shall be conclusive.
3.2 Employment Rights. Neither the establishment of, nor participation in, the
Plan shall be construed to give any Participant the right to be retained in the
service of the Penton Companies or to any benefits not specifically provided by
the Plan.
3.3 Taxes and Withholding. Each Participant (or his Spouse, as applicable) shall
be responsible for any taxes imposed on him (or his Spouse) by reason of the
establishment of, or his participation in, the Plan, including, without
limitation, any Federal, state and/or local income or employment taxes imposed
on benefits or potential benefits under the Plan (or on the value thereof)
("Taxes") in advance of the Participant's receipt of such benefits or potential
benefits. The Company or a subsidiary of the Company may deduct any Taxes from
payroll or other payments due the Participant or his Spouse. The Committee shall
deduct from all payments under the Plan any Taxes required to be withheld. In
the event that such deductions and/or withholdings are not sufficient to pay the
Taxes, the Participant (or his Spouse) shall promptly remit the deficit to the
Company upon its request.
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<PAGE> 7
3.4 Interests Not Transferable. Except as to withholding of any Taxes, the
interests of Participants and their Spouses under the Plan are not subject to
the claims of their creditors and may not be voluntarily or involuntarily
transferred, assigned, alienated or encumbered. No Participant shall have any
right to any benefit payments hereunder prior to his termination of employment
with the Penton Companies.
3.5 Payment with Respect to Incapacitated Participants or Beneficiaries. If any
person entitled to benefits under the Plan is under a legal disability or in the
Committee's opinion is incapacitated in any way so as to be unable to manage his
financial affairs, the Committee may direct the payment of such benefit to such
person's legal representative or to a relative or friend of such person for such
person's benefit, or the Committee may direct the application of such benefits
for the benefit of such person in any manner which the Committee may select that
is consistent with the Plan. Any payments made in accordance with the foregoing
provisions of this section shall be a full and complete discharge of any
liability for such payments.
3.6 Limitation of Liability. To the extent permitted by law, no person
(including the Company, any subsidiary of the Company, the Board of Directors of
the Company (the "Board"), the board of directors of any subsidiary of the
Company, the Committee, any present or former member of the Board or of the
board of directors of any subsidiary of the Company or of the Committee, and any
present or former officer of the Company or of any subsidiary of the Company)
shall be personally liable for any act done or omitted to be done in good faith
in the administration of the Plan.
3.7 Controlling Law. The Plan shall be construed in accordance with the
provisions of ERISA and other Federal laws, to the extent such provisions are
applicable to the Plan. To the extent not inconsistent therewith, the Plan shall
be construed in accordance with the laws of the State of Ohio.
3.8 Gender and Number. Where the context admits, words in the masculine gender
shall include the feminine and neuter genders, the plural shall include the
singular and the singular shall include the plural.
3.9 Action by the Company. Any action required of or permitted by the Company
under the Plan, including action by the Company to amend the Plan, shall be by
resolution of the Board or by a duly authorized committee of the Board or by a
person or persons authorized by resolution of the Board or such committee. The
procedure for amending the Plan is that the Plan shall be amended by the Company
taking appropriate corporate action to effectuate any amendment considered by it
to be advisable to be made. Appropriate corporate action includes action by
resolution of the Board, by a committee authorized by the Board, or by a person
or persons authorized by the Board or such committee, as provided above.
3.10 Successor to the Company. The term "Company" as used in the Plan shall
include any successor to the Company by reason of merger, consolidation, the
purchase of all or substantially all of the Company's assets or otherwise.
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<PAGE> 8
3.11 Miscellaneous. The Plan shall be binding upon and inure to the benefit of
the parties, their legal representatives, successors and assigns, and all
persons entitled to benefits hereunder. Any notice given in connection with the
Plan shall be in writing and shall be delivered in person or by registered mail,
return receipt requested. Any notice given by registered mail shall be deemed to
have been given upon the date of delivery indicated on the registered mail
return receipt, if correctly addressed.
SECTION 4
Amendment and Termination
While the Company expects to continue the Plan, it must necessarily reserve, and
hereby does reserve, the right, either in general or as to one or more
particular Participants, to amend the Plan from time to time or to terminate the
Plan at any time; provided that no amendment of the Plan with respect to a
Participant that reduces or eliminates any benefits such Participant has accrued
as of the effective date of such amendment shall be effective unless such
Participant consents to such amendment.
IN WITNESS WHEREOF, this Plan has been executed on behalf of the
Company by its duly authorized officers as of the day and year first above
written.
PENTON MEDIA, INC.
By: ______________________
Its: ______________________
Date: ______________________
8
<PAGE> 1
Exhibit 10.16
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") made as of August 24,
1999, between Penton Media, Inc., a Delaware corporation (the "Company"), and
Joseph G. NeCastro ("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
Chief Financial Officer and Treasurer 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.
(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.
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 $260,000 per year. The Compensation Committee of the Board (or,
if there is no such Committee, the Board) shall review Executive's salary at
least annually and may, in its sole discretion, increase it.
(b) Bonus(es). For the calendar year 1999 and for subsequent
calendar 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)). Annual bonus for 1999 shall be based on principles similar to the
foregoing, but with a minimum bonus opportunity of $100,000. 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
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<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) 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 annual salary; but only if and
so long as such additional coverage is available at
standard rates from the insurer providing term life
insurance coverage under the Standard Executive
Benefits Package or from a comparable insurer
acceptable to the Company;
(ii) supplementary long-term disability coverage in an
amount which will increase maximum covered annual
compensation to $270,000 and the maximum monthly
payments to $15,000; 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) coverage under the Company's Supplemental Executive
Retirement Plan, subject to approval of the
Compensation Committee of the Board (or, if there is
no such Committee, the Board) .
(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, 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.
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<PAGE> 4
(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");
(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
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<PAGE> 5
(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
(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
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<PAGE> 6
(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
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<PAGE> 7
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 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
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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
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 annual 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
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<PAGE> 9
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
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
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<PAGE> 10
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.
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,
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<PAGE> 11
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. Joseph G. NeCastro
2235 Harcourt Drive
Cleveland Heights, Ohio 44106
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<PAGE> 12
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 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.
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<PAGE> 13
(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.
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.
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<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date written below.
PENTON MEDIA, INC.
Date: , 1999 By
Thomas L. Kemp
Chief Executive Officer
Date: , 1999
Joseph G. NeCastro
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<PAGE> 15
Exhibit 1
PENTON MEDIA, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
This AGREEMENT (this "Agreement") is made as of _____________ (the
"Date of Grant"), by and between Penton Media, Inc. a Delaware corporation (the
"Company"), and ____________ (the "Optionee").
1. GRANT OF STOCK OPTION. Subject to and upon the terms,
conditions, and restrictions set forth in this Agreement and in the
Company's 1998 Equity and Performance Incentive Plan (the "Plan"), the
Company hereby grants to the Optionee as of the Date of Grant a stock
option (the "Option") to purchase __________ shares of Common Stock
(the "Optioned Shares"). The Option may be exercised from time to time
in accordance with the terms of this Agreement. The price at which the
Optioned Shares may be purchased pursuant to the Option shall be
___________ per share subject to adjustment as hereinafter provided
(the "Option Price"). The Option is intended to be a nonqualified stock
option and shall not be treated as an "incentive stock option" within
the meaning of that term under Section 422 of the Code, or any
successor provision thereto.
2. TERM OF OPTION. The term of the Option shall commence on the
Date of Grant and, unless earlier terminated in accordance with Section
6 hereof, shall expire ten (10) years from the Date of Grant.
3. RIGHT TO EXERCISE. Subject to Section 6 hereof, the Option
will be exercisable in whole at any time and in part from time to time
after the third anniversary of the Date of Grant but prior to the tenth
anniversary of the Date of Grant; provided, however that:
a. in the event that the employment with the Company
and its Subsidiaries terminates prior to the third anniversary
of the Date of Grant on account of (i) the Optionee's
retirement at or after age 65, (ii) the death of the Optionee
if such death occurs while the Optionee is employed by the
Company or any Subsidiary or (iii) the Optionee's permanent
and total disability if the Optionee becomes permanently and
totally disabled while an employee of the Company or any
Subsidiary, the Option will thereupon become exercisable
immediately with respect to all of the Optioned Shares; and
b. in the event that employment with the Company and
its Subsidiaries terminates prior to the third anniversary of
the Date of Grant other than on account of retirement at or
after age 65, death or permanent and total disability, the
Option will thereupon become exercisable immediately (i) as to
33 1/3% of the Optioned Shares if such termination occurs on
or after the first anniversary of the Date of Grant but prior
to the second anniversary of the Date of Grant, and (ii) as to
66 2/3% of the Optioned Shares if such termination occurs on
or after the second anniversary of the Date of Grant but prior
to the third anniversary of the Date of Grant.
<PAGE> 16
Notwithstanding the foregoing, in no event shall the Optionee
be entitled to acquire a fraction of one Optioned Share pursuant to the
Option. The Optionee shall be entitled to the privileges of ownership
with respect to Optioned Shares purchased and delivered to the Optionee
upon the exercise of all or part of the Option.
4. OPTION NONTRANSFERABLE. The Option granted hereby shall be
neither transferable nor assignable by the Optionee other than by will
or by the laws of descent and distribution and may be exercised, during
the lifetime of the Optionee, only by the Optionee, or in the event of
his or her legal incapacity, by his or her guardian or legal
representative acting on behalf of the Optionee in a fiduciary capacity
under state law and court supervision.
5. NOTICE OF EXERCISE; PAYMENT. To the extent then exercisable,
the Option may be exercised by written notice to the Company stating
the number of Optioned Shares for which the Option is being exercised
and the intended manner of payment. Payment equal to the aggregate
Option Price of the Optioned Shares for which the Option is being
exercised shall be tendered in full with the notice of exercise to the
Company in cash in the form of currency or check or other cash
equivalent acceptable to the Company. The Optionee may also tender the
Option Price by (a) the actual or constructive transfer to the Company
of nonforfeitable, nonrestricted shares of Common Stock that have been
owned by the Optionee for (i) more than one year prior to the date of
exercise and for more than two years from the date on which the option
was granted, if they were originally acquired by the Optionee pursuant
to the exercise of an incentive stock option, within the meaning of
Section 422 of the Code or (ii) more than six months prior to the date
of exercise, if they were originally acquired by the Optionee other
than pursuant to the exercise of an incentive stock option, or (b) by
any combination of the foregoing methods of payment, including a
partial tender in cash and a partial tender in nonforfeitable,
nonrestricted shares of Common Stock. Nonforfeitable, nonrestricted
shares of Common Stock that are transferred by the Optionee in payment
of all or any part of the Option Price shall be valued on the basis of
their Market Value per Share. The requirement of payment in cash shall
be deemed satisfied if the Optionee makes arrangements that are
satisfactory to the Company with a broker that is a member of the
National Association of Securities Dealers, Inc. to sell on the
exercise date a sufficient number of Optioned Shares that are being
purchased pursuant to the exercise, so that the net proceeds of the
sale transaction will at least equal the amount of the aggregate Option
Price plus payment of any applicable withholding taxes, and pursuant to
which the broker undertakes to deliver to the Company the amount of the
aggregate Option Price plus payment of any applicable withholding taxes
on a date satisfactory to the Company, but not later than the date on
which the sale transaction will settle in the ordinary course of
business. As a further condition precedent to the exercise of the
Option, the Optionee shall comply with all regulations and requirements
of any regulatory authority having control of, or supervision over, the
issuance of shares of Common Stock and in connection therewith shall
execute any documents that the Board shall in its sole discretion deem
necessary or advisable. The date of the Optionee's written notice shall
be the exercise date.
6. TERMINATION OF AGREEMENT. This Agreement and the Option
granted hereby shall terminate automatically and without further notice
on the earliest of the following dates:
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<PAGE> 17
(a) One (1) year after the Optionee's retirement at
or after age 65;
(b) One (1) year after the Optionee's death if such
death occurs while the Optionee is employed by the Company or
any Subsidiary;
(c) One (1) year after the Optionee's permanent and
total disability, if the Optionee becomes permanently and
totally disabled while an employee of the Company or any
Subsidiary;
(d) Except as provided on a case-by-case basis,
thirty (30) calendar days after the Optionee ceases to be an
employee of the Company and the Subsidiaries for any reason
other than as described in Section 6(a), 6(b) or 6(c) hereof;
or
(e) Ten (10) years from the Date of Grant.
In the event that the Optionee's employment is terminated for cause,
this Agreement shall terminate at the time of such termination
notwithstanding any other provision of this Agreement and the
Optionee's option will cease to be exercisable to the extent
exercisable as of such termination and will not become exercisable
after such termination. For purposes of this provision, "cause" shall
mean the Optionee shall have committed prior to termination of
employment any of the following acts:
(i) an intentional act of fraud, embezzlement,
theft, or any other material violation of
law in connection with the Optionee's duties
or in the course of the Optionee's
employment;
(ii) intentional wrongful damage to material
assets of the Company or any Subsidiary;
(iii) intentional wrongful disclosure of material
confidential information of the Company or
any Subsidiary;
(iv) intentional wrongful engagement in any
competitive activity that would constitute a
material breach of the duty of loyalty to
the Company or any Subsidiary; or
(v) intentional breach of any stated material
employment policy of the Company or any
Subsidiary.
This Agreement shall not be exercisable for any number of Optioned
Shares in excess of the number of Optioned Shares for which this
Agreement is then exercisable, pursuant to Sections 3 and 7 hereof, on
the date of termination of employment. For the purposes of this
Agreement, the continuous employment of the Optionee with the Company
shall not be deemed to have been interrupted, and the Optionee shall
not be deemed to have ceased
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<PAGE> 18
to be an employee of the Company, by reason of the transfer of his or
her employment among the Company and the Subsidiaries or a leave of
absence approved by the Board.
7. ACCELERATION OF OPTION. The Option granted hereby shall become
immediately exercisable in full in the event of (i) a Change of
Control, (ii) the Optionee's retirement at or after age 65, (iii) the
death of the Optionee if such death occurs while the Optionee is
employed by the Company or any Subsidiary or (iv) the Optionee's
permanent and total disability if the Optionee becomes permanently and
totally disabled while an employee of the Company or any Subsidiary.
8. NO EMPLOYMENT CONTRACT. Nothing contained in this Agreement
shall confer upon the Optionee any right with respect to continuance of
employment by the Company or any Subsidiary, nor limit or affect in any
manner the right of the Company or any Subsidiary to terminate the
employment or adjust the compensation of the Optionee.
9. TAXES AND WITHHOLDING. To the extent that the Company shall
be required to withhold any federal, state, local or foreign taxes in
connection with the exercise of the Option, and the amounts available
to the Company for such withholding are insufficient, it shall be a
condition to the exercise of the Option that the Optionee shall pay
such taxes or make provisions that are satisfactory to the Company for
the payment thereof. The Optionee may elect to satisfy all or any part
of any such withholding obligation by (a) surrendering to the Company a
portion of the Optioned Shares that are issued or transferred to the
Optionee upon the exercise of the Option, and the Optioned Shares so
surrendered by the Optionee shall be credited against any such
withholding obligation at the Market Value per Share of such shares on
the date of such surrender or (b) utilizing the broker assistance
arrangement provided in Section 5.
10. COMPLIANCE WITH LAW. The Company shall make reasonable efforts
to comply with all applicable federal and state securities laws;
provided, however, notwithstanding any other provision of this
Agreement, the Option shall not be exercisable if the exercise thereof
would result in a violation of any such law.
11. ADJUSTMENTS. The Board may make or provide for such
adjustments in the number of Optioned Shares covered by the Option, in
the Option Price applicable to the Option, and in the kind of shares
covered thereby, as the Board, in its sole discretion, exercised in
good faith, may determine is equitably required to prevent dilution or
enlargement of the Optionee's rights that otherwise would result from
(a) any stock dividend, stock split, combination of shares,
recapitalization, or other change in the capital structure of the
Company, (b) any merger, consolidation, spin-off, split-off, spin-out,
split-up, reorganization, partial or complete liquidation, or other
distribution of assets or issuance of rights or warrants to purchase
securities, or (c) any other corporate transaction or event having an
effect similar to any of the foregoing. In the event of any such
transaction or event, the Board, in its discretion, may provide in
substitution for the Option such alternative consideration as it may
determine to be equitable in the circumstances and may require in
connection therewith the surrender of the Option.
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<PAGE> 19
12. AVAILABILITY OF COMMON STOCK. The Company shall at all times
until the expiration of the Option reserve and keep available, either
in its treasury or out of its authorized but unissued shares of Common
Stock, the full number of Optioned Shares deliverable upon the exercise
of the Option.
13. AMENDMENTS. Any amendment to the Plan shall be deemed to be an
amendment to this Agreement to the extent that the amendment is
applicable hereto; provided, however, that no amendment shall adversely
affect the rights of the Optionee under this Agreement without the
Optionee's consent.
14. SEVERABILITY. In the event that one or more of the provisions
of this Agreement shall be invalidated for any reason by a court of
competent jurisdiction, any provision so invalidated shall be deemed to
be separable from the other provisions hereof, and the remaining
provisions hereof shall continue to be valid and fully enforceable.
15. RELATION TO PLAN. This Agreement is subject to the terms and
conditions of the Plan. In the event of any inconsistency between the
provisions of this Agreement and the Plan, the Plan shall govern.
Capitalized terms used herein without definition shall have the
meanings assigned to them in the Plan. The Board acting pursuant to the
Plan, as constituted from time to time, shall, except as expressly
provided otherwise herein, have the right to determine any questions
which arise in connection with the Option or its exercise.
16. SUCCESSORS AND ASSIGNS. Without limiting Section 4 hereof, the
provisions of this Agreement shall inure to the benefit of, and be
binding upon, the successors, administrators, heirs, legal
representatives and assigns of the Optionee, and the successors and
assigns of the Company.
17. GOVERNING LAW. The interpretation, performance, and
enforcement of this Agreement shall be governed by the laws of the
State of Ohio, without giving effect to the principles of conflict of
laws thereof.
18. NOTICES. Any notice to the Company provided for herein shall
be in writing to the Company and any notice to the Optionee shall be
addressed to the Optionee at his or her address on file with the
Company. Except as otherwise provided herein, any written notice shall
be deemed to be duly given if and when delivered personally or
deposited in the United States mail, first class certified or
registered mail, postage and fees prepaid, return receipt requested,
and addressed as aforesaid. Any party may change the address to which
notices are to be given hereunder by written notice to the other party
as herein specified (provided that for this purpose any mailed notice
shall be deemed given on the third business day following deposit of
the same in the United States mail).
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by its duly authorized officer and Optionee has
also executed this Agreement in duplicate, as of the day and year first
above written.
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PENTON MEDIA, INC.
By:
The undersigned Optionee hereby acknowledges receipt of an executed original of
this Stock Option Agreement.
Optionee
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Exhibit 10.17
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") made as of August 24,
1999, between Penton Media, Inc., a Delaware corporation (the "Company"), and
Preston L. Vice ("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
Senior Vice President and Secretary 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.
(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.
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.
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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 $170,000 per year. The Compensation Committee of the Board (or,
if there is no such Committee, the Board) shall review Executive's salary at
least annually and may, in its sole discretion, increase it.
(b) Bonus(es). For the calendar year 1999 and for subsequent
calendar 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
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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 annual salary; but only if and
so long as such additional coverage is available at
standard rates from the insurer providing term life
insurance coverage under the Standard Executive
Benefits Package or from a comparable insurer
acceptable to the Company;
(ii) supplementary long-term disability coverage in an
amount which will increase maximum covered annual
compensation to $180,000 and the maximum monthly
payments to $10,000; 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) coverage under the Company's Supplemental Executive
Retirement Plan, subject to approval of the
Compensation Committee of the Board (or, if there is
no such Committee, the Board) .
(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, 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.
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(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");
(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
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(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
(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
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(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
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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 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
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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
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 annual 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
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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
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
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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.
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,
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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. Preston L. Vice
15574 Forestwood Drive
Strongsville, Ohio 44136
-11-
<PAGE> 12
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 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.
-12-
<PAGE> 13
(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.
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.
-13-
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date written below.
PENTON MEDIA, INC.
Date: , 1999 By
Thomas L. Kemp
Chief Executive Officer
Date: , 1999
Preston L. Vice
-14-
<PAGE> 15
Exhibit 1
PENTON MEDIA, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
This AGREEMENT (this "Agreement") is made as of _____________ (the
"Date of Grant"), by and between Penton Media, Inc. a Delaware corporation (the
"Company"), and ____________ (the "Optionee").
1. GRANT OF STOCK OPTION. Subject to and upon the terms,
conditions, and restrictions set forth in this Agreement and in the
Company's 1998 Equity and Performance Incentive Plan (the "Plan"), the
Company hereby grants to the Optionee as of the Date of Grant a stock
option (the "Option") to purchase __________ shares of Common Stock
(the "Optioned Shares"). The Option may be exercised from time to time
in accordance with the terms of this Agreement. The price at which the
Optioned Shares may be purchased pursuant to the Option shall be
___________ per share subject to adjustment as hereinafter provided
(the "Option Price"). The Option is intended to be a nonqualified stock
option and shall not be treated as an "incentive stock option" within
the meaning of that term under Section 422 of the Code, or any
successor provision thereto.
2. TERM OF OPTION. The term of the Option shall commence on the
Date of Grant and, unless earlier terminated in accordance with Section
6 hereof, shall expire ten (10) years from the Date of Grant.
3. RIGHT TO EXERCISE. Subject to Section 6 hereof, the Option
will be exercisable in whole at any time and in part from time to time
after the third anniversary of the Date of Grant but prior to the tenth
anniversary of the Date of Grant; provided, however that:
a. in the event that the employment with the Company
and its Subsidiaries terminates prior to the third anniversary
of the Date of Grant on account of (i) the Optionee's
retirement at or after age 65, (ii) the death of the Optionee
if such death occurs while the Optionee is employed by the
Company or any Subsidiary or (iii) the Optionee's permanent
and total disability if the Optionee becomes permanently and
totally disabled while an employee of the Company or any
Subsidiary, the Option will thereupon become exercisable
immediately with respect to all of the Optioned Shares; and
b. in the event that employment with the Company and
its Subsidiaries terminates prior to the third anniversary of
the Date of Grant other than on account of retirement at or
after age 65, death or permanent and total disability, the
Option will thereupon become exercisable immediately (i) as to
33 1/3% of the Optioned Shares if such termination occurs on
or after the first anniversary of the Date of Grant but prior
to the second anniversary of the Date of Grant, and (ii) as to
66 2/3% of the Optioned Shares if such termination occurs on
or after the second anniversary of the Date of Grant but prior
to the third anniversary of the Date of Grant.
<PAGE> 16
Notwithstanding the foregoing, in no event shall the Optionee
be entitled to acquire a fraction of one Optioned Share pursuant to the
Option. The Optionee shall be entitled to the privileges of ownership
with respect to Optioned Shares purchased and delivered to the Optionee
upon the exercise of all or part of the Option.
4. OPTION NONTRANSFERABLE. The Option granted hereby shall be
neither transferable nor assignable by the Optionee other than by will
or by the laws of descent and distribution and may be exercised, during
the lifetime of the Optionee, only by the Optionee, or in the event of
his or her legal incapacity, by his or her guardian or legal
representative acting on behalf of the Optionee in a fiduciary capacity
under state law and court supervision.
5. NOTICE OF EXERCISE; PAYMENT. To the extent then exercisable,
the Option may be exercised by written notice to the Company stating
the number of Optioned Shares for which the Option is being exercised
and the intended manner of payment. Payment equal to the aggregate
Option Price of the Optioned Shares for which the Option is being
exercised shall be tendered in full with the notice of exercise to the
Company in cash in the form of currency or check or other cash
equivalent acceptable to the Company. The Optionee may also tender the
Option Price by (a) the actual or constructive transfer to the Company
of nonforfeitable, nonrestricted shares of Common Stock that have been
owned by the Optionee for (i) more than one year prior to the date of
exercise and for more than two years from the date on which the option
was granted, if they were originally acquired by the Optionee pursuant
to the exercise of an incentive stock option, within the meaning of
Section 422 of the Code or (ii) more than six months prior to the date
of exercise, if they were originally acquired by the Optionee other
than pursuant to the exercise of an incentive stock option, or (b) by
any combination of the foregoing methods of payment, including a
partial tender in cash and a partial tender in nonforfeitable,
nonrestricted shares of Common Stock. Nonforfeitable, nonrestricted
shares of Common Stock that are transferred by the Optionee in payment
of all or any part of the Option Price shall be valued on the basis of
their Market Value per Share. The requirement of payment in cash shall
be deemed satisfied if the Optionee makes arrangements that are
satisfactory to the Company with a broker that is a member of the
National Association of Securities Dealers, Inc. to sell on the
exercise date a sufficient number of Optioned Shares that are being
purchased pursuant to the exercise, so that the net proceeds of the
sale transaction will at least equal the amount of the aggregate Option
Price plus payment of any applicable withholding taxes, and pursuant to
which the broker undertakes to deliver to the Company the amount of the
aggregate Option Price plus payment of any applicable withholding taxes
on a date satisfactory to the Company, but not later than the date on
which the sale transaction will settle in the ordinary course of
business. As a further condition precedent to the exercise of the
Option, the Optionee shall comply with all regulations and requirements
of any regulatory authority having control of, or supervision over, the
issuance of shares of Common Stock and in connection therewith shall
execute any documents that the Board shall in its sole discretion deem
necessary or advisable. The date of the Optionee's written notice shall
be the exercise date.
6. TERMINATION OF AGREEMENT. This Agreement and the Option
granted hereby shall terminate automatically and without further notice
on the earliest of the following dates:
-2-
<PAGE> 17
(a) One (1) year after the Optionee's retirement at
or after age 65;
(b) One (1) year after the Optionee's death if such
death occurs while the Optionee is employed by the Company or
any Subsidiary;
(c) One (1) year after the Optionee's permanent and
total disability, if the Optionee becomes permanently and
totally disabled while an employee of the Company or any
Subsidiary;
(d) Except as provided on a case-by-case basis,
thirty (30) calendar days after the Optionee ceases to be an
employee of the Company and the Subsidiaries for any reason
other than as described in Section 6(a), 6(b) or 6(c) hereof;
or
(e) Ten (10) years from the Date of Grant.
In the event that the Optionee's employment is terminated for cause,
this Agreement shall terminate at the time of such termination
notwithstanding any other provision of this Agreement and the
Optionee's option will cease to be exercisable to the extent
exercisable as of such termination and will not become exercisable
after such termination. For purposes of this provision, "cause" shall
mean the Optionee shall have committed prior to termination of
employment any of the following acts:
(i) an intentional act of fraud, embezzlement,
theft, or any other material violation of
law in connection with the Optionee's duties
or in the course of the Optionee's
employment;
(ii) intentional wrongful damage to material
assets of the Company or any Subsidiary;
(iii) intentional wrongful disclosure of material
confidential information of the Company or
any Subsidiary;
(iv) intentional wrongful engagement in any
competitive activity that would constitute a
material breach of the duty of loyalty to
the Company or any Subsidiary; or
(v) intentional breach of any stated material
employment policy of the Company or any
Subsidiary.
This Agreement shall not be exercisable for any number of Optioned
Shares in excess of the number of Optioned Shares for which this
Agreement is then exercisable, pursuant to Sections 3 and 7 hereof, on
the date of termination of employment. For the purposes of this
Agreement, the continuous employment of the Optionee with the Company
shall not be deemed to have been interrupted, and the Optionee shall
not be deemed to have ceased
-3-
<PAGE> 18
to be an employee of the Company, by reason of the transfer of his or
her employment among the Company and the Subsidiaries or a leave of
absence approved by the Board.
7. ACCELERATION OF OPTION. The Option granted hereby shall become
immediately exercisable in full in the event of (i) a Change of
Control, (ii) the Optionee's retirement at or after age 65, (iii) the
death of the Optionee if such death occurs while the Optionee is
employed by the Company or any Subsidiary or (iv) the Optionee's
permanent and total disability if the Optionee becomes permanently and
totally disabled while an employee of the Company or any Subsidiary.
8. NO EMPLOYMENT CONTRACT. Nothing contained in this Agreement
shall confer upon the Optionee any right with respect to continuance of
employment by the Company or any Subsidiary, nor limit or affect in any
manner the right of the Company or any Subsidiary to terminate the
employment or adjust the compensation of the Optionee.
9. TAXES AND WITHHOLDING. To the extent that the Company shall
be required to withhold any federal, state, local or foreign taxes in
connection with the exercise of the Option, and the amounts available
to the Company for such withholding are insufficient, it shall be a
condition to the exercise of the Option that the Optionee shall pay
such taxes or make provisions that are satisfactory to the Company for
the payment thereof. The Optionee may elect to satisfy all or any part
of any such withholding obligation by (a) surrendering to the Company a
portion of the Optioned Shares that are issued or transferred to the
Optionee upon the exercise of the Option, and the Optioned Shares so
surrendered by the Optionee shall be credited against any such
withholding obligation at the Market Value per Share of such shares on
the date of such surrender or (b) utilizing the broker assistance
arrangement provided in Section 5.
10. COMPLIANCE WITH LAW. The Company shall make reasonable efforts
to comply with all applicable federal and state securities laws;
provided, however, notwithstanding any other provision of this
Agreement, the Option shall not be exercisable if the exercise thereof
would result in a violation of any such law.
11. ADJUSTMENTS. The Board may make or provide for such
adjustments in the number of Optioned Shares covered by the Option, in
the Option Price applicable to the Option, and in the kind of shares
covered thereby, as the Board, in its sole discretion, exercised in
good faith, may determine is equitably required to prevent dilution or
enlargement of the Optionee's rights that otherwise would result from
(a) any stock dividend, stock split, combination of shares,
recapitalization, or other change in the capital structure of the
Company, (b) any merger, consolidation, spin-off, split-off, spin-out,
split-up, reorganization, partial or complete liquidation, or other
distribution of assets or issuance of rights or warrants to purchase
securities, or (c) any other corporate transaction or event having an
effect similar to any of the foregoing. In the event of any such
transaction or event, the Board, in its discretion, may provide in
substitution for the Option such alternative consideration as it may
determine to be equitable in the circumstances and may require in
connection therewith the surrender of the Option.
-4-
<PAGE> 19
12. AVAILABILITY OF COMMON STOCK. The Company shall at all times
until the expiration of the Option reserve and keep available, either
in its treasury or out of its authorized but unissued shares of Common
Stock, the full number of Optioned Shares deliverable upon the exercise
of the Option.
13. AMENDMENTS. Any amendment to the Plan shall be deemed to be an
amendment to this Agreement to the extent that the amendment is
applicable hereto; provided, however, that no amendment shall adversely
affect the rights of the Optionee under this Agreement without the
Optionee's consent.
14. SEVERABILITY. In the event that one or more of the provisions
of this Agreement shall be invalidated for any reason by a court of
competent jurisdiction, any provision so invalidated shall be deemed to
be separable from the other provisions hereof, and the remaining
provisions hereof shall continue to be valid and fully enforceable.
15. RELATION TO PLAN. This Agreement is subject to the terms and
conditions of the Plan. In the event of any inconsistency between the
provisions of this Agreement and the Plan, the Plan shall govern.
Capitalized terms used herein without definition shall have the
meanings assigned to them in the Plan. The Board acting pursuant to the
Plan, as constituted from time to time, shall, except as expressly
provided otherwise herein, have the right to determine any questions
which arise in connection with the Option or its exercise.
16. SUCCESSORS AND ASSIGNS. Without limiting Section 4 hereof, the
provisions of this Agreement shall inure to the benefit of, and be
binding upon, the successors, administrators, heirs, legal
representatives and assigns of the Optionee, and the successors and
assigns of the Company.
17. GOVERNING LAW. The interpretation, performance, and
enforcement of this Agreement shall be governed by the laws of the
State of Ohio, without giving effect to the principles of conflict of
laws thereof.
18. NOTICES. Any notice to the Company provided for herein shall
be in writing to the Company and any notice to the Optionee shall be
addressed to the Optionee at his or her address on file with the
Company. Except as otherwise provided herein, any written notice shall
be deemed to be duly given if and when delivered personally or
deposited in the United States mail, first class certified or
registered mail, postage and fees prepaid, return receipt requested,
and addressed as aforesaid. Any party may change the address to which
notices are to be given hereunder by written notice to the other party
as herein specified (provided that for this purpose any mailed notice
shall be deemed given on the third business day following deposit of
the same in the United States mail).
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by its duly authorized officer and Optionee has
also executed this Agreement in duplicate, as of the day and year first
above written.
-5-
<PAGE> 20
PENTON MEDIA, INC.
By:
The undersigned Optionee hereby acknowledges receipt of an executed original of
this Stock Option Agreement.
Optionee
-6-
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF PENTON MEDIA INC.
1. Penton Media Limited, a United Kingdom corporation, and its wholly-owned
subsidiaries:
1. Independent Exhibitions Limited, a United Kingdom corporation;
2. Service Exhibitions Limited, a United Kingdom corporation; and
3. Equity Information Exchange Limited, a United Kingdom corporation.
2. Donohue Meehan Publishing Company, an Illinois corporation.
3. Stardust.com, a California corporation.
4. New Hope International Limited, a United Kingdom corporation.
5. Internet World Media, Inc., a Connecticut corporation, and its wholly-owned
subsidiaries:
1. One, Inc., a Colorado corporation;
2. Boardwatch Magazine, Inc., a Colorado corporation; and
3. Penton Business Media London Limited, a United Kingdom corporation.
6. Healthwell.com Inc., a Delaware corporation.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-62385) of Penton Media Inc. of our report dated
February 9, 2000 relating to the financial statements, which appears in the
Annual Report to Shareholders, which is incorporated in this Annual Report on
Form 10-K. We also consent to the incorporation by reference of our report dated
February 9, 2000 relating to the financial statement schedule, which appears in
this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Cleveland, Ohio
March 30, 2000
<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, 1999 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 15th 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/ JOCELYN A. BRADFORD /s/ WILLIAM J. FRIEND
- ---------------------------------- ----------------------------------
Jocelyn A. Bradford William J. Friend
Director Director
/s/ KING HARRIS /s/ JOAN W. HARRIS
- ---------------------------------- ----------------------------------
King Harris Joan W. Harris
Director Director
/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 /s/ DOUGLAS GREENE
- ---------------------------------- ----------------------------------
Edward J. Schwartz Douglas Greene
Director Director
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