<PAGE>
As filed with the Securities and Exchange Commission on April 22, 1999
Registration No. 333-74683
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
Advanstar, Inc.
(Exact name of registrant as specified in its charter)
Delaware 7389 94-3243499
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification Number)
incorporation or
organization)
---------------
Advanstar, Inc.
545 Boylston Street
Boston, Massachusetts 02116
(617) 267-6500
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
---------------
ROBERT L. KRAKOFF
Chairman of the Board and Chief Executive Officer
Advanstar, Inc.
545 Boylston Street
Boston, Massachusetts 02116
(617) 267-6500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
F. GEORGE DAVITT, ESQ. JONATHAN A. SCHAFFZIN, ESQ.
TESTA, HURWITZ & THIBEAULT, LLP CAHILL GORDON & REINDEL
125 High Street 80 Pine Street
Boston, Massachusetts 02110 New York, New York 10005
(617) 248-7000 (212) 701-3000
---------------
Approximate date of commencement of proposed sale to the public: As soon
as practicable after this registration statement becomes effective.
---------------
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
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<CAPTION>
Proposed maximum
aggregate Amount of
Title of each class of securities to be registered offering price(1) registration fee
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $.01 par value....................... $265,650,000.00 $73,850.70(2)
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933. Includes
proceeds payable upon exercise of over-allotment options.
(2) Includes a fee of $55,600 previously paid in connection with the initial
filing of this Registration Statement.
---------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
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<PAGE>
EXPLANATORY NOTE
This registration statement contains two forms of prospectus: one to be
used in connection with an offering in the United States and Canada and one to
be used in connection with a concurrent offering outside of the United States
and Canada. The two prospectuses are identical except for the front and back
cover pages and the section entitled "Underwriting." Each of the alternate
pages for the international Prospectus included herein is labeled "Alternate
Page for International Prospectus."
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting offers to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated April 22, 1999
PROSPECTUS
(LOGO)
14,000,000 Shares
Advanstar, Inc.
Common Stock
-----------
This is Advanstar, Inc.'s initial public offering of common stock. Of the
shares being offered, Advanstar, Inc. is selling 7,000,000 shares of common
stock and certain of our stockholders are selling 7,000,000 shares of common
stock. We will not receive any of the proceeds from the sale of shares by the
selling stockholders. The U.S. underwriters will offer 11,900,000 shares in the
United States and Canada and the international managers will offer 2,100,000
shares outside the United States and Canada. The initial public offering price
and the underwriting discount per share are identical for both offerings.
We expect the public offering price to be between $12.50 and $16.50 per
share. Currently, no public market exists for the shares. We will apply to list
the common stock on the New York Stock Exchange under the symbol "ADS."
Investing in the common stock involves risks which are described in the
"Risk Factors" section beginning on page 13 of this prospectus.
-----------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public Offering Price................................. $ $
Underwriting Discounts and Commissions................ $ $
Net proceeds, before expenses, to Advanstar, Inc...... $ $
Net proceeds to Selling Stockholders.................. $ $
</TABLE>
The U.S. underwriters may also purchase from the selling stockholders up to
an additional 1,785,000 shares at the public offering price, less underwriting
discounts and commissions, within 30 days from the date of this prospectus to
cover over-allotments. The international managers may similarly purchase from
the selling stockholders up to an aggregate of an additional 315,000 shares.
-----------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
Merrill Lynch & Co. is acting as book-running lead manager for this
offering. Merrill Lynch & Co. and Bear, Stearns & Co. Inc. are acting as joint
lead managers. The shares of common stock will be ready for delivery in New
York, New York on or about , 1999.
-----------
Merrill Lynch & Co. Bear, Stearns & Co. Inc.
Joint Lead Managers
-----------
Lehman Brothers
Morgan Stanley Dean Witter
Salomon Smith Barney
-----------
The date of this prospectus is , 1999
<PAGE>
[ARTWORK--INSIDE FRONT COVER]
The names of events, publications and services used in this prospectus
are trademarks, trade names and service marks of Advanstar, Inc., its
subsidiaries or its joint ventures. Names of companies and associations used in
this prospectus are trademarks or trade names of the respective organizations.
----------------
Market and industry data used throughout this prospectus were obtained
through company research, surveys and studies conducted by third parties and
industry and general publications. Where we state the market ranking of our
trade shows, we have based that ranking on our internal analysis of net square
feet of exhibition space (except where an outside source is specifically
referenced). Where we state the market ranking of our publications, we have
based that ranking on the number of advertising pages as determined by Inquiry
Management Systems Ltd. or PERQ/HCI Research, a branch of VNU Business
Information Services, Inc., each an independent third party (except where
another source is specifically referenced). For these purposes, we have defined
our markets narrowly as the niche of businesses or professionals at which a
trade show or publication is exclusively or specifically targeted. Advanstar,
Inc. has not independently verified market and industry data from third-party
sources. While we believe internal company surveys are reliable and market
definitions are appropriate, neither these internal surveys nor these
definitions have been verified by any independent sources.
<PAGE>
Description of Graphics on Inside Front and Back Cover Pages of Prospectus
Inside front cover
The inside front cover depicts a collage of images consisting of front
covers of our publications and photographs of professionals at work, with text
placed across the top of the page, down the right side of the page and at the
lower left corner of the page. The publications displayed most prominently in
the collage are, from top to bottom: Automatic ID News, Premier, Post, Travel
Agent, Pharmaceutical Technology, Video Store, Hotel and Motel Management and
American Salon.
The text on the top of this page is: "The Advanstar Advantage."
The text on the right side of this page is, from top to bottom:
"Integrating Marketing Initiatives," Building Brands," "Selling and Sales
Support" and "Customer Retention".
The text on the lower left of the page, and superimposed on the
collage, is: "Trade Show," Publications," Marketing Services" and "Internet".
Our logo is prominently displayed at the lower right corner of this
page.
Inside back cover
The inside back cover depicts two columns. The first column, on the
left side of the page, is comprised of four rectangular sections, one for each
of our four main clusters. These four sections are in the following order, from
top to bottom: Retail, Hospitality & Fashion, Information Technology &
Communications, Healthcare, Science & Pharmaceuticals and Manufacturing &
Processing. In each of these four sections is a collage comprising of the front
covers of our publications in that cluster and the logos of our trade shows in
that cluster.
The second column has the following text at the top of the column:
"One Stop Shopping With ... ADVANSTAR". Underneath this text is a diagram
depicting the products and services Advanstar provides with the following text
printed across the top and bottom of the diagram: "Trade Shows," "Publications,"
"Marketing Services" and "Internet".
Our logo is prominently displayed at the lower right corner of this
page.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary.................................................................. 3
Risk Factors............................................................. 13
Forward-Looking Statements............................................... 21
Use of Proceeds.......................................................... 22
Dividend Policy.......................................................... 22
Capitalization........................................................... 23
Dilution................................................................. 24
Selected Historical Consolidated Financial Data of Advanstar and the
Predecessor............................................................. 25
Unaudited Pro Forma Combined Financial Information....................... 29
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 33
Business................................................................. 47
Management............................................................... 65
Certain Relationships and Related Transactions........................... 73
Principal and Selling Stockholders....................................... 74
Description of Capital Stock............................................. 77
Description of Indebtedness.............................................. 82
Shares Eligible for Future Sale.......................................... 86
Certain U.S. Federal Tax Considerations for Non-U.S. Holders of Common
Stock................................................................... 88
Underwriting............................................................. 92
Legal Matters............................................................ 96
Experts.................................................................. 96
Additional Information................................................... 97
Index to Financial Statements............................................ F-1
</TABLE>
We have not authorized any dealer, salesperson or other person to give
any information or to make any representations other than those contained in
this prospectus. If they give you such information or make such
representations, you must not rely upon them as having been authorized by us or
the underwriters. This prospectus is not an offer to sell, or the solicitation
of an offer to buy, any securities other than these registered securities. It
is also not an offer to, or solicitation of, any person in any jurisdiction in
which such offer or solicitation would be unlawful. Neither the delivery of
this prospectus nor any offer or sale shall, under any circumstances, create
any implication that we have had no change in our business since the date of
this prospectus or that the information contained in this prospectus is correct
as of anytime after the date of this prospectus.
<PAGE>
SUMMARY
This summary contains basic information about the offerings but may not
contain all the information that may be important to you. Except where the
context otherwise requires, the terms "Advanstar," "the Company," "our company"
and "we," as used in this prospectus, refer collectively to "Advanstar, Inc.,"
its direct and indirect subsidiaries and predecessors as a combined entity. In
addition, the "Predecessor" refers to Advanstar prior to the acquisition of
Advanstar on May 31, 1996. Unless otherwise indicated herein, the information
in this prospectus assumes an initial public offering price of $14.50 per share
of common stock, the mid-point of the range set forth on the cover page of this
prospectus. The information in this prospectus reflects the two-for-one stock
split effected as a stock dividend on April 21, 1999. You should read this
entire prospectus, including the financial data and related notes, before
making an investment decision. You should carefully consider the information
set forth under "Risk Factors." In addition, we make forward-looking statements
in the prospectus and these statements involve risks and uncertainties. Please
see "Forward-Looking Statements."
The Company
We are a worldwide provider of integrated, business-to-business marketing
communications solutions. We target industry sectors, principally through trade
shows and conferences and through controlled circulation trade, business and
professional magazines. We also provide a broad range of marketing services
products, including classified advertising, direct mail services, reprints,
database marketing, directories, guides and reference books.
Since May 31, 1996, we have been controlled by Hellman & Friedman Capital
Partners III, L.P., H&F Orchard Partners III, L.P. and H&F International
Partners III, L.P., or otherwise referred to collectively as Hellman & Friedman
Capital Partners. Since Hellman & Friedman Capital Partners purchased
Advanstar, we have completed 24 acquisitions and joint ventures. Our total
revenue has increased from approximately $151.0 million in 1996 to $306.7
million in 1998 on a pro forma basis. As of March 31, 1999, our outstanding
indebtedness would have equaled approximately $325.1 million after giving
effect to our application of our estimated net proceeds of the offerings. We
may not generate net income for the foreseeable future.
Our pro forma EBITDA in 1998 approximated $72.8 million, after a $3.4
million non-cash charge for stock option compensation. In 1998, trade shows and
conferences represented approximately 45.5% of our total pro forma revenue and
approximately 54.1% of our total pro forma contribution or gross profit before
general and administrative expenses and amortization. Publications accounted
for approximately 49.2% of our total pro forma revenue and approximately 38.8%
of our total pro forma contribution. Other revenue
3
<PAGE>
components, including direct mail and database products and services, generated
approximately 5.3% of our total pro forma revenue and approximately 7.1% of our
total pro forma contribution. The aggregate amount of our actual net losses for
1996, 1997 and 1998 added up to approximately $43.3 million. You should read
the information set forth in "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
We serve a number of industry sectors in North America, Latin America,
Europe, Asia and Australia. We market our broad range of products and services
in certain niche markets of the following industry clusters in which we believe
we have developed scale and expertise:
. Retail, Hospitality & Fashion,
. Healthcare, Science & Pharmaceuticals,
. Information Technology & Communications and
. Manufacturing & Processing.
We believe our industry-focused cluster structure, rather than a product-
focused approach, enables us to better serve our customers' business-to-
business marketing communications needs. In addition, we believe our cluster
structure allows us to cross-sell our products and services effectively and to
capture a larger share of our customers' marketing budgets. In each of our
niche markets, many of the same customers advertise in our publications,
exhibit at our trade shows and use our marketing services to reach their
buyers. We have rapidly expanded our trade show, conference and publication
products within each cluster through new product introductions and strategic
acquisitions. This expansion further enhances our competitive position in each
cluster and maximizes our existing marketing and customer service
infrastructure and industry expertise.
4
<PAGE>
Products and Services
Trade shows and conferences. In 1998, we held 107 events. An event is a
stand-alone trade show or conference. We believe that most of our events are
the largest in their respective national or regional markets. For example, in
our Retail, Hospitality & Fashion cluster, we produce MAGIC, the world's
largest trade show dedicated to the men's apparel industry; WWDMAGIC, the
second largest women's apparel trade show in the United States; and MAGICKids,
a children's apparel trade show. In addition, we produce Artexpo New York, the
largest mid-market art show in the United States; IBS New York, the largest
exhibition and educational event on the East Coast for the beauty salon market;
and Dealernews International Powersports Dealer Expo, the largest motorcycle
accessories aftermarket U.S. trade show. Our major trade shows and conferences
in other clusters include Telexpo, the largest telecommunications trade show in
Latin America, and Incoming Call Center Management Conference & Exhibition, the
largest U.S. trade show and conference for the call center market.
Publications. In 1998, we published 110 publications. Our largest
magazines include Travel Agent, Video Store, Pharmaceutical Technology, Hotel &
Motel MANAGEMENT and CADALYST. Travel Agent is the second largest non-computer
U.S. trade magazine and the #1 trade periodical for the travel industry based
on advertising revenue in 1997, according to the June 15, 1998 edition of
Crain's Advertising Age. Of our 61 magazines and journals for which competitive
data is available, we believe that over 70% rank either first or second in
their respective markets.
Marketing services. Within each industry-focused cluster, we offer our
customers classified advertising, direct mail services, reprints, database
marketing, directories, guides and reference books to support their business-
to-business marketing communications programs. Our marketing services,
particularly our direct mail services, reinforce our efforts to cross-sell our
events and publications and further provides our customers "one-stop shopping"
for their business-to-business marketing communications needs.
Internet. We operate over 70 web sites which provide an interactive
component to our core products. These web sites promote our trade shows,
conferences and publications as well as our marketing services. Over 80% of our
web sites either enable exhibitors and attendees to register on-line for our
trade shows and conferences or permit prospective readers to subscribe on-line
for our controlled circulation publications. In addition, many of our web sites
provide attendees of our trade shows and conferences and readers of our
publications the opportunity to receive additional product information through
links to our customers' web sites.
5
<PAGE>
The following table summarizes our events, publications, marketing
services and Internet services offered in 1998:
Advanstar, Inc.
----------------------------------------------------
<TABLE>
<CAPTION>
Retail, Hospitality and Healthcare, Science and Information Technology Manufacturing and
Fashion Pharmaceuticals and Communications Processing
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Events 34 Trade Shows 6 Trade Shows 23 Trade Shows 13 Trade Shows
4 Conferences 9 Conferences 12 Conferences 1 Conference
(e.g., MAGIC, (e.g., (e.g., ICCM, (e.g., SCANTECH,
Artexpo New WORLDPHARM, Telexpo and iEC) Plastic
York, IBS New Abilities Expo) Fairs, Sensors)
York)
----------------------------------------------------------------------------------------------------
15 Magazines 23 Magazines 16 Magazines 10 Magazines
Publications 13 Directories 3 Directories 4 Directories 8 Directories
and Other and Other and Other and Other
Publications Publications Publications Publications
(e.g., Travel (e.g., (e.g., CADALYST, (e.g., Automatic
Agent, Pharmaceutical America's ID News, Medical
Video Store, Technology, Network) Device
Hotel and Motel LC.GC, Technology)
Management) Geriatrics)
Marketing Classified Advertising, Direct Mail Services, Reprints, Database Marketing, Directories,
Services Guides and Reference Books
Internet 101 Web Sites
Advertising Sales, Subscriptions and Event Registration
</TABLE>
In addition to the four clusters above, we have grouped the industry
sectors in which we provide products and services but do not have a significant
industry presence into a Market Development cluster. In this cluster, in 1998,
we produced five trade shows, seven magazines and 11 directories and other
publications, provided marketing services and operated three web sites, which
are included in the table above.
6
<PAGE>
Operating Strategy
Advanstar's objective is to be the leading business-to-business marketing
communications company in the niche markets which we choose to serve. To
achieve our objective, we operate our businesses based on the following
strategies:
. Operate Leading Trade Shows and Publish Leading Magazines in
Attractive Niche Markets;
. Maximize Our Share of Our Customers' Marketing Expenditures;
. Continue to Realize Economies of Scale Through Our Centralized
Administrative and Production Facilities; and
. Attract and Retain Superior Management.
Growth Strategy
Building upon our operating strategies, we continue to pursue the
following growth strategies to expand our business:
. Identify and Consummate Strategic Acquisitions;
. Launch New Products and Services within Existing Clusters; and
. Enter Attractive New Industry Sectors.
7
<PAGE>
Benefits of the Offerings to Hellman & Friedman Capital Partners
Advanstar was purchased on May 31, 1996 by Hellman & Friedman Capital
Partners. Hellman & Friedman Capital Partners is a private equity investment
fund with committed equity capital of approximately $1.5 billion. Hellman &
Friedman Capital Partners and its predecessors are an experienced investor in
the media industry, with current or former investments in companies including
Young & Rubicam Inc., Bronner Slosberg Humphrey Inc., Eller Media Company
(which was sold to Clear Channel Communications, Inc.) and Hoyts Cinemas
Limited. To date, Hellman & Friedman Capital Partners has invested
$177.0 million of equity in Advanstar.
Hellman & Friedman Capital Partners proposes to sell 7,000,000 of their
30,810,859 shares of our common stock in the offerings. Hellman & Friedman
Capital Partners purchased their 30,810,859 shares of our common stock for
approximately $177,000,000. Based upon an assumed initial public offering price
of $14.50, the shares of our common stock that Hellman & Friedman Capital
Partners proposes to sell in the offerings have a market value of approximately
$101,500,000. We expect that a public market will exist for our common stock
after the offerings. Hellman & Friedman Capital Partners is expected to retain
an aggregate of 23,810,859 shares of our common stock, assuming the
underwriters do not exercise their over-allotment options. These 23,810,859
shares were purchased for an average per share price of $5.74 and an aggregate
of approximately $136,787,000 and, based upon an assumed initial public
offering price of $14.50, have a market value of approximately $345,257,456.
----------------
Advanstar, Inc. was incorporated in the State of Delaware on April, 11,
1996 as AHI Holding Corp. AHI Holding Corp. changed its corporate name to
Advanstar Holdings, Inc. in a merger with its wholly-owned subsidiary Advanstar
Holdings, Inc. on June 10, 1998 and changed its corporate name to Advanstar,
Inc. on March 17, 1999. Advanstar's executive offices are located at 545
Boylston Street, Boston, Massachusetts 02116. Advanstar's telephone number at
such address is (617) 267-6500.
8
<PAGE>
The Offerings
Unless we specifically state otherwise, the information in this
prospectus does not take into account the possible issuance of up to 2,100,000
additional shares of common stock, which the underwriters have the option to
purchase solely to cover over-allotments. We will initially offer 11,900,000
shares of our common stock in the United States and Canada and 2,100,000 shares
of our common stock outside the United States and Canada. These offerings are
collectively referred to as the offerings.
<TABLE>
<C> <S>
Common stock offered:
Advanstar......................... 7,000,000 shares
Selling stockholders.............. 7,000,000 shares
Total......................... 14,000,000 shares
Shares outstanding after the U.S. and 40,630,000 shares. This does not include
international offerings............. shares of
common stock reserved for sale or
issuance under our stock option plans.
Use of proceeds...................... We will use our estimated net proceeds
from the offerings to repay existing
indebtedness, a portion of which may be
reborrowed and used for general
corporate purposes. We will not receive
any proceeds from the sale of shares by
the selling stockholders. See "Use of
Proceeds."
Risk factors......................... See "Risk Factors" for a discussion of
factors you should carefully consider
before deciding to invest in shares of
the common stock.
Proposed NYSE symbol................. "ADS"
</TABLE>
9
<PAGE>
Summary Financial Data
The following table presents our summary financial data. We have
presented combined financial data for 1996. This combined financial data has
not been audited and does not comply with GAAP. This data combines financial
data of the Predecessor for the five months ended May 31, 1996 with financial
data of Advanstar for the seven months ended December 31, 1996, without giving
effect to purchase accounting or the impact of the financing of the acquisition
of Advanstar by Hellman & Friedman Capital Partners on May 31, 1996. You should
consider that the combined financial data is not comparable to other periods.
The other summary financial data has been derived from the audited
consolidated financial statements of Advanstar included elsewhere in this
prospectus. The summary pro forma financial data has been derived from the data
contained under the caption "Unaudited Pro Forma Combined Financial
Information." The summary statement of operations and other financial data for
the three months ended March 31, 1998 and 1999 and the summary balance sheet
data at March 31, 1999 have not been audited. This March 31, 1998 and 1999
financial data has been derived from our unaudited consolidated financial
statements. Our results of operations for the three-month periods ended March
31, 1998 and 1999 do not necessarily indicate what our results of operations
will be for future periods or the entire year.
In connection with the following table, you should read "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Selected Historical Consolidated Financial Data of Advanstar and the
Predecessor," "Unaudited Pro Forma Combined Financial Information" and the
consolidated financial statements and accompanying notes included elsewhere in
this prospectus.
We have presented balance sheet and income (loss) per share data to give
effect to the offerings and the application of our estimated net offering
proceeds to repay debt. See "Use of Proceeds."
Operating expenses for the year ended December 31, 1998 and the three
months ended March 31, 1999 include non-cash compensation charges of $3.4
million and $3.0 million related to our stock option plan.
When reading the other financial data presented in the table below, you
should also consider the following:
. we define EBITDA as operating income plus amortization and
depreciation;
. our calculation of EBITDA may not be comparable to other companies'
calculations;
. EBITDA does not represent, and should not be considered, an
alternative to net income or cash flow from operations;
10
<PAGE>
. EBITDA does not take into account our working capital requirements,
debt service requirements and other commitments and does not
necessarily indicate amounts that may be available to us for
discretionary uses; and
. our 1998 pro forma EBITDA excludes a non-recurring compensation
expense of $6.5 million related to the acquisition of MAGIC.
We have included this data in the table below because we believe that EBITDA
provides useful information regarding our ability to service and/or incur
indebtedness. Our lenders have indicated that the amount of indebtedness we
will be permitted to incur will be based, in part, on our EBITDA.
<TABLE>
<CAPTION>
Predecessor Advanstar
-------------- ---------------------------------------------------------------------------------
Three months
ended
Seven months Year ended December 31, March 31,
Five months ended -------------------------------------------- -----------------------
ended May 31, December 31, Combined Pro forma
1996 1996 1996 1997 1998 1998 1998 1999
-------------- ------------ ----------- -------- --------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
Statement of Operations
Data: (in thousands) (in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue............. $68,286 $ 82,720 $151,006 $187,656 $ 259,825 $306,666 $ 62,063 $99,084
Operating expenses...... 56,877 84,059 140,936 181,143 257,249 291,526 54,044 81,978
------- -------- -------- -------- --------- -------- -------- -------
Operating income
(loss)................. 11,409 (1,339) 10,070 6,513 2,576 15,140 8,019 17,106
Interest expense, net... (6,963) (7,511) (14,474) (15,117) (27,862) (37,518) (3,814) (8,827)
Other income (expense),
net.................... 23 (488) (465) 292 (1,886) (37) 290 364
Provision for income
taxes.................. 13 1,076 1,089 583 1,264 1,264 54 494
------- -------- -------- -------- --------- -------- -------- -------
Net income (loss)....... $ 4,456 $(10,414) $ (5,958) $ (8,895) $ (28,436) $(23,679) $ 4,441 $ 8,149
======= ======== ======== ======== ========= ======== ======== =======
Net income (loss) per
share, diluted......... $ (0.31) $ (0.41) $ (0.96) $ (0.80) $ 0.20 $ 0.24
Weighted average shares
outstanding, diluted... 19,400 21,768 29,652 29,652 21,800 34,486
As adjusted income
(loss) per share,
diluted................
As adjusted weighted
average shares
outstanding, diluted...
Other Financial Data:
EBITDA.................. $14,428 $ 13,781 $ 28,209 $ 34,039 $ 53,828 $ 72,814 $ 14,670 $27,807
EBITDA margin........... 21.1% 16.7% 18.7% 18.1% 20.7% 23.7% 23.6% 28.1%
Non-cash stock option
compensation........... $ -- $ -- $ -- $ 3,397 $ 3,397 $ -- $ 2,997
Cash flows provided by
(used in):
Operating activities.... $(1,011) $ 12,616 $ 11,605 $ 12,592 $ 32,653 $ 3,369 $ 9,729
Investing activities.... (274) (18,924) (19,198) (33,323) (358,261) (27,064) (3,297)
Financing activities.... 2,227 5,944 8,171 25,224 332,600 22,774 (7,885)
Depreciation............ 1,431 1,949 3,380 3,200 3,071 $ 3,243 695 868
Amortization............ 1,588 13,171 14,759 24,326 48,752 55,222 5,652 9,656
Capital expenditures.... 365 780 1,145 2,260 4,154 4,272 1,240 791
</TABLE>
<TABLE>
<CAPTION>
At March 31, 1999
---------------------
Actual As adjusted
-------- -----------
(in thousands)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents................................. $ 12,930 $ 12,930
Working capital (deficit)................................. (21,872) (21,872)
Total assets.............................................. 643,338 643,338
Long-term debt, including current maturities.............. 418,993 325,137
Total stockholders' equity................................ 142,528 236,384
</TABLE>
11
<PAGE>
Set forth below is a reconciliation of Advanstar's operating income to
EBITDA for the periods indicated:
<TABLE>
<CAPTION>
Predecessor Advanstar
------------- -----------------------------------------------------
Seven months Year ended December 31,
Five months ended ----------------------------------------
ended May 31, December 31, Combined Pro forma
1996 1996 1996 1997 1998 1998
------------- ------------ ----------- ------- ------- -----------
(unaudited) (unaudited)
(in
thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C>
Operating income (loss)....... $11,409 $(1,339) $10,070 $ 6,513 $ 2,576 $15,140
Depreciation and
amortization................. 3,019 15,120 18,139 27,526 51,823 58,465
Minority interest............. (571) (791)
------- ------- ------- ------- ------- -------
EBITDA........................ $14,428 $13,781 $28,209 $34,039 $53,828 $72,814
- --------------------------------------------------
======= ======= ======= ======= ======= =======
<CAPTION>
Three months
ended
March 31,
-----------------------
1998 1999
----------- -----------
(unaudited) (unaudited)
<S> <C> <C>
Operating income (loss)....... $8,019 $17,106
Depreciation and
amortization................. 6,347 10,524
Minority interest............. 304 177
----------- -----------
EBITDA........................ $14,670 $27,807
- --------------------------------------------------
=========== ===========
</TABLE>
12
<PAGE>
RISK FACTORS
You should carefully consider the risks and uncertainties described below
and the other information in this prospectus before you invest in our common
stock. You may lose all or part of your investment. The risks and uncertainties
described below are not the only risks and uncertainties facing our company.
We have substantial indebtedness that could negatively affect our operations
and results.
As of March 31, 1999, our outstanding indebtedness was approximately
$419.0 million or 74.6% of our total capitalization. After giving effect to our
use of the estimated proceeds to repay outstanding indebtedness, our
outstanding indebtedness as of March 31, 1999 would have equaled approximately
$325.1 million or 57.9% of our total capitalization. In addition, after giving
effect to such repayment, our pro forma EBITDA to interest expense coverage for
the twelve months ended March 31, 1999 would have been approximately 2.5
to 1.0.
Our leveraged financial position creates the risks that:
. we will not obtain financing for acquisitions, capital
expenditures, working capital or general corporate purposes when
needed in the future;
. we will divert funds otherwise available for operations or other
purposes to pay our debt service obligations;
. we will be more vulnerable to changing market conditions than many
of our competitors that are less leveraged than we are; and
. our debt service obligations will increase if interest rates
increase because some of our indebtedness bears variable interest
rates.
In the past, we have paid our debt service obligations with cash flow
from operations. In the future, we may not generate cash flow sufficient to pay
our debt service obligations and pursue our present operating and growth
strategies. Our debt service obligations as of March 31, 1999 consisted of
approximately $149.6 million at a fixed rate of 9.25%, $149.6 million at a
variable rate equal to 7.44% at March 31, 1999 and $119.8 million at a variable
rate equal to 7.19% at March 31, 1999. If we cannot generate cash flow
sufficient to pay our debt service obligations, we could default under the
terms of our existing indebtedness. A default could cause our creditors to
declare all our outstanding indebtedness immediately due and payable, which
would adversely affect the market price of our common stock. Our financial and
operating performance depends on the economy and other factors over which we
have no control. If we cannot pay our debt service obligations, we will
reconsider our present operating and growth strategies and may be required to
sell material assets or operations to pay our obligations. In addition, we may
sell shares of our capital stock to pay these obligations, and if we do, our
stockholders may experience dilution.
13
<PAGE>
The terms of our indebtedness may restrict our ability to pursue our operating
and growth strategies.
The terms of our indebtedness impose operating restrictions on our
ability to borrow, make investments, capital expenditures and distributions and
pursue other corporate objectives. In addition, our credit facility requires us
to satisfy specified financial covenants. Our ability to comply with such
provisions depends in part on factors over which we have no control. These
operating restrictions could adversely affect our ability to pursue our growth
and expansion strategy. If we breach any of our financial covenants, 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 may be required to sell assets to repay in full
such amounts. Our credit facility is secured by all of our assets. If we cannot
repay all amounts that we have borrowed under our credit facility, our senior
lenders could proceed against our assets.
We have a history of net losses.
We had net losses of approximately $8.9 million in 1997 and $28.4 million
in 1998. On a pro forma basis, we would have had a net loss of approximately
$23.7 million for the year ended December 31, 1998. Since 1994, our actual net
losses and our Predecessor's actual net losses add up to approximately $103.2
million. We cannot assure you that we will report net income in the future. If
we continue to sustain net losses, we may have to reconsider our present growth
and operating strategies. Moreover, our failure to generate net income within
the timeframe forecasted by market professionals could negatively affect the
market price of our common stock.
We depend on our customers' discretionary marketing and advertising budgets.
In 1998, we derived approximately 45.5% of our total pro forma revenue
from trade shows and conferences and approximately 46.5% of our total pro forma
revenue from advertising sales. If a general economic downturn or a recession
occurs in the United States, our customers may reduce their marketing and
advertising budgets. Any material decrease in marketing budgets could reduce
the demand for exhibition space and also reduce attendance at our trade shows
and conferences. Any material decrease in advertising budgets could reduce the
demand for advertising space in our publications. As a result, our revenue and
our cash flow from operations would decrease significantly. In addition, our
integrated marketing strategy could be materially adversely affected if
advertising revenue cannot support one or more of our important publications or
if declines in our customers' marketing and advertising budgets require us to
discontinue one or more of our important trade shows or conferences.
14
<PAGE>
We depend on securing desirable dates and locations for our trade shows and
conferences.
The date and location of a trade show or a conference impact its
profitability and prospects. The market for desirable dates and locations is
highly competitive. If we cannot secure desirable dates and locations for our
trade shows and conferences, their profitability and future prospects would
suffer, and our financial condition and results of operations would be
materially adversely affected. In general, we maintain multi-year reservations
for our trade shows and conferences. Consistent with industry practice, we do
not pay for these reservations, and these reservations are not binding on the
facility owners until we execute a contract with the owner. We typically sign
contracts that guarantee the right to venues or dates for only one year.
Therefore, our multi-year reservations may not lead to binding contracts with
facility owners. In addition, because trade shows and conferences are held on
pre-scheduled dates at specific locations, the success of a particular trade
show or conference depends upon events outside of our control, such as natural
catastrophes, labor strikes and transportation shutdowns.
A significant portion of our revenue and EBITDA is generated from the MAGIC
trade shows.
In 1998, the MAGIC trade shows would have represented 14.6% of our total
pro forma revenue and 35.5% of our total pro forma EBITDA. We expect that the
MAGIC trade shows will continue to represent a significant portion of our
overall revenue and EBITDA in the future. Therefore, a significant decline in
the performance of one or both of the MAGIC trade shows, typically held in the
first and third quarters, could have a material adverse effect on our financial
condition and results of operations.
Any significant increase in paper or postage costs would cause our expenses to
increase significantly and materially adversely affect us.
Because of our print products, direct mail solicitations and product
distributions, we incur substantial costs for paper and postage. We do not use
forward contracts to purchase paper, and therefore are not protected against
fluctuations in paper prices. In general, we use the United States Postal
Service to distribute our print products and mailings. United States Postal
Service rates increase periodically. If we cannot pass increased paper and
postage costs through to our customers, our financial condition and results of
operations would be materially adversely affected.
The market for our products and services is intensely competitive.
The market for our products and services is intensely competitive. The
competition is highly fragmented, both by product offering and geography. On a
global level, larger international firms operate in many geographic markets and
have broad product offerings in trade shows, conferences, publications and
marketing services. In several industries such as information technology and
healthcare, we compete with large firms with a single-industry
15
<PAGE>
focus. Many of these large international and single-industry firms are better
capitalized than we are and have substantially greater financial and other
resources than we have.
Within each particular industry sector, we also compete with a large
number of small to medium-sized firms. While most small to medium-sized firms
operate in a single geographic market, in some cases, our competitors operate
in several geographic markets. For trade shows and conferences, we compete with
trade associations and, in several international markets, with exposition hall
owners and operators. For publications, we typically have between two and five
direct competitors which target the same industry sector. For publications, we
also have many indirect competitors which define niche markets differently than
we do and thus may be alternatives for either readers or advertisers.
We depend in part on new product introductions.
Our success has depended in part upon our ability to monitor rapidly
changing market trends and to adapt our events and publications to meet the
evolving needs of existing and emerging target audiences. Our future success
will depend in part on our ability to continue to adapt our existing events and
publications and to offer new events and publications that gain market
acceptance by addressing the needs of specific audience groups within our
target markets. The process of researching and developing, launching and
establishing profitability for a new event or publication is inherently risky
and costly. We generally incur initial operating losses when we introduce new
events and publications. Our efforts to introduce new events or publications
may not ultimately be successful or profitable. In addition, we have invested
in, and intend to continue to invest in, the development of Internet services,
which are currently generating losses. The Internet is still in the early
stages of development as a commercial medium, and these services may not prove
to be successful or profitable. We expense as incurred costs related to the
development of new events and publications. Therefore, our year to year results
may be adversely affected by the number and timing of new product launches.
Our growth strategy to identify and consummate acquisitions entails risk.
We intend to continue to grow in part through strategic acquisitions.
This growth strategy entails risks inherent in identifying desirable
acquisition candidates and in integrating the operations of acquired
businesses. In addition, we may not be able to finance the acquisition of a
desirable candidate or to pay as much as our competitors because of our
leveraged financial condition or general economic conditions. Our management
will continue to devote substantial attention to the identification of
acquisition candidates and the integration of acquired businesses. The
diversion of our management's attention and the difficulties that we may
encounter in integrating the operations of acquired businesses could have a
material adverse impact on our results of operations and financial condition.
Moreover, we may not realize any of the anticipated benefits of an acquisition,
and integration costs may exceed anticipated amounts. In addition, we may issue
additional shares of stock as acquisition consideration, and if we do, our
stockholders may experience dilution.
16
<PAGE>
We depend on our senior management team.
We benefit substantially from the leadership and experience of Robert L.
Krakoff, James M. Alic and other members of our senior management team and
depend on their continued services to implement successfully our business
strategy. The loss of any member of our senior management team or other key
employee could materially adversely affect our financial condition and results
of operations. Although we have entered into employment agreements with Mr.
Krakoff and Mr. Alic, we cannot be certain that we will continue to have their
services, or the services of other key personnel, going forward. Moreover, we
may not be able to attract and retain other qualified personnel in the future.
We do not currently maintain key-man life insurance policies on any member of
our senior management team or other key employees.
There are risks related to our international operations and international
expansion.
Our growth strategy includes expanding our product and service offerings
internationally. We currently maintain offices in Brazil, Canada, Hong Kong,
Mexico and the United Kingdom. International operations accounted for
approximately 13.0% of our pro forma revenue in 1998. International operations
and expansion involve numerous risks, such as:
. the uncertainty of product acceptance by different cultures,
. divergent business expectations or cultural incompatibility in
establishing joint ventures with foreign partners,
. difficulties in staffing and managing multinational operations,
. currency fluctuations,
. state-imposed restrictions on the repatriation of funds and
. potentially adverse tax consequences.
The impact of any these risks could materially adversely affect our future
international operations and our financial condition and results of operations.
We have some exposure to fluctuations in the exchange rates of international
currencies.
Our consolidated financial statements are prepared in U.S. dollars. A
percentage of the revenues, expenses, assets and liabilities of Advanstar is
denominated in currencies other than the U.S. dollar. These currencies include
the British Pound Sterling, the Euro and the Brazilian Real. Consequently,
fluctuations in exchange rates could result in exchange losses. In 1997 and
1998, there was no material effect on net income due to currency fluctuations.
The impact of future exchange rate fluctuations on our results of operations
cannot be accurately predicted. Moreover, because we intend to continue our
international expansion, the effect of exchange rate fluctuations could be
greater in the future. We may undertake
17
<PAGE>
transactions to hedge the risks associated with fluctuations in exchange rates
of other currencies to the dollar. We do not know if any hedging techniques
that we may implement will be successful or will mitigate the effect, if any,
of exchange rate fluctuations on our financial condition and results of
operations.
Our business is seasonal due largely to higher trade show revenue in the first
quarter.
Our business is seasonal, with revenue typically reaching its highest
levels during the first and third quarters of each calendar year, largely due
to the timing of the MAGIC trade shows and our other large trade shows and
conferences. In 1998, approximately 30.1% of our pro forma revenue would have
been generated during the first quarter and approximately 25.9% during the
third quarter. The second quarter would have accounted for approximately 23.5%
of pro forma revenue in 1998 and the fourth quarter would have accounted for
approximately 20.5% of pro forma revenue in 1998. Because event revenue is
recognized when a particular event is held, we may also experience fluctuations
in quarterly revenue based on the movement of annual trade show dates from one
quarter to another.
Investors in the offerings will suffer substantial and immediate dilution.
The initial public offering price is substantially higher than the net
tangible book value of our common stock outstanding after the offerings.
Assuming an initial public offering price of $14.50 per share, the net tangible
book deficit of our common stock after the offerings would have been $8.37 per
share as of March 31, 1999. Net tangible book deficit per share represents the
amount per share by which our total liabilities exceed our total tangible
assets. You will pay $22.87 more for each share of our common stock than its
net tangible book value. Accordingly, you will incur substantial and immediate
dilution of $22.87 per share in the pro forma net tangible book value of our
common stock. In addition, you will incur further dilution upon the exercise of
outstanding stock options.
We will be controlled by Hellman & Friedman Capital Partners.
After the offerings, Hellman & Friedman Capital Partners will
beneficially own 57.5% of our outstanding capital stock assuming the exercise
of all currently vested stock options that will vest within 180 days of the
offerings. As a result, Hellman & Friedman Capital Partners will have the right
to elect all of our directors and will exercise substantial control over
matters requiring the vote of our stockholders. Hellman & Friedman Capital
Partners' control of Advanstar could prevent a change of control, even if you
would otherwise receive a premium for your shares of our common stock. In
addition, Hellman & Friedman Capital Partners' ability to prevent a change of
control could negatively affect the market price of our common stock.
Certain provisions of our certificate of incorporation and debt instruments
could discourage or prevent a takeover.
Our certificate of incorporation authorizes our Board of Directors to
issue up to 20,000,000 shares of preferred stock and designate the rights and
preferences of our
18
<PAGE>
preferred stock, without stockholder approval. If our Board of Directors elects
to issue preferred stock, it could be more difficult for a third party to
acquire us. Certain other provisions of our certificate of incorporation could
make it more difficult for a third party to acquire control of us, even if such
change of control would be beneficial to stockholders. In addition, the terms
of our indebtedness could make it more difficult for a third party to acquire
us. For example, our 9 1/4% Senior Subordinated Notes due 2008 require that,
upon a change of control, we offer to purchase all Notes at 101% of principal
and unpaid accrued interest.
Future sales of our common stock could depress the market price.
After the offerings, 40,630,000 shares of our common stock will be
outstanding and options to purchase 1,811,124 shares of our common stock will
be outstanding, of which 812,226 shares of common stock will be issuable upon
the exercise of stock options which are vested or will vest in the next 180
days. Of the outstanding shares, the 14,000,000 shares to be sold in the
offerings will be freely tradable without restriction under the Securities Act
of 1933, as amended, except for any shares acquired by our affiliates. In
connection with the offerings, we, all of our existing stockholders and option
holders and all our officers and directors, together holding 26,630,000 shares
of our common stock and all outstanding stock options, have agreed not to sell
any shares of common stock for a period of 180 days after the date of the U.S.
purchase agreement without the consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated. Upon expiration of the lock-up period, 26,630,000 shares may be
sold at any time subject to compliance with the volume limitations and other
restrictions of Rule 144 under the Securities Act.
The market price of our common stock could drop due to sales of a large
number of shares of our common stock in the market after the offerings or the
perception that such sales could occur. These factors could also make it more
difficult to raise funds through future offerings of common stock.
We do not anticipate paying dividends on our common stock.
We do not currently anticipate paying any cash dividends. In addition,
our ability to pay dividends on our common stock is limited under the terms of
our existing indebtedness. As a holding company, our major assets will
initially be the shares we hold in our subsidiaries. Therefore, our ability to
pay future dividends and distributions, if any, to holders of our common stock
is dependent upon the receipt of dividends or other payments from our
subsidiaries, which are also limited under the terms of our existing
indebtedness.
There has not been a public market for our common stock.
We will apply to list our common stock for trading on the New York Stock
Exchange. We do not know the extent to which investor interest in Advanstar
will lead to the development of a trading market for our common stock or how
our common stock will trade in the future. The initial public offering price
was determined by negotiation among us,
19
<PAGE>
Hellman & Friedman Capital Partners and the underwriters. Investors may not be
able to resell their shares at or above the initial public offering price.
The market price of our common stock may fluctuate after the offerings.
The price at which our common stock will trade depends upon a number of
factors, including our historical and anticipated operating results and general
market and economic conditions, some of which are beyond our ability to
control. Factors such as quarterly fluctuations in our financial and operating
results, developments affecting our products and our customers, the markets in
which we compete or industry developments could also cause the market price of
our common stock to fluctuate substantially. In addition, the stock market has
from time to time experienced extreme price and volume fluctuations. These
broad market fluctuations may adversely affect the market price of our common
stock.
The failure of the computer systems on which we rely to recognize Year 2000
dates could affect our operations.
We are highly dependent on our computer software programs and systems in
operating our business. We also depend on the proper functioning of computer
systems of third parties, such as vendors and clients. The failure of any of
these systems to appropriately interpret the upcoming calendar year 2000 could
have a material adverse effect on our financial condition and results of
operations. We have identified our own applications that are not currently Year
2000 compliant and are taking steps to determine whether third parties are
doing the same. In addition, we are implementing a worldwide plan to make our
computer systems Year 2000 compliant by September 1999. We have already spent
as of December 31, 1998 approximately $0.8 million on Year 2000 issues and
estimate that the total cost of implementing our Year 2000 compliance program
will require an additional $3.0 million to $3.5 million.
Our inability to remedy our own Year 2000 problems or the failure of
third parties to do so may cause business interruptions or shutdown, financial
loss, regulatory actions, reputational harm and/or legal liability. We can not
assure you that our Year 2000 program will be effective or that our estimates
about the timing and cost of completing our program will be accurate.
20
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties and assumptions about Advanstar, including, among other things:
.our ability to successfully pursue our identified growth strategies,
.our intention to expand our product and service offerings,
. the performance of our MAGIC trade shows, Travel Agent magazine and other
large events and publications,
.anticipated trends in our businesses,
.the availability of desirable venues and dates for our important trade
shows and
.our ability to continue to control costs.
In light of these risks, uncertainties and assumptions, the forward-
looking events discussed in this prospectus might not occur.
21
<PAGE>
USE OF PROCEEDS
We estimate that we will receive aggregate net proceeds of approximately
$93,856,250 million after deducting the underwriting discount and other
estimated offering expenses. We will not receive any of the proceeds from the
sale of shares by the selling stockholders. We will use the net proceeds of the
offerings to repay indebtedness under our credit facility.
We may reborrow the amount repaid and use such reborrowed funds for
general corporate purposes, including for any acquisitions that we may
identify. As of March 31, 1999, the outstanding balance under our revolving
credit facility was approximately $22.0 million, and the weighted average
annual interest rate for the three months ended on such March 31, 1999 was
7.46%. We had borrowed such amount under our revolving credit facility to pay
in part for the acquisition of Travel Agent magazine and other travel-related
assets from Universal Media, Inc. and for other acquisitions completed in 1998.
Our revolving credit facility matures on October 31, 2003. We will also use a
portion of the net proceeds of the offerings to prepay a portion of the term
loans under our term loan facility. We may not reborrow the amount of term
loans prepaid. As of March 31, 1999, the outstanding terms loans aggregated
approximately $247.3 million, and the weighted average annual interest rate for
the three months ended March 31, 1999 was 7.56%. We had borrowed approximately
$250.0 million in term loans in 1998 to refinance our then outstanding
indebtedness in connection with the acquisition of MAGIC. The term loan
facility amortizes in quarterly installments from 1999 to 2005. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Description of Indebtedness."
DIVIDEND POLICY
Except for the stock dividend declared and paid in connection with the
two-for-one stock split effected on April 21, 1999, we have never declared or
paid dividends on our capital stock, and we do not anticipate paying any cash
dividends in the foreseeable future. Our credit facility and the indenture
under which we issued our 9 1/4% Senior Subordinated Notes due 2008 restrict
our ability to pay dividends to stockholders. In addition, payments of any
future dividends will be at the discretion of our Board of Directors after
taking into account factors, such as our financial condition, operating
results, current and anticipated cash needs and plans for expansion.
22
<PAGE>
CAPITALIZATION
The following table sets forth the cash and cash equivalents and
capitalization of Advanstar as of March 31, 1999 on an actual basis and as
adjusted to give effect to the application of the estimated proceeds of the
offerings to repay debt, as described in "Use of Proceeds." The stockholders'
equity in the following table assumes the effectiveness, upon the closing of
the offerings, of our Amended and Restated Certificate of Incorporation. This
table should be read in conjunction with our consolidated financial statements
and the accompanying notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
At March 31, 1999
---------------------
Actual As adjusted
-------- -----------
(dollars
in thousands)
(unaudited)
<S> <C> <C>
Cash and cash equivalents................................ $ 12,930 $ 12,930
======== ========
Long-term debt (including current portion)
Revolving credit facility(1)........................... 22,000 22,000
Term loan facility..................................... 247,344 153,488
9 1/4% Senior Subordinated Notes (net of discount)..... 149,649 149,649
-------- --------
Total long-term debt................................. $418,993 $325,137
======== ========
Stockholders' equity:
Preferred Stock, $.01 par value; 20,000,000 shares
authorized; no shares issued and outstanding actual
and as adjusted.......................................
Common Stock, $.01 par value; 200,000,000 shares
authorized; 33,630,000 shares issued and outstanding
actual and 40,630,000 shares issued and outstanding as
adjusted(2)........................................... $ 336 $ 406
Accumulated other comprehensive income................. (4,250) (4,250)
Capital in excess of par value......................... 186,038 279,824
Accumulated deficit.................................... (39,596) (39,596)
-------- --------
Total stockholders' equity............................ 142,528 236,384
-------- --------
Total capitalization................................. $561,521 $561,521
======== ========
</TABLE>
- --------
(1) Amounts repaid under the $60.0 million revolving credit facility may be
reborrowed. See "Use of Proceeds."
(2) Excludes 1,811,124 shares of our common stock reserved for issuance upon
exercise of outstanding stock options under our stock option plans as of
March 31, 1999.
23
<PAGE>
DILUTION
Our net tangible book value (deficit) at March 31, 1999 was $(12.90) per
share. Net tangible book value (deficit) per share represents the amount of our
total tangible assets less total liabilities, divided by the number of shares
of common stock outstanding. See "Capitalization." After giving effect to our
sale of the 7,000,000 shares of common stock in the offerings, assuming a
public offering price of $14.50 per share, less estimated underwriting
discounts and commissions and other expenses of the offerings, our pro forma
net tangible book value (deficit) as of March 31, 1999 would have been $(8.37)
per share. This represents an immediate increase in net tangible book value per
share of $4.53 to existing stockholders and immediate dilution in net tangible
book value of $22.87 per share to new investors in the offerings. The following
table illustrates the per share dilution:
<TABLE>
<CAPTION>
Assumed initial public offering price per share............... $14.50
<S> <C> <C>
Net tangible book value (deficit) per share at March 31,
1998....................................................... $(12.90)
Increase per share attributable to new investors............ 4.53
-------
Pro forma net tangible book value (deficit) per share after
the offerings................................................ (8.37)
------
Dilution per share to new investors........................... $22.87
======
</TABLE>
The following table summarizes the number of shares of common stock
purchased from us, the total consideration paid and the average price per share
paid by the existing stockholders and by new investors in the offerings, before
deduction of estimated underwriting discounts and commissions and other
expenses of the offerings.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
---------------------- ----------------------
Number Amount Average Price
(in thousands) Percent (in thousands) Percent Per Share
-------------- ------- -------------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 33,630 82.8% $179,980 63.9% $ 5.35
New investors........... 7,000 17.2 101,500 36.1 14.50
------ ----- -------- -----
Totals................ 40,630(1) 100.0% $281,480 100.0%
====== ===== ======== =====
</TABLE>
- --------
(1) Excludes as of March 31, 1999, 1,811,124 shares of our common stock
issuable upon exercise of outstanding stock options with a weighted average
exercise price of $6.56 per share. To the extent these stock options are
exercised, there will be further dilution to the investors.
24
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL
DATA OF ADVANSTAR AND THE PREDECESSOR
The following table presents our selected historical consolidated
financial data. The selected historical consolidated financial data for the
years ended December 31, 1994 and 1995 and the five months ended May 31, 1996
have been derived from the audited consolidated financial statements of the
Predecessor for such periods. The consolidated financial data of Advanstar for
the seven months ended December 31, 1996 and the years ended December 31, 1997
and 1998 have been derived from the audited consolidated financial statements
of Advanstar included elsewhere in this prospectus. The consolidated financial
data for the combined year ended December 31, 1996 has been derived from the
audited consolidated financial statements of the Predecessor and Advanstar and
has not been audited and does not comply with GAAP. This data combines
financial data of the Predecessor for the five months ended May 31, 1996 with
financial data of Advanstar for the seven months ended December 31, 1996,
without giving effect to purchase accounting or the impact of the financing of
the acquisition of Advanstar by Hellman & Friedman Capital Partners on May 31,
1996. The consolidated financial data for the three months ended March 31, 1998
and 1999 has been derived from our unaudited consolidated financial statements
and has not been audited.
In connection with the following table, you should read "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the historical consolidated financial statements and the other financial
information included elsewhere in this prospectus. When you read the unaudited
financial data set forth in the following table, you should consider that
unaudited financial data do not necessarily indicate what our results of
operations will be for future periods or the entire year.
When reading the statement of operations data presented in the table
below, you should also consider the following:
. our amortized assets include identifiable intangibles, such as
advertiser, exhibitor and circulation lists, assembled work force
and other intangibles as well as goodwill, amortized over lives
ranging from one to 23 years;
. we allocate purchase price in excess of fair market value of
identifiable tangible and intangible assets acquired to goodwill;
. for 1994, our amortization expense reflects the final year of
amortization of reorganization value as a result of the
Predecessor's emergence out of its prepackaged Chapter 11
bankruptcy; and
. for the seven months ended December 31, 1996, the years ended
December 31, 1997 and 1998 and the three months ended March 31,
1998 and 1999, our amortization expense increased as a result of
the acquisition of Advanstar by Hellman & Friedman Capital
Partners completed in May 1996 and other acquisitions completed in
1997 and 1998.
25
<PAGE>
When reading the other financial data presented in the table below, you
should also consider the following:
. we define EBITDA as operating income plus amortization and
depreciation;
. our calculation of EBITDA may not be comparable to other
companies' calculations;
. EBITDA does not represent, and should not be considered, an
alternative to net income or cash flow from operations; and
. EBITDA does not take into account our working capital
requirements, debt service requirements and other commitments and
does not necessarily indicate amounts that may be available to us
for discretionary uses.
We have included this data in the table below because we believe that EBITDA
provides useful information regarding our ability to service and/or incur
indebtedness. Our lenders have indicated that the amount of indebtedness we
will be permitted to incur will be based, in part, on our EBITDA.
26
<PAGE>
<TABLE>
<CAPTION>
Predecessor Advanstar
--------------------------------- ----------------------------------------------------------------------
Year ended Three months ended
December 31, Five months Seven months Year ended December 31, March 31,
------------------- ended ended -------------------------------- -----------------------
May 31, December 31, Combined
1994 1995 1996 1996 1996 1997 1998 1998 1999
-------- -------- ----------- ------------ ----------- -------- -------- ----------- -----------
(unaudited) (unaudited) (unaudited)
(in thousands) (in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of
Operations Data:
Net revenue........ $141,721 $145,300 $68,286 $ 82,720 $151,006 $187,656 $259,825 $ 62,063 $ 99,084
Operating expenses:
Cost of
production,
selling and other
direct........... 107,906 96,942 43,835 53,560 97,395 126,339 169,035 39,601 58,471
General and
administrative... 27,511 27,152 11,454 17,328 28,782 30,478 36,065 8,791 10,854
Non-cash stock
option
compensation..... -- -- -- 3,397 -- 2,997
Amortization...... 42,808 4,801 1,588 13,171 14,759 24,326 48,752 5,652 9,656
-------- -------- ------- -------- -------- -------- -------- -------- --------
Operating income
(loss)............ (36,504) 16,405 11,409 (1,339) 10,070 6,513 2,576 8,019 17,106
Interest expense,
net.............. (18,034) (19,613) (6,963) (7,511) (14,474) (15,117) (27,862) (3,814) (8,827)
Other income
(expense), net... (4,363) 2,230 23 (488) (465) 292 (1,886) 290 364
Provision for
income taxes..... 21 16 13 1,076 1,089 583 1,264 54 494
-------- -------- ------- -------- -------- -------- -------- -------- --------
Net income (loss).. $(58,922) $ (994) $ 4,456 $(10,414) $ (5,958) $ (8,895) $(28,436) $ 4,441 $ 8,149
======== ======== ======= ======== ======== ======== ======== ======== ========
Net income (loss)
per share,
diluted........... $ (0.31) $ (0.41) $ (0.96) $ 0.20 $ 0.24
Weighted average
shares
outstanding,
diluted........... 19,400 21,768 29,652 21,800 34,486
Other Financial
Data:
EBITDA............. $ 9,573 $ 24,611 $14,428 $ 13,781 $ 28,209 $ 34,039 $ 53,828 $ 14,670 $ 27,807
EBITDA margin...... 6.7 % 16.9 % 21.1 % 16.7 % 18.7 % 18.1 % 20.7% 23.6% 28.1%
Non-cash stock
option
compensation...... $ -- $ -- $ -- $ 3,397 $ -- $ 2,997
Cash flows provided
by
(used in):
Operating
activities....... $ 1,350 $ 3,907 $(1,011) 12,616 11,605 12,592 32,653 3,369 9,729
Investing
activities....... (2,694) 4,432 (274) (18,924) (19,198) (33,323) (358,261) (27,064) (3,297)
Financing
activities....... 4,949 (14,658) 2,227 5,944 8,171 25,224 332,600 22,774 (7,885)
Depreciation....... 3,269 3,405 1,431 1,949 3,380 3,200 3,071 695 868
Amortization....... 42,808 4,801 1,588 13,171 14,759 24,326 48,752 5,652 9,656
Capital
expenditures...... 2,530 1,451 365 780 1,145 2,260 4,154 1,240 791
Balance Sheet Data
(at end of
period):
Total assets....... $ 95,593 $ 79,098 $277,173 $298,497 $660,226 $329,823 $643,338
Long-term debt,
including current
maturities........ 185,099 173,058 151,000 164,223 426,868 186,999 418,993
</TABLE>
27
<PAGE>
Set forth below is a reconciliation of Advanstar's operating income to
EBITDA for the periods indicated:
<TABLE>
<CAPTION>
Predecessor
-----------------------------
Year ended
December 31, Five months
----------------- ended
May 31,
1994 1995 1996
-------- ------- -----------
(in thousands)
<S> <C> <C> <C>
Operating income (loss).. $(36,504) $16,405 $11,409
Depreciation and
amortization............ 46,077 8,206 3,019
Minority interest........
-------- ------- -------
EBITDA................... $ 9,573 $24,611 $14,428
- --------------------------------------------------
======== ======= =======
<CAPTION>
Advanstar
-----------------------------------------------------------------
Three months ended
Seven months Year ended December 31, March 31,
ended ---------------------------- -----------------------
December 31, Combined
1996 1996(1) 1997 1998 1998 1999
------------ ----------- ------- -------- ----------- -----------
(unaudited) (unaudited) (unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Operating income (loss).. $(1,339) $10,070 $ 6,513 $ 2,576 $ 8,019 $17,106
Depreciation and
amortization............ 15,120 18,139 27,526 51,823 6,347 10,524
Minority interest........ (571) 304 177
------------ ----------- ------- -------- ----------- -----------
EBITDA................... $13,781 $28,209 $34,039 $53,828 $14,670 $27,807
- --------------------------------------------------
============ =========== ======= ======== =========== ===========
</TABLE>
28
<PAGE>
UNAUDITED PRO FORMA COMBINED
FINANCIAL INFORMATION
The unaudited pro forma combined statement of operations for the year
ended December 31, 1998 and for the three months ended March 31, 1999 includes
the historical operations of Advanstar and give effect to the acquisitions that
we completed in 1998 and the divestiture of two trade publications for
consideration of approximately $4.3 million, as if they had occurred on January
1, 1998. The pro forma adjustments relating to the 14 acquisitions that we
completed in 1998, together with the elimination of operating results of the
divested trade publications, are otherwise referred to as the pro forma
adjustments.
The unaudited pro forma combined financial information, which has been
prepared by the management of Advanstar and has been derived from the
historical statements of operations and balance sheets of Advanstar, MAGIC,
Travel Agent and the other travel-related assets acquired from Universal Media,
Inc. and all of the entities or businesses, other than MAGIC and the travel-
related assets acquired from Universal Media, Inc., that we acquired in 1998.
We have accounted for the 14 acquisitions that we completed in 1998 under the
purchase method of accounting.
Since May 31, 1996, we have completed 24 acquisitions and joint ventures,
14 of which were completed in 1998. On April 30, 1998, we acquired Men's
Apparel Guild in California, Inc., or otherwise referred to as MAGIC, for
approximately $231.0 million. MAGIC is a wholly-owned subsidiary of Advanstar
and the MAGIC trade shows are core assets of our Retail, Hospitality & Fashion
cluster. On August 17, 1998, we acquired the travel-related publications and
trade show assets from Universal Media, Inc., including Travel Agent, for cash
consideration of $68.0 million. In addition, in 1998, we completed 12 other
acquisitions or joint ventures with purchase prices ranging from approximately
$0.6 million to approximately $20.0 million and aggregating approximately $89.1
million.
The unaudited pro forma combined financial information is not designed to
represent and does not represent what Advanstar's results of operations
actually would have been had the aforementioned transactions been completed as
of the dates indicated, or to project Advanstar's results of operations for any
future period. The Pro Forma Adjustments are based on available historical
financial information and should be read in conjunction with "Capitalization,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the financial statements and accompanying notes and other
financial information included elsewhere in this prospectus.
When you read the unaudited combined pro forma statement of operations
data for 1998 presented in the table below, please consider the following:
. Advanstar's results of operations include the results of
operations of acquired businesses from the date we acquired them;
. MAGIC's results of operations represent results of operations for
the four months ended April 30, 1998, the date we acquired MAGIC;
29
<PAGE>
. the results of operations of Travel Agent and the other travel-
related assets acquired from Universal Media, Inc. represent the
results for the seven and one-half months ended August 17, 1998,
the date we acquired those assets;
. the results of operations of the other 12 acquisitions that we
completed in 1998 represents the results of operations for the
acquired businesses prior to the date we acquired them; and
. the results of operations of the other 12 acquisitions that we
completed in 1998 includes the elimination of operating results of
two publications that we divested in 1998, which contributed $0.8
million in revenue and no net income in 1998.
Please also consider that Advanstar's gross profit for 1998 has been
reduced by $0.5 million to reflect depreciation expense included in cost of
production.
When you read the table below for 1998, you should consider the following
about the pro forma adjustments:
. gross profit represents the elimination of (1) $0.3 million of
related party pricing discounts that were granted to certain
former MAGIC shareholders/directors for their purchase of trade
show exhibition space and (2) $0.4 million of direct costs related
to trade show profit sharing payments reflected in the operating
results of our other acquisitions; we terminated these discounts
and direct costs following our acquisition of the respective
businesses;
. general and administrative expenses represent the elimination of
(1) $0.2 million of director fees for the four month period ended
April 30, 1998 that will not recur following our acquisition of
MAGIC, (2) $1.7 million of shareholder/director payments to
certain shareholders of Universal Media, Inc. that will not recur
following our acquisition of Travel Agent and the other travel-
related assets and (3) $0.5 million of other non-recurring costs
related to Travel Agent for 1998;
. depreciation and amortization represent the incremental
amortization of goodwill arising from our 14 acquisitions in 1998;
we are amortizing this goodwill on a straight line basis over
lives ranging from one to 23 years;
. depreciation and amortization also represent the deferred
financing costs arising from the financing of our credit facility
related to our 1998 acquisitions; we are amortizing these costs
over the lives of the related debt instruments (5.5-10 years);
. interest income (expense), net represents incremental interest
expense (1) arising from the amortization of original issue
discount on our 9 1/4% Senior Subordinated Notes due 2008 and (2)
on borrowing under our credit facility to finance the acquisitions
that we completed in 1998 as if they had been completed on January
1, 1998;
30
<PAGE>
. other income (expense), net represents the write-off of $4.1
million of unamortized intangibles in connection with the
financing of the acquisition of MAGIC, partially offset by a gain
on the disposition of publishing assets of $2.2 million; and
. provision for income taxes relates to state taxes and our U.K. and
Brazil subsidiaries; we have made no provision for U.S. federal
income taxes due to our net operating loss carryforwards.
When reading the other financial data presented in the table below, you
should also consider the following:
. we define EBITDA as operating income plus amortization and
depreciation;
. our calculation of EBITDA may not be comparable to other
companies' calculations;
. EBITDA does not represent, and should not be considered, an
alternative to net income or cash flow from operations; and
. EBITDA does not take into account our working capital
requirements, debt service requirements and other commitments and
does not necessarily indicate amounts that may be available to us
for discretionary uses.
We have included this data in the table below because we believe that EBITDA
provides useful information regarding our ability to service and/or incur
indebtedness. Our lenders have indicated that the amount of indebtedness we
will be permitted to incur will be based, in part, on our EBITDA.
In addition, you should consider that the as adjusted interest expense
reflects the reduction in interest expense of $7.5 million for 1998 and of $1.6
million for the three months ended March 31, 1999 to give effect to the
offerings and the application of our estimated net offering proceeds to repay
debt. See "Use of Proceeds."
31
<PAGE>
UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three
months
ended
March 31,
Year ended December 31, 1998 1999
---------------------------------------------------------------------------- -----------
Travel Other Pro forma Pro forma Pro forma
Advanstar MAGIC Agent Acquisitions adjustments Pro forma as adjusted as adjusted
--------- ------- ------- ------------ ----------- --------- ----------- -----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations:
Net revenue............. $259,825 $20,259 $17,959 $8,323 $ 300 $306,666 $306,666 $99,084
Gross profit............ 90,790 13,973 5,917 3,084 707 114,471 114,471 40,613
General and
administrative
expenses.............. 33,486 2,277 2,653 1,990 (2,445) 37,961 37,961 10,132
Non-cash stock option
compensation.......... 3,397 -- -- -- -- 3,397 3,397 2,997
Depreciation and
amortization.......... 51,331 130 42 -- 6,470 57,973 57,973 10,378
-------- ------- ------- ------ ------- -------- -------- -------
Operating income
(loss)................. 2,576 11,566 3,222 1,094 (3,318) 15,140 15,140 17,106
Interest income
(expense), net......... (27,862) 155 (116) -- (9,695) (37,518) (29,979) (7,183)
Other income (expense),
net.................... (1,886) -- -- -- 1,849 (37) (37) 364
-------- ------- ------- ------ ------- -------- -------- -------
Income (loss) before
income taxes........... (27,172) 11,721 3,106 1,094 (11,164) (22,415) (14,876) 10,287
Provision for income
taxes.................. 1,264 4,390 78 -- (4,468) 1,264 1,264 494
-------- ------- ------- ------ ------- -------- -------- -------
Net income (loss)....... $(28,436) $ 7,331 $ 3,028 $1,094 $(6,696) $(23,679) $(16,140) $ 9,793
======== ======= ======= ====== ======= ======== ======== =======
Net income (loss) per
share, diluted......... $ (0.96) $ (0.80) $ (0.44) $ 0.24
======== ======== ======== =======
Weighted average shares
outstanding, diluted... 29,652 29,652 36,652 41,486
Other Financial Data:
EBITDA.................. $ 53,828 $11,696 $ 3,264 $1,094 $ 2,932 $ 72,814 $ 72,814 $27,807
EBITDA margin........... 20.7% 57.7% 18.2% 13.1% 23.7% 23.7% 28.1%
Non-cash stock option
compensation........... $ 3,397 $ 3,397 $ 3,397 $ 2,997
Depreciation and
amortization........... 51,823 $ 130 $ 42 $ -- $ 6,470 58,465 58,465 10,524
Capital expenditures.... 4,154 65 53 -- 4,272 4,272 791
</TABLE>
Set forth below is a reconciliation of operating income to EBITDA for the
periods indicated:
<TABLE>
<CAPTION>
Three
months
ended
March 31,
Year ended December 31, 1998 1999
----------------------------------------------------------------------- -----------
Travel Other Pro forma Pro forma Pro forma
Advanstar MAGIC Agent Acquisitions adjustments Pro forma as adjusted as adjusted
--------- ------- ------ ------------ ----------- --------- ----------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating income
(loss)................. $ 2,576 $11,566 $3,222 $1,094 $(3,318) $15,140 $15,140 $17,106
Depreciation and
amortization........... 51,823 130 42 -- 6,470 58,465 58,465 10,524
Minority interest....... (571) -- -- -- (220) (791) (791) 177
------- ------- ------ ------ ------- ------- ------- -------
EBITDA.................. $53,828 $11,696 $3,264 $1,094 $ 2,932 $72,814 $72,814 $27,807
======= ======= ====== ====== ======= ======= ======= =======
</TABLE>
32
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
This discussion and analysis of Advanstar's financial condition and
results of operations should be read in conjunction with the "Unaudited Pro
Forma Combined Financial Information" and the consolidated financial statements
and accompanying notes included elsewhere in this prospectus.
Advanstar is a worldwide provider of integrated, business-to-business
marketing communications solutions for targeted industry sectors, principally
through trade shows and conferences and through controlled circulation trade,
business and professional magazines. We also provide a broad range of other
marketing services products, including classified advertising, direct mail
services, reprints, database marketing, directories, guides and reference
books.
Advanstar reports its business in three segments: trade shows and
conferences, which consists primarily of the management of expositions and
seminars held in convention and conference centers; publications, which
consists primarily of the creation and distribution of controlled circulation
trade, business and professional magazines; and marketing services, which
consists primarily of sales of a variety of direct mail and database products,
magazine editorial reprints, and directory and classified advertising.
Trade shows and conferences accounted for 62.1% of total revenue for the
three months ended March 31, 1999, and 43.5% of total revenue for 1998.
Publications accounted for 33.6% of total revenue for the three months ended
March 31, 1999 and 50.2% of total revenue for 1998. Marketing services
accounted for 4.3% of total revenue for the three months ended March 31, 1999
and 6.3% of total revenue for 1998.
Sources of Revenue
Trade shows and conferences. The trade shows and conferences segment
derives revenue principally from the sale of exhibit space and conference
attendance fees generated at its events. Events are generally held on an annual
basis in major metropolitan or convention areas such as New York City or Las
Vegas. At many of our trade shows, a portion of exhibit space is reserved and
partial payment is received as much as a year in advance. For example, over 70%
of exhibit space at our MAGIC, Dealernews and Call Center shows is reserved
prior to the end of the preceding show. The sale of exhibit space is affected
by the on-going quality and quantity of attendance, venue selection and
availability, industry life cycle and general market conditions. Revenue and
related direct event expenses are recognized in the month in which the event is
held. Cash is collected in advance of an event and is recorded on our balance
sheet as deferred revenue.
33
<PAGE>
Publications. The publications segment derives revenue principally from
the sale of advertising in its business-to-business magazines. In 1998,
approximately 93.7% of revenue from publications was derived from advertising
and approximately 3.7% from subscriptions. Most publications are produced
monthly with advertising sold both on an annual schedule and single insertion
basis. The sale of advertising is affected by new product releases,
circulation, readership studies and general market conditions. Advertising
revenue is recognized on the publication issue date, and subscription revenue,
if any, is recognized over the subscription period, typically one year.
Marketing services. The marketing services segment derives its revenue
from the sale of value-added marketing products such as classified advertising,
direct mail services, reprints, database marketing, directories, guides and
reference books. These products complement and, in many cases, utilize the
content or databases generated by our trade shows, conferences and
publications. The sale of these products is affected by the success of the
event or publication from which these products are derived, the quality of the
sales team and general market conditions. Revenue is generally recognized when
the applicable product is shipped.
Components of Expenses
Trade shows and conferences. Costs incurred by the trade shows and
conferences segment include facility rent, outsourced services such as
registration, security and decorator, and attendee and exhibitor promotion.
Exhibitors contract directly with third parties for on-site services such as
electrical, booth set-up and drayage. Staff salaries and related payroll
expenses are treated as monthly period expenses. All other direct costs are
expensed in the month the event occurs. General and administrative costs are
not allocated to the segments.
Publications. Costs incurred by the publications segment include
printing, paper and postage; selling and promotion; editorial and prepress; and
circulation acquisition and fulfillment. Additionally, publisher and sales
staff costs, and production, editorial and circulation staff costs, with
related payroll taxes and benefits, are charged to the publications. We
outsource the actual printing of our publications. General and administrative
costs are not allocated to the segments.
Marketing services. Costs of the marketing services segment include
printing and distribution costs, database administration fees and staff
salaries and related payroll taxes and benefits. General and administrative
costs are not allocated to the segments.
34
<PAGE>
Selected Financial Data
The following table sets forth selected statements of operations and
other financial data. The 1996 data is combined financial data accumulated from
the historical financial statements of the Predecessor for the period from
January 1, 1996 to May 31, 1996 and of Advanstar for the period from June 1,
1996 to December 31, 1996. The combined financial data is presented for
comparative purposes only, does not fully comply with GAAP and does not purport
to reflect the operating results of Advanstar as if Advanstar had been
controlled by Hellman & Friedman Capital Partners for the full year.
We define "EBITDA" as operating income plus amortization and
depreciation. EBITDA does not represent, and should not be considered to be, an
alternative to net income or cash flow from operations as determined in
accordance with GAAP, and our calculation thereof may not be comparable to that
reported by other companies. We believe that EBITDA provides useful information
regarding our ability to service and/or incur indebtedness and is used by many
other companies. Our lenders have indicated that the amount of indebtedness we
will be permitted to incur will be based, in part, on our EBITDA. EBITDA does
not take into account our working capital requirements, debt service
requirements and other commitments. Accordingly, EBITDA is not necessarily
indicative of amounts that may be available to us for discretionary uses.
To calculate EBITDA for 1998 and for three months ended March 31, 1998
and 1999, we adjusted operating income by $0.6 million, $0.3 million and $0.2
million, respectively, to reflect minority interest. There was no minority
interest in 1996 and 1997.
<TABLE>
<CAPTION>
Three months
Year ended December 31, ended March 31,
---------------------------- ----------------
1996 1997 1998 1998 1999
-------- -------- -------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C>
Net revenue
Trade shows and conferences.. $ 36,418 $ 61,608 $113,066 $32,302 $61,573
Publications................. 101,774 111,611 130,442 26,132 33,272
Marketing services and
other....................... 12,814 14,437 16,317 3,629 4,239
-------- -------- -------- ------- -------
Total net revenues......... 151,006 187,656 259,825 62,063 99,084
Production, selling and other
direct expenses
Trade shows and conferences.. 21,932 41,809 68,538 16,588 29,472
Publications................. 69,362 77,810 92,727 20,937 26,400
Marketing services and
other....................... 6,101 6,720 7,770 2,076 2,599
-------- -------- -------- ------- -------
Total production, selling
and other direct
expenses.................. 97,395 126,339 169,035 39,601 58,471
General and administrative
expenses...................... 28,782 30,478 36,065 8,791 10,854
Non-cash stock option
compensation.................. -- -- 3,397 -- 2,997
Amortization................... 14,759 24,326 48,752 5,652 9,656
-------- -------- -------- ------- -------
Operating income........... 10,070 6,513 2,576 8,019 17,106
Other income (expense):
Interest expense (net)....... (14,474) (15,117) (27,862) (3,814) (8,827)
Other income (expense)....... (465) 292 (1,886) 290 364
Provision for income taxes..... 1,089 583 1,264 54 494
-------- -------- -------- ------- -------
Net income (loss).............. $ (5,958) $ (8,895) $(28,436) $ 4,441 $ 8,149
======== ======== ======== ======= =======
EBITDA......................... $ 28,209 $ 34,039 $ 53,828 $14,670 $27,807
</TABLE>
35
<PAGE>
Three Months Ended March 31, 1999 Compared to the Three Months Ended March 31,
1998
Revenue
Revenue increased $37.0 million or 59.7% from $62.1 million for the first
three months of 1998 to $99.1 million for the comparable period in 1999.
Revenue from our trade shows and conferences increased $29.3 million or
90.6% from $32.3 million for the first three months of 1998 to $61.6 million
for the first three months of 1999. The increase in revenue was attributable to
acquisitions and new launches, such as MAGIC and iEC Europe and the growth in
our existing product portfolio. Acquisitions that we completed after March 31,
1998 accounted for 47.2% of our total revenue from trade shows and conferences
for the first three months of 1999 and new launches after March 31, 1998
accounted for 4.1%. In 1998, we acquired MAGIC, TeleCon, Telexpo, SCANTECH and
eight other trade shows and conferences.
Revenue from our publications increased $7.2 million or 27.3% from $26.1
million for the first three months of 1998 to $33.3 million for the first three
months of 1999. The increase in revenue was attributable primarily to
acquisitions that we made in 1998 and a modest increase in 1998 of advertising
pages and advertising revenue per page. Acquisitions that we completed after
March 31, 1998 accounted for 23.6% of total revenue from publications for the
first three months of 1999 and new launches after March 31, 1998 accounted for
1.3%. In 1998, we acquired Travel Agent and six other trade publications,
including TeleProfessional and Post.
Revenue from our marketing services increased $0.6 million or 16.8% from
$3.6 million for the first three months of 1998 to $4.2 million for the first
three months of 1999. Growth in revenue from list rentals, classified
advertising and books was primarily responsible for the increase.
Production, selling and other direct expenses
Production, selling and other direct expenses increased $18.9 million or
47.7% from $39.6 million for the first three months of 1998 to $58.5 million
for the first three months of 1999.
Trade shows and conferences production, selling and other direct expenses
increased $12.9 million or 77.7% from $16.6 million for the first three months
of 1998 to $29.5 million for the first three months of 1999. This increase was
primarily due to increases in our operation, promotion and management costs
associated with the acquisitions that we completed after March 31, 1998 as well
as to costs attributable to new launches and growth in our existing events.
Publications production, selling and other direct expenses increased $5.5
million or 26.1% from $20.9 million for the first three months of 1998 to $26.4
million for the first
36
<PAGE>
three months of 1999. Direct costs related to acquisitions of publications that
we completed after March 31, 1998 were primarily responsible for the increase.
Marketing services production, selling and other direct expenses
increased $0.5 million or 25.2% from $2.1 million for the first three months of
1998 to $2.6 million for the first three months of 1999. This increase was
primarily due to increased selling expenses incurred as a result of our efforts
to market these products as well as increased costs of production due to the
growth in those respective product lines.
General and administrative expenses
General and administrative expenses increased $5.1 million or 57.6% from
$8.8 million for the first three months of 1998 to $13.9 million for the first
three months of 1999. This increase was primarily attributable to a $3.0
million non-cash charge related to our stock option plan and to increased
overheads acquired with the acquisitions that we made after March 31, 1998.
Amortization
Amortization expense increased $4.0 million from $5.7 million for the
first three months of 1998 to $9.7 million for the first three months of 1999
primarily attributable to increased amortization of intangible assets related
to the acquisitions that we completed after March 31, 1998.
Operating income
Operating income increased $9.1 million or 113.3% from $8.0 million for
the first three months of 1998 to $17.1 million for the first three months of
1999 primarily attributable to acquisitions that we made during 1998, partially
offset by a $3.0 million non-cash charge for stock option related compensation
expense and increased amortization expense.
Interest expense
Net interest expense increased $5.0 million or 131.4% from $3.8 million
for the first three months of 1998 to $8.8 million for the first three months
of 1999 due to the additional indebtedness necessary to fund acquisitions made
after March 31, 1998. In April 1998, we issued our 9 1/4% Senior Subordinated
Notes due 2008 in the amount of $150.0 million at a fixed rate of 9.25% to fund
a portion of our acquisition of MAGIC. Interest on our 9 1/4% Senior
Subordinated Notes due 2008 is payable semi-annually with the first payment
made on November 1, 1998.
Net income
Net income increased $3.7 million or 83.5% from $4.4 million for the
first three months of 1998 to $8.1 million for the first three months of 1999
primarily due to the changes described above.
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EBITDA
EBITDA increased $13.1 million or 89.6% from $14.7 million for the first
three months of 1998 to $27.8 million for the first three months of 1999. The
increase was due primarily to an increase in our revenue and resulting increase
in operating performance as described above.
1998 Compared to 1997
Revenue
Revenue increased $72.1 million or 38.5% from $187.7 million in 1997 to
$259.8 million in 1998.
Revenue from our trade shows and conferences increased $51.5 million or
83.5% from $61.6 million to $113.1 million in 1998. The increase in our revenue
was attributable to trade shows and conferences that we acquired in 1998, new
launches such as Healthcare Information Technology, WORLDPHARM and Call Centre
Solutions and the growth of our existing product portfolio and revenue
generated by our plastics events which were not held in 1997, offset by the
discontinuation in 1998 of some trade shows and conferences held in 1997.
Acquisitions that we acquired during 1998 accounted for 37.6% of total revenue
from trade shows and conferences in 1998 and new launches during 1998 accounted
for 3.6%. In 1998, we acquired MAGIC, TeleCon, Telexpo, SCANTECH and eight
other trade shows and conferences.
Revenue from our publications increased $18.8 million or 16.9% from
$111.6 million to $130.4 million in 1998. The increase in revenue was
attributable primarily to acquisitions in 1998 and a modest increase in 1998 of
advertising pages and advertising revenue per page, partially offset by the
sale or discontinuation in 1998 of some magazines published in 1997.
Acquisitions during 1998 accounted for 13.4% of total revenue from publications
in 1998. In 1998, we acquired Travel Agent and six other trade publications,
including TeleProfessional and Post. We also launched several other
publications in 1998, which increased revenue.
Revenue from our marketing services increased $1.9 million or 13.0% from
$14.4 million to $16.3 million in 1998. Growth in revenue from our list
rentals, classified advertising and reprints was primarily responsible for the
increase.
Production, selling and other direct expenses
Production, selling and other direct expenses increased $42.7 million or
33.8% from $126.3 million in 1997 to $169.0 million in 1998.
Trade shows and conferences production, selling and other direct expenses
increased $26.7 million or 63.9% from $41.8 million to $68.5 million in 1998.
This increase was primarily due to increases in operation, promotion and
management costs associated with the
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acquisitions that we completed in 1998 as well as costs attributable to our new
launches and growth of our existing events.
Publications production, selling and other direct expenses increased
$14.9 million or 19.2% from $77.8 million to $92.7 million in 1998. Direct
costs related to our acquisitions of publications in 1998 were primarily
responsible for the increase.
Marketing services production, selling and other direct expenses
increased $1.1 million or 15.6% from $6.7 million to $7.8 million in 1998. This
increase was primarily due to increased selling expenses incurred as a result
of our efforts to market these products as well as increased costs of
production due to the growth in those respective product lines.
General and administrative expenses
General and administrative expenses increased $9.0 million or 29.5% from
$30.5 million to $39.5 million in 1998. This increase was primarily
attributable to overheads acquired with acquisitions that we made in 1998 and a
$3.4 million non-cash charge related to our stock option plan. We also incurred
incremental expenses relating to the establishment of our Latin American
operations and to the expansion of infrastructure to support our new industry-
focused organization.
Amortization
Amortization expense increased $24.5 million from $24.3 million to $48.8
million in 1998 primarily due to increased amortization of intangible assets
related to the acquisitions that we completed in 1998 and a $12.7 million
write-off of impaired intangible assets related to three discontinued trade
shows and two discontinued publications as well as the replacement of certain
software system applications.
Operating income
Operating income decreased $3.9 million or 60.4% from $6.5 million to
$2.6 million in 1998 due primarily to increased amortization and the incurrence
of a $3.4 million charge for non-cash, stock option-related compensation
expense, partially offset by our improved operating performance.
Interest expense
Net interest expense increased $12.8 million or 84.3% from $15.1 million
to $27.9 million in 1998, due to the incurrence of additional indebtedness
necessary to fund acquisitions that we made in 1998. In April 1998, we issued
our 9 1/4% Senior Subordinated Notes due 2008 in the amount of $150.0 million
at a fixed rate of 9.25% to fund a portion of our acquisition of MAGIC.
Interest on the Notes is payable semi-annually with the first payment made on
November 1, 1998.
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Net loss
Net loss increased $19.5 million from $8.9 million to $28.4 million in
1998. In addition to the changes described above, the increase was due to the
write-off of $4.1 million of unamortized intangibles relating to the
refinancing of our credit facilities as part of the acquisition of MAGIC,
partially offset by a gain of $2.2 million on the disposition of our publishing
assets.
EBITDA
EBITDA increased $19.8 million or 58.1% from $34.0 million to $53.8
million in 1998. The increase was due primarily to the increase in our revenue
and resulting increase in operating performance as described above.
1997 Compared to Combined 1996
Revenue
Revenue increased $36.7 million or 24.3% from $151.0 million in 1996 to
$187.7 million in 1997.
Revenue from our trade shows and conferences increased $25.2 million or
69.2% from $36.4 million to $61.6 million in 1997. The increase in revenue was
primarily attributable to acquisitions as well as growth in our existing
business and specifically in our U.S. and European call center trade shows and
conferences, partially offset by the absence of three events for the plastics
industry in 1997. Acquisitions that we made during 1997 accounted for 40.8% of
total revenue from trade shows and conferences in 1997 and our new launches
during 1997 accounted for 3.6%. In 1997, we acquired the Expocon trade shows
and the Hair Color conference.
Revenue from our publications increased $9.8 million or 9.7% from $101.8
million to $111.6 million in 1997. The increase in our revenue resulted from
the Premier Hotels & Resorts and TelePress acquisitions that we made completed
during 1997 and the improved operating performance of Telecom Asia and our
other telecommunications and information technology publications. These
increases were partially offset by the discontinuance of a small publication in
late 1996. Acquisitions that we made during 1997 accounted for 4.2% of our
total revenue from publications in 1997.
Revenue from our marketing services increased in $1.6 million or 12.7%
from $12.8 million to $14.4 million in 1997. Growth in revenue from our
database product marketing and direct mail was primarily responsible for the
increase.
Production, selling and other direct expenses
Production, selling and other direct expenses increased $28.9 million or
29.7% from $97.4 million in 1996 to $126.3 million in 1997.
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Trade shows and conferences production, selling and other direct expenses
increased $19.9 million or 90.6% from $21.9 million to $41.8 million in 1997.
This increase was primarily due to operation, promotion and management costs
associated with our 1997 acquisitions and increases in direct costs due to
growth in the size and revenue of our existing trade shows and conferences.
Publications production, selling and other direct expenses increased $8.4
million or 12.2% from $69.4 million to $77.8 million in 1997. This increase is
primarily a result of increased expenses relating to the operations of
businesses that we acquired during late 1996 and 1997, and to a lesser extent,
increased investment in circulation, sales staffing and promotion and
marketing.
Marketing services production, selling and other direct expenses
increased $0.6 million or 10.1% from $6.1 million to $6.7 million in 1997. This
increase was primarily due to increased selling expenses incurred as a result
of our effort to market these products.
General and administrative expenses
General and administrative expenses increased $1.7 million or 5.9% from
$28.8 million to $30.5 million in 1997. Most of this increase was due to
incremental general and administrative expenses relating to our operation of
acquired businesses and related expansion of infrastructure, primarily in
Brazil and Hong Kong.
Amortization
Amortization expense increased $9.5 million or 64.8% from $14.8 million
to $24.3 million in 1997 primarily due to increased amortization of intangible
assets related to the acquisitions that we made in 1997.
Operating income
Operating income decreased $3.6 million or 35.3% from $10.1 million to
$6.5 million in 1997 primarily due to the $6.8 million increase in non-cash
amortization resulting from the acquisition of Advanstar by Hellman & Friedman
Capital Partners. Operating income before amortization increased $6.0 million
or 24.2% from $24.8 million to $30.8 million in 1997 due to the revenue and
operating performance improvements discussed above.
Interest expense
Net interest expense increased $0.6 million or 4.4% from $14.5 million to
$15.1 million in 1997 due to the incurrence of additional indebtedness
necessary to partially fund acquisitions that we completed in late 1996 and
early 1997.
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Net loss
Net loss increased $2.9 million or 49.3% from $6.0 million to $8.9
million in 1997 primarily due to increased amortization resulting from the
acquisition of Advanstar by Hellman & Friedman Capital Partners, partially
offset by improvements in operating income before amortization.
EBITDA
EBITDA increased $5.8 million or 20.7% from $28.2 million to $34.0
million in 1997. This increase was primarily due to a $6.0 million increase in
our operating income before amortization, partially offset by a decrease of
$0.2 million in depreciation.
Liquidity and Capital Resources
Historically, our financing requirements have been funded through cash
generated by operating activities, the sale of additional shares of common
stock to existing stockholders, revolving and term loan borrowings under
revolving credit facilities and, in 1998, term loan borrowings and the issuance
of $150.0 million of our 9 1/4% Senior Subordinated Notes due 2008.
Cash flows from operating activities. Net cash provided by operations for
the first three months of 1999 increased $6.3 million or 188.8% from $3.4
million for the first three months of 1998 to $9.7 million for the first three
months of 1999. The increase was due to an increase in our net income of $3.7
million adjusted for the increase of $4.9 million of depreciation, amortization
and other charges, offset by an increase in working capital items of $5.3
million relating primarily to higher deferred revenue balances from MAGIC and
other acquisitions. Additionally, for the first three months of 1999, a non-
cash charge of $3.0 million was taken as compensation expense to reflect the
value of certain stock options held by our senior management.
In 1998, net cash provided by operations increased $20.1 million or
159.3% from $12.6 million to $32.7 million. The increase was due to an increase
in our net loss of $19.5 million as a result of higher interest expenses
associated with financing the acquisition of MAGIC, adjusted for a gain on the
sale of assets of $2.2 million, an increase of $12.8 million of depreciation
and amortization, a non-cash charge of $12.7 million related to impaired assets
and a decrease in working capital items of $9.7 million relating primarily to
higher deferred revenue balances from MAGIC and other acquisitions.
Additionally, in 1998, a non-cash charge of $3.4 million was taken as
compensation expense to reflect the value of certain stock options held by our
senior management.
Cash flows from investing activities. Net cash used in investing
activities decreased $23.8 million from $27.1 million to $3.3 million for the
first three months of 1999. The decrease is primarily due to cash that we used
for acquisitions during the first quarter of 1998.
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In 1998, net cash used in investing activities increased $325.0 million
from $33.3 million to $358.3 million. The increase is primarily due to cash
that we used for the acquisitions that we completed in 1998, net of acquired
working capital, offset by proceeds of $4.3 million from the sale of publishing
properties in 1998, and an increase of $1.9 million in our capital
expenditures.
Cash flows from financing activities. Net cash provided by financing
activities decreased $30.7 million from a source of $22.8 million for the first
three months of 1998 to a use of $7.9 million for the first three months of
1999. The decrease is due primarily net borrowings during the first quarter of
1998 used to finance acquisitions partially offset with repayments during the
first quarter of 1999.
In 1998, net cash provided by financing activities increased $307.4
million from $25.2 million to $332.6 million. The increase is due primarily to
the refinancing of our credit facility in April 1998 and August 1998
(consisting of $250.0 million of senior term loans and a $60.0 million
revolving credit facility replacing outstanding senior term and revolver loans
of $187.0 million), issuance of $150.0 million of our 9 1/4% Senior
Subordinated Notes due 2008, and the sale of additional shares of our common
stock for $71.0 million to our existing stockholders to finance the acquisition
that we completed in 1998.
Capital expenditures. Capital expenditures decreased $0.4 million from
$1.2 million for the first three months of 1998 to $0.8 million for the first
three months of 1999. Capital expenditures increased $1.9 million from $2.3
million to $4.2 million in 1998. The increase was due primarily to upgrades and
expansion of certain of Advanstar's computer networks and servers as well as
expenditures for additional exposition wall and lighting systems. Annual
capital expenditures have historically included approximately $1.5 million for
routine replacement or maintenance level requirements primarily for
expenditures related to our desktop computers and management information
systems. Capital expenditures have been financed by our cash flows from
operations. We anticipate our capital expenditures will increase from 1998
levels to approximately $5.0 million to $5.5 million in 1999 as a result of our
recent acquisition activity and the resultant increase in the size of the
Company's overall business and information system requirements. Expenditures
include additions for desktop replacement programs, various software upgrades
and enhancements, and the expansion of our communication networks and systems.
Capital expenditures after 1999 are expected to drop back to levels of
approximately $4.0 million to $4.5 million annually. Management further
believes that our operating cash flows will be sufficient to fund anticipated
levels of capital expenditures.
Management expects our primary source of liquidity will be cash flow from
operations. We also have a $60.0 million revolving credit line under its credit
facility available for funding capital expenditures, working capital needs,
acquisitions or for other general corporate purposes. As of March 31, 1999, we
have approximately $38.0 million of availability under the revolving credit
line. We generally operate with negative working capital, excluding cash and
current maturities of long-term debt, due to the impact of deferred revenue
from trade shows, which is billed and collected as deposits up to one year
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in advance of the respective trade show. Consequently, our existing operations
are expected to maintain very low or negative working capital balances,
excluding cash and current maturities of long-term debt. Management believes
that we have sufficient capital resources for ongoing operating requirements.
For our long-term capital requirements beyond December 31, 2000, we will
continue to rely on operating cash flows and believe that we will be able to
access to capital markets. We make no assurance that we will have access to
these markets on terms favorable to us or at all.
Interest payments on our 9 1/4% Senior Subordinated Notes due 2008 and
interest and principal payments under our credit facility will represent
significant liquidity requirements for us. Our credit facility includes both
term loans and a revolving credit facility. The senior term debt under our
credit facility consists of two tranches, $100.0 million of tranche A term
loans amortizing over 5.5 years and maturing October 31, 2003 and $150.0
million of tranche B term loans with modest amortization over the initial
5.5 years of its term maturing with balloon payments in 2004 and 2005. The
Chase Manhattan Bank, as administrative agent, leads our lenders under the
tranche A term loans, which include BankBoston, N.A., Dresdner Bank AG, Fleet
National Bank, Heller Financial and First Source Financial LLP. Our lenders
under the tranche B term loans also include several other institutional funds.
After giving effect to the use of proceeds from the offerings, as of March 31,
1999, we would have approximately $153.5 million outstanding under our term
loans and approximately $22.0 million outstanding under our revolving credit
loans. See "Description of Certain Indebtedness" included elsewhere in this
prospectus for a description of how our indebtedness under the term loans
matures. The $60.0 million revolving credit facility matures on October 31,
2003. The interest rates under our revolving credit facility fluctuate and
significant increases in LIBOR could adversely impact our liquidity. To
mitigate such risk, we have capped our interest rate exposure by fixing
interest rates on approximately $225.0 million of its total long-term debt by
the issuance of its 9 1/4% Senior Subordinated Notes due 2008 and the purchase
of interest rate cap agreements ranging from 8.0% to 8.5%.
We are currently engaged in discussions with our lenders under the credit
facility to refinance our indebtedness. We believe that we may obtain more
favorable interest rates and modifications to other terms under our credit
facility as a result.
Management believes that cash flow from operations and borrowings under
the revolving credit facility will provide adequate funds for our working
capital needs, planned capital expenditures, debt service obligations
(including our 9 1/4% Senior Subordinated Notes due 2008) and other needs.
Management believes such liquidity also will enable us to make selective
acquisitions to the extent of available free cash flow and remaining
availability under our revolving credit facility. There can be no assurance
that our business will generate sufficient revenue growth, or that future
borrowings will be available to enable us to service our indebtedness and, or
to fund our other liquidity needs. See "Risk Factors" included elsewhere in the
prospectus.
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Year 2000
We have conducted a review of our computer systems and software
infrastructure to identify risks related to processing Year 2000 information,
and have begun implementing our plan to correct any failures to be Year 2000
compliant. We believe that the implementation will be completed by September
1999 and that the total cost to implement the plan should be no more than $4.3
million, of which approximately $1.1 million had been incurred as of March 31,
1999. Because most of these costs relate to the purchase of capital equipment,
most of these costs will be capitalized. Management believes that, with
modifications or upgrades to existing software, Year 2000 compliance will not
pose significant operational issues. We have identified significant service
providers, vendors and suppliers that we believe will be critical to our
business operations after December 31, 1999. We are conducting a review of the
Year 2000 compliance of these service providers, vendors and suppliers. The
outcome of our Year 2000 readiness review depends on a number of risks and
uncertainties, some of which are beyond our control. Based on our review and
assessment to date, management does not believe that any Year 2000 issues will
have a material adverse effect on our business, financial condition or results
of operations. If we are not able to resolve any unforeseen Year 2000 issues,
there could be a delay in providing services to new subscribers of our
publications and in our trade show operations, such as invoicing exhibitors. If
our services were delayed, we would continue to mail our publications to our
subscribers as of December 31, 1999 and manually invoice exhibitors at our
trade shows until we could take remedial action. We do not believe a delay
caused by failure to resolve unforeseen Year 2000 issues would have a material
impact on our revenue.
Market Risk
We are exposed to changes in foreign currency exchange rates and interest
rates. Market risk is the potential loss arising from adverse changes in market
rates and prices, such as foreign currency exchange and interest rates. We do
not enter into derivatives or other financial instruments for trading or
speculative purposes.
Interest. We rely significantly on long-term variable and fixed-rate debt
in its capital structure. We use interest rate caps to manage a portion of the
floating-rate balance of its interest sensitive liabilities. Our outstanding
interest-sensitive financial instruments as of December 31, 1998, are reflected
in note 5 of the notes accompanying the consolidated financial statements
included elsewhere in this prospectus. In addition, we have $150.0 million,
face value, of 9 1/4% Senior Subordinated Notes due 2008.
At December 31, 1998, the carrying value of our fixed-rate long-term debt
approximated its fair value. Market risk related to our fixed-rate debt is
estimated as the potential increase in fair value resulting from a hypothetical
one-half percent decrease in interest rates at which our debt bore interest as
of December 31, 1998, and amounts to approximately $4.9 million. Market risk
related to our variable-rate debt is estimated as the potential decrease in
pre-tax earnings resulting from a hypothetical one-half percent increase in
interest rates, assuming we continue to make scheduled principal and interest
payments
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during 1999. If interest rates rise immediately by one-half percent, our pre-
tax earnings will decrease by $1.4 million in 1999.
Currencies. We maintain assets and operations in Europe, South America
and Asia and are exposed to fluctuations in the British Pound Sterling, the
Euro and the Brazilian Real. As a result, exposure to gains and losses in these
currencies exists. Our subsidiaries and affiliates also purchase and sell
products and services in various currencies. As a result, we may be exposed to
cost increases relative to the local currencies in the markets in which it
sells. For 1998, a hypothetical 10% strengthening of the U.S. dollar relative
to the currencies of foreign countries in which we operate would not have had a
material effect on our results of operations.
Seasonality and Fluctuations in Quarterly Results of Operations
On a relative basis, our revenue reaches its highest levels during the
first and third quarters of the year largely due to the timing of the MAGIC
trade shows and our other large trade shows and conferences. Because trade
shows and conferences revenue is recognized when a particular event is held, we
may experience fluctuations in quarterly revenue based on the movement of
annual trade show dates from one quarter to another.
The following table sets forth unaudited pro forma quarterly revenue for
the quarters in the year ended December 31, 1998. The unaudited pro forma
revenue for the year ended December 31, 1998 include the historical operations
of Advanstar and gives effect to the acquisitions and two divestitures
completed in 1998 as if they occurred on January 1, 1998. See "Unaudited Pro
Forma Combined Financial Information." Our operating results for any quarter do
not necessarily indicate what our operating results for any future period may
be.
<TABLE>
<CAPTION>
1998 Quarters Ended
------------------------------------
March 31 June 30 Sept. 30 Dec. 31
-------- ------- -------- -------
(in thousands)
<S> <C> <C> <C> <C>
Pro forma revenue....................... $92,364 $72,139 $79,369 $62,794
Percent of total annual pro forma
revenue................................ 30.1% 23.5% 25.9% 20.5%
</TABLE>
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BUSINESS
The Company
We are a worldwide provider of integrated, business-to-business marketing
communications solutions for targeted industry sectors, principally through
trade shows and conferences and through controlled circulation trade, business
and professional magazines. We also provide a broad range of marketing services
products, including classified advertising, direct mail services, reprints,
database marketing, directories, guides and reference books. We operate over 70
web sites which provide an interactive component to our core products. We
currently own and manage 81 trade shows, most of which we believe are the
largest events in their respective national or regional markets, and 26
conferences for business, professional and consumer audiences worldwide. We
currently publish 71 specialized business magazines and professional journals
and 39 directories and other publications. Of our 61 magazines and journals for
which competitive data is available, we believe that over 70% rank either first
or second in their respective markets. Since May 31, 1996, we have completed 24
acquisitions and joint ventures. Our total revenue has increased from
approximately $151.0 million in 1996 to $306.7 million in 1998 on a pro forma
basis.
We serve a number of industry sectors in North America, Latin America,
Europe, Asia and Australia. We market our broad range of products and services
in certain niche markets of the following industry clusters in which we believe
we have developed scale and expertise:
. Retail, Hospitality & Fashion,
. Healthcare, Science & Pharmaceuticals,
. Information Technology & Communications and
. Manufacturing & Processing.
Within each of these clusters, we operate trade shows and publications
targeted at businesses or professionals in specific or niche market segments.
We believe our industry-focused cluster structure, rather than a product-
focused approach, allows us to cross-sell our products and services effectively
and to capture a larger share of our customers' marketing budgets. In each of
our niche markets, many of the same customers advertise in our publications,
exhibit at our trade shows and use our marketing services to reach their
buyers. We have rapidly expanded our trade show, conference and publication
products within each cluster through new product introductions and strategic
acquisitions. This expansion further enhances our competitive position in each
cluster and maximizes our existing marketing and customer service
infrastructure and industry expertise.
Trade shows and conferences. In 1998, we held 107 events. An event is a
stand-alone trade show or conference. We believe that most of our events are
the largest in their respective national or regional markets. For example, in
our Retail, Hospitality & Fashion cluster, we produce MAGIC, the world's
largest trade show dedicated to the men's apparel
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industry; WWDMAGIC, the second largest women's apparel trade show in the United
States; and MAGICKids, a children's apparel trade show. In addition, we produce
Artexpo New York, the largest mid-market art trade show in the United States;
IBS New York, the largest exhibition and educational event on the East Coast
for the beauty salon market; and Dealernews International Powersports Dealer
Expo, the largest U.S. motorcycle accessories aftermarket trade show. Our
largest trade shows and conferences in other clusters include Telexpo, the
largest telecommunications trade show in Latin America, and Incoming Call
Center Management Conference & Exhibition, the largest U.S. trade show and
conference for the call center market.
As is typical in the trade show industry, we rank our trade shows and
conferences against the trade shows of our competitors based on an internally
conducted analysis of net square feet of exhibition space. This data is
typically reported by exhibitors and published in the Tradeshow Week Data Book,
a publication that lists trade shows grouped by industrial classification
codes. We include both direct and indirect competitors in such comparisons.
Direct competitors are the trade shows within the same industrial
classification code and geographic region as our trade shows. Direct
competitors are also determined in some cases by the time of the year during
which a trade show is held. Indirect competitors are subjectively determined by
us on a case-by-case basis. These indirect competitors include (1) broad-based
trade shows that the we know from prior experience display, among other
products, products displayed at our trade shows and (2) trade shows identified
by our current exhibitors as other trade shows in which they participate. Many
of our trade shows have a commanding market presence. Some of our trade shows
have insignificant or no direct competition, such as IBS New York, Licensing
International, Dealernews International Powersports Dealer Expo and the TeleCon
shows.
Publications. In 1998, we published 110 publications. A publication is a
magazine, newsletter, directory or other publication. Our largest magazines
include Travel Agent, Video Store, Pharmaceutical Technology, Hotel & Motel
MANAGEMENT and CADALYST. Travel Agent is the second largest non-computer U.S.
trade magazine and the #1 trade periodical for the travel industry based on
advertising revenue in 1997, according to the June 15, 1998 edition of Crain's
Advertising Age.
We utilize the industry-standard method of number of advertising pages to
rank our publications against competitive publications. For purposes of these
rankings, we have defined our markets narrowly as the niche of businesses or
professionals at which a publication is exclusively or specifically targeted.
Except where otherwise specifically referenced, we have based the rankings of
our publications on the number of advertising pages in our publications
compared to their competitors as determined by Inquiry Management Systems Ltd.
or PERQ/HQI Research, a branch of VNU Business Information Services, Inc., each
an independent third party.
Marketing services. Within each industry-focused cluster, we offer our
customers classified advertising, direct mail services, reprints, database
marketing, directories, guides and reference books to support their business-
to-business marketing communications
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programs. Our marketing services, particularly our direct mail services and
directories, reinforce our efforts to cross-sell our events and publications
and, we believe, further our goal of providing our customers "one-stop
shopping" for their business-to-business marketing communications needs.
Internet. We operate over 70 web sites which provide an interactive
component of our core products. These web sites promote our trade shows,
conferences and publications as well as our marketing services. Over 80% of our
web sites either enable exhibitors and attendees to register on-line for our
trade shows and conferences or permit prospective readers to subscribe on-line
to our controlled circulation publications. In addition, many of our web sites
provide attendees of our trade shows and conferences and readers of our
publications the opportunity to receive additional product information through
links to our customers' web sites.
In 1998, after giving effect to the pro forma adjustments, we would have
generated total revenue of approximately $306.7 million and EBITDA of
approximately $72.8 million. Our pro forma EBITDA in 1998 includes a $3.4
million non-cash charge for stock option compensation. Our total pro forma
revenue was derived primarily from sale of exhibition space at trade shows and
from sales of advertising in our publications. In 1998, trade shows and
conferences represented approximately 45.5% of our total pro forma revenue and
approximately 54.1% of our total pro forma contribution, or gross profit before
general and administrative expenses and amortization. Publications accounted
for approximately 49.2% of our total pro forma revenue and approximately 38.8%
of our total pro forma contribution. Other revenue components, including direct
mail and database products and services, generated approximately 5.3% of our
total pro forma revenue and approximately 7.1% of our total pro forma
contribution. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
Operating Strategy
Advanstar's objective is to be the leading business-to-business marketing
communications company in the niche market segments which we choose to serve.
Our strong market position serves as a platform to launch new products and
services and to extend our existing products and services on a cost-effective
basis. To achieve our objective, we operate our businesses based on the
following strategies.
. Operate Leading Trade Shows and Publish Leading Magazines in
Attractive Niche Markets. We will continue to focus on owning and
managing businesses that are the leading sources of information
for businesses and professionals in specific niches. We believe
that leading publications or trade shows serve as unique forums
for business-to-business communication and provide substantial
value to industry participants resulting in an attractive, high
margin business for Advanstar. Niche markets, which are narrowly
defined to include markets such as call centers or power sports,
are often attractive publishing and trade show opportunities
because of the difficulty in
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reaching industry leaders through general interest publications or
at general expositions. We believe over 70% of our magazines and
most of our trade shows are ranked either first or second in their
respective niche markets. We intend to continue to focus on
operating leading properties and may from time to time divest
properties that do not meet this standard.
. Maximize Our Share of Our Customers' Marketing Expenditures. We
will continue to employ our integrated, solution-driven marketing
approach to create cross-selling opportunities across existing and
newly-launched or acquired products and services. We believe our
industry-focused cluster structure enables us to better serve our
customers' business-to-business marketing communications needs. In
addition, we believe this approach facilitates the development of
deeper relationships with our customers. We offer our customers a
range of communications methods to attain their specific business-
to-business marketing goals. For example, our customers can choose
to benefit from face-to-face meetings at trade shows and
conferences, achieve cost effective advertising through controlled
circulation trade publications and seek to diversify and expand
revenues through customized marketing services, including Internet
links from our web sites.
. Continue to Realize Economies of Scale Through Our Centralized
Administrative and Production Facilities. We believe that our
organizational structure creates opportunities (1) to launch new
events and publications by building upon our existing products and
services, (2) to generate attractive margins through centralized
functional cost management and (3) to integrate and improve the
profitability of acquired events and titles. To enhance operating
flexibility and to deliver trade show and conference services cost
effectively, we established a centrally-managed event operations
structure in both the U.S. and Europe in 1997. In addition, we
have an efficient and centralized publishing infrastructure in
both the United States and Europe. We focus on continually
improving our systems and processes to provide effective, low-cost
operations in circulation, fulfillment, production and print and
paper vendor management. Centralized support also exists in
finance and accounting, information technology and communications,
human resources and strategic planning.
. Attract and Retain Superior Management. We will continue to
reinforce our management team with experienced, talented
individuals. Our senior managers have on average over 15 years of
industry experience and an established record of growing revenue
and EBITDA, developing new products, penetrating new markets and
integrating acquisitions. Advanstar is led by Robert L. Krakoff,
our Chairman and Chief Executive Officer, and James M. Alic, our
Vice Chairman. Messrs. Krakoff and Alic joined Advanstar in July
1996. Prior to joining Advanstar, Mr. Krakoff was Chief Executive
Officer of Reed Publishing USA and a director of its parent
company, Reed-Elsevier plc. During Mr. Krakoff's 23-year tenure,
he
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managed a trade show business, which became one of the largest
worldwide event management companies. Prior to joining Advanstar,
Mr. Alic served as Vice President and Controller of IBM
Corporation, and prior thereto was the Chairman of Reed Exhibition
Companies. Messrs. Krakoff and Alic and other members of
Advanstar's management collectively, subject to vesting, own or
have options to acquire approximately 8.9%, giving effect to the
offerings, of Advanstar's common stock on a fully-diluted basis.
Growth Strategy
Building upon our operating strategies, we continue to pursue the
following growth strategies to expand our business.
. Identify and Consummate Strategic Acquisitions. We intend to
expand further in our existing industry sectors through strategic
acquisitions and joint ventures designed to maintain and achieve
market leading positions in particular niche markets. In addition,
building upon our existing international infrastructure, we intend
to make strategic acquisitions internationally and enter into
joint ventures with local operating partners. We believe that we
can enhance the value of acquired businesses by (1) integrating
acquisitions and joint ventures into our efficient infrastructure,
(2) applying our industry experience and (3) cross-selling new
products and services. Since May 31, 1996, we have completed 24
acquisitions and joint ventures.
. Launch New Products and Services Within Existing Clusters. We will
continue to introduce new products and services to extend our
market position and add fill-in products within our existing
industry clusters. Also, we plan to expand internationally by
introducing country-specific versions of our trade shows,
conferences and publications. We believe that we can enhance our
position in international markets by leveraging our widely
recognized brands, our experience in international operations and
our existing customers' demand for increased global marketing. We
have a successful track record of developing new products and
services within our existing industry clusters. In 1998, we
launched eight expositions and conferences and four magazines in
existing industry sectors to supplement our existing products and
services. For example, in our call center sector, we have launched
two trade shows since May 31, 1996, and we currently plan to
launch two additional trade shows and one publication in 1999.
. Enter Attractive New Industry Sectors. We will selectively enter
new industry sectors in which we believe we can establish a strong
market position and operate profitably. In identifying potential
new sectors, we consider the size of the market, potential growth
rates and the competitive environment. For example, through the
acquisition of MAGIC, we became a leading participant in the U.S.
men's apparel business-to-business market and increased revenue
and improved margins by applying our extensive trade show
experience.
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Industry Overview
Market-focused, business-to-business communications products and services
are designed to enable companies to:
. increase sales;
. build brand loyalty;
. market new products and services to select target audiences; and
. learn about recent industry developments.
According to the October 1998 Veronis, Suhler & Associates Communications
Industry Forecast, business-to-business communications was the fifth fastest
growing segment of the overall communications industry for the period from 1992
to 1997, with total spending growing at a compound annual growth rate, or
otherwise referred to as CAGR, of 8.0% during that period. Total spending in
business-to-business communications was $17.1 billion in 1997, according to the
Veronis, Suhler & Associates report. The report forecasts a 10.1% CAGR for
trade shows and exhibitions from 1997 to 2002, and a 8.0% CAGR for business
magazines (which includes both general circulation magazines and controlled
circulation magazines) over the same period.
The business-to-business communications industry remains highly
fragmented. In the United States and Canada, there are approximately 4,500
trade shows each year. Of these trade shows, approximately 55% are operated by
media companies and independent event operators, and the remainder are operated
by trade associations. According to Tradeshow Week Data Book '99, the top ten
trade show producers will operate an aggregate of 629 trade shows in 1999,
approximately 14% of the total number of trade shows expected to be held that
year. In addition, the business-to-business communications industry currently
includes approximately 4,800 trade magazine publishing companies that publish
approximately 9,400 titles.
Trade shows and conferences. A trade show or conference provides an
opportunity for industry participants to conduct direct selling efforts,
transact business and receive product information in the form of exhibits,
conferences, workshops and other face-to-face forums. Trade show attendees
include executives, manufacturers and developers, sales and marketing
personnel, industry analysts, middle-level managers and other industry
professionals. According to the Veronis, Suhler & Associates report, spending
on exhibition space in trade shows and conferences amounted to $7.2 billion in
1997, a 10.8% increase from 1996. Trade show attendance grew by 6.4% in 1997.
We believe that the increase in trade show spending and attendance
reflects a growing awareness among companies of the numerous benefits of trade
shows. As new products and services proliferate, both suppliers and their
customers need efficient forums to interact and transact business with one
another. For attendees, trade shows and conferences provide the opportunity to
survey market trends, network with industry professionals and create
relationships with new vendors. For exhibitors, trade shows and conferences
represent
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cost effective means to position their company, products and services within
the industry, introduce new products and cultivate relationships with new and
existing customers. According to The Center for Exhibition Industry Research,
in 1996, the cost of making a sales call at a trade show was 39% of the cost of
making a field sales call. Moreover, the percentage of time spent actually
selling in a given day equaled 67% at a trade show versus 32% on a field call.
In addition, trade shows and conferences enable exhibitors to measure directly
the return on their marketing investment based on actual sales and sales leads
gathered at the event.
Publications. Trade publications are generally published monthly and
provide information about a specific industry or market segment within an
industry. Business magazines have become one of the most dynamic advertising
media in recent years, with advertising revenues expanding at a 9.5% CAGR for
the period between 1994-1997, according to the Veronis, Suhler & Associates
report. In general, trade publications are circulated free-of-charge to readers
and generate revenues primarily from the sale of advertising.
We believe that the increase in the advertising revenues of trade
publications reflects a growing awareness among companies of the numerous
benefits of advertising in specialized or controlled circulation publications.
For readers, trade publications provide relevant and up-to-date industry-
specific information. For advertisers, trade publications generally provide
highly focused and targeted audiences of qualified, interested readers and a
cost-effective means to disseminate information about their products.
Marketing services. In recent years, many companies have sought
complementary ways to reach their customers in addition to trade shows and
trade publications. We believe that these companies are increasingly utilizing
highly targeted marketing services such as classified advertising, direct mail,
list rentals, reprints, database marketing, directories, guides and reference
books.
Internet. The rapidly growing number of users of the World Wide Web makes
the Internet an increasingly effective advertising and brand-building vehicle.
The Internet enables marketers to deliver product information and advertising
to a targeted audience, track user behavior and process transactions on-line.
Products and Services
We provide integrated solutions to our customers' business-to-business
marketing communications needs. Within each cluster, we provide a comprehensive
set of industry-focused marketing communications products, services and
support, which include trade shows, conferences, publications and marketing
services, to facilitate our customers' business-to-business marketing and
communications programs. Our comprehensive set of trade shows, conferences,
publications and marketing services positions Advanstar to better serve our
customers' business-to-business marketing communications needs and to capture a
larger share of their marketing expenditures.
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Trade Shows and Conferences. Our trade shows and conferences are an
essential part of our overall portfolio of products and services. In 1998, we
held 107 events. Our trade shows typically include an extensive conference
program, which provides a forum for the exchange and dissemination of
information relevant to a particular event niche. Our conferences typically
have one or more keynote speakers drawn from industry leaders.
The sales cycle for a future trade show typically begins shortly before
the current show, with pricing, preliminary floor plans and exhibitor promotion
mailed in advance of the current show so that selling for the future show can
begin at the current show. Typically, this "upfront" selling includes floor
space reservations with exhibitors executing a contract and making deposits for
the future show. At many of our trade shows, a commitment for a large portion
of exhibit space for the next event is reserved by the end of the current
event. For example, at each of the MAGIC, Dealernews and Call Center trade
shows, over 70% of the exhibit space for the future show is reserved by the end
of the current show, and a portion of the fees is collected shortly thereafter.
The sales cycle continues with selling to new exhibitors and collecting the
balance of payments due. In general, we require exhibitor payments in full
prior to a trade show as a condition to participation.
In addition to the sale of exhibit space, we market to exhibitors a wide
range of promotional opportunities to raise their visibility at an event,
including directory and preview advertising, banners, sponsorships of related
functions and a wide variety of other products or services. We also produce
related conferences and workshops, which play a crucial strategic role in trade
show development. Conferences, workshops and other ancillary forums all
stimulate interest in the industry and drive attendance at the trade show.
While show attendance is typically free for qualified attendees, participation
in conferences at these shows can be a significant revenue source.
Event promotion is undertaken through direct mail, using both in-house,
exhibitor-provided and rented lists of pre-qualified industry participants. In
those industry sectors for which we also have complementary publications, our
publications play a key role in event promotion by providing lists from
circulation files and editorial coverage for the upcoming show. Other industry
magazines may also be involved, as the goal of any event is to represent the
entire industry or market. The "show issue" of an industry magazine for a
related event is often the biggest issue of the year, as the advertisers want
to reinforce their show presence.
In operating trade shows and conferences, we function in a capacity
similar to a general contractor. Through our central trade show and conference
operations, we select and manage venues, hotels, and vendors for decorating,
registration, travel and housing, audio-visual services and other services. In
many cases, venue and hotel reservations are made several years in advance,
particularly for primary markets such as New York, Chicago, Las Vegas, Los
Angeles and San Francisco. While the production of a show may involve hundreds
of workers, we employ very few of the workers on-site. We therefore are able to
have increased control over our overhead and permanent staffing costs.
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Publications. Our publications generally are controlled circulation,
business-to-business trade magazines which are distributed free-of-charge to
qualified recipients. We build readership and maintain the quality and quantity
of our circulation based on delivering high quality, professional coverage of
relevant industry information. Because we offer our advertisers access to a
highly targeted, industry-specific subscriber base, our advertisers are willing
to pay higher rates per reader than they would typically pay in the case of
general circulation magazines.
Recipients of our publications are targeted through market research
designed to determine the market coverage and purchasing authority desired by
prospective advertisers. Based on existing and acquired mail lists, the
targeted recipient is then solicited through promotions offering free
subscriptions to the relevant publications. High-quality circulation is
achieved when a high percentage of the circulation list is recently qualified
(within one or two years) and the publication is delivered at the direct
request of the recipient. Recipients are qualified and re-qualified on a
regular basis through direct mail, qualification cards included in the
publication and, increasingly, the Internet. We attract recipients and improve
the effectiveness of our advertising by maintaining and continuously improving
the quality of the editorial content of our publications.
Our advertising sales and editorial functions are dispersed throughout
North America, Asia, Europe and Brazil advertising sales are predominantly
conducted by our dedicated sales force. Editorial content for our publications
is primarily staff-written, with some editorial contribution by freelance
writers and industry or professional participants in selected markets.
Our advertising materials and editorial content are integrated in our
Duluth, Minnesota and Chester, United Kingdom production facilities, where
layout, ad insertion and output to film is completed. All printing is
outsourced to vendors, but printing contracts are negotiated and managed
centrally. We purchase paper centrally through a relationship with one of the
industry's largest paper brokers. This broker ships paper directly from the
mills to the printers at our request. We maintain our own central U.S.
fulfillment operations in Duluth to generate mailing labels and mailing
instructions for the printers. Our production workforce is highly experienced
and is based in relatively low-cost locations in Duluth and Chester.
Marketing services. As a value-added supplement to our trade shows,
conferences and publications, we offer our customers a variety of marketing
services to support their business-to-business marketing communications
programs. We believe that our marketing services highlight our commitment to be
a "one stop" provider of business-to-business marketing communications
solutions. Within each cluster, we provide classified advertising, direct mail
services, reprints, database marketing, directories, guides and reference
books. Our marketing services, particularly our direct mail services, support
our efforts to cross-sell events and publications and customize our integrated
products and services, thus enabling us to capture a larger share of our
customers' marketing budgets. Our marketing services
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business enjoys attractive operating margins because of the low incremental
product cost of reusing our existing data content and utilizing our centralized
telephone sales approach.
Internet. In addition to our trade shows, conferences, publications and
marketing services, we are increasingly using the World Wide Web to deliver our
integrated business-to-business marketing communications solutions to our
customers. We operate a centralized web site that serves as a portal to our
event- and publication-related web sites. We also believe that the Internet can
be utilized on a customized basis to serve our customers' business-to-business
marketing communication needs more efficiently and effectively by offering
information 24 hours a day, seven days a week. For example, we are completing
development on a web site, Travel Agent University, to serve as an on-line
information and education resource for travel agents.
Our Markets
Our comprehensive business-to-business marketing communications solutions
for our four industry-related clusters--Retail, Hospitality & Fashion,
Healthcare, Science & Pharmaceuticals, Information Technology & Communications
and Manufacturing & Processing--and our Market Development cluster are
set forth below.
Retail, Hospitality & Fashion
Our Retail, Hospitality & Fashion cluster serves the fashion, art,
beauty, travel and hospitality, entertainment and marketing, and motor vehicle
industry sectors. In 1998, we delivered our business-to-business marketing
communications solutions to our customers in these industry sectors through 34
trade shows, four conferences, 15 magazines, 13 directories and other
publications, 46 marketing services products and 19 related web sites. Our
trade shows and publications include:
^ MAGIC (the world's largest trade show dedicated to the men's
apparel industry), WWDMAGIC (the second largest trade show for the
women's apparel industry in the United States) and MAGICKids (a
trade show for the children's apparel industry);
^ Artexpo New York (the largest mid-market art trade show in the
United States);
^ IBS New York (the largest trade show and educational event on the
East Coast for the beauty salon market; it has no significant
direct competitors) and American Salon (the #2 publication for the
professional beauty and hair care industry);
^ Travel Agent (the second largest non-computer U.S. trade magazine
and #1 trade periodical for the travel industry based on
advertising revenue in 1997, according to the June 15, 1998
edition of Crain's Advertising Age) and Hotel & Motel MANAGEMENT
(the #2 publication for the hospitality management market);
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. Licensing International (the largest trade show for the
merchandise licensing industry; it has no significant direct
competitors); and
. Dealernews International Powersports Dealer Expo (the largest
aftermarket accessories trade shows in the United States targeted
at motorcycle dealers; it has no significant direct competitors)
and Dealernews (the #1 magazine targeted at retailers in the
powersports market--motorcycles, snowmobiles and personal
watercraft).
The following table sets forth pro forma information relating to trade
shows, conferences and publications in our Retail, Hospitality & Fashion
cluster in 1998.
<TABLE>
<CAPTION>
Events Magazines
----------------- ----------------------------------
Number of our
Net square magazines
footage Advertising ranked
Sector Number (1) Number pages #1 or #2 (2)(3)
- ---------------------------- ------ ---------- ------ ----------- ---------------
<S> <C> <C> <C> <C> <C>
Fashion..................... 7 1,729,000 1 281 1 of 1
Art......................... 3 186,000 1 703 0 of 1
Beauty...................... 9 455,000 2 906 1 of 2
Travel/Hospitality.......... 3 38,000 4 7,165 3 of 3
Entertainment/Marketing..... 5 280,000 5 2,235 3 of 4
Motor Vehicle............... 11 666,000 2 1,278 2 of 2
--- --------- --- ------ --------
Total..................... 38 3,354,000 15 12,568 10 of 13
</TABLE>
- --------
(1) Rounded to the nearest thousand.
(2) Of those for which data is available. For example, in the
Entertainment/Marketing sector, there is competitive data available for
four of our five publications and three of those four are either #1 or #2
in the market segment served. Data is generally available only for U.S. and
major European markets.
(3) For purposes of these rankings, we have defined our markets narrowly as the
niche of businesses or professionals at which a publication is exclusively
or specifically targeted. Except where otherwise specifically referenced,
we have based the rankings of our publications on the number of advertising
pages determined by Inquiry Management Systems Ltd., an independent third
party. While we believe our market definitions are appropriate, no
independent source has verified them.
We have identified numerous opportunities to grow our Retail, Hospitality
& Fashion cluster by using our trade shows, conferences and publications as
platforms to expand geographically and launch related products and services. We
expect to launch four new events and two new publications in 1999. In addition,
we believe that our MAGIC trade shows create opportunities to expand our strong
market position into new segments of the fashion sector and, as in the case of
MAGICEast, into new geographic regions. Similarly, our publications for the
travel and hospitality sector, including Travel Agent, provide a strong
foundation to launch related trade shows and services as well as to develop
custom-publishing products and establish a stronger Internet presence, as with
Travel Agent University.
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Healthcare, Science & Pharmaceuticals
Our Healthcare, Science & Pharmaceuticals cluster serves the healthcare,
science and pharmaceuticals industry sectors. In 1998, we delivered our
business-to-business marketing communications solutions to our customers in
these industry sectors through six trade shows, nine conferences, 23 magazines,
three directories and other publications, 58 marketing services products and 20
related web sites. We serve the healthcare sector in areas such as geriatrics,
dermatology, ophthalmology and veterinary medicine, the science sector in areas
such as spectroscopy and liquid and gas chromatography and the pharmaceutical
sector in areas such as research and development, manufacturing, packaging and
marketing. Our trade shows, conferences and publications include:
. Abilities Expo (the largest consumer-oriented events targeting
individuals with disabilities; they have no significant direct
competitors);
. Geriatrics (the #1 magazine for the geriatrics segment of the
primary care market), Formulary (the #1 magazine for the drug
selection market) and dvm THE NEWSMAGAZINE OF VETERINARY MEDICINE
(the #1 magazine for veterinarians); and
. Pharmaceutical Technology (the #1 publication targeted at
pharmaceutical scientists, engineers and operation managers) and
PHARMACEUTICAL EXECUTIVE (the #1 magazine for pharmaceutical
company product managers and marketing professionals).
The following table sets forth pro forma information relating to our
trade shows, conferences and publications in our Healthcare, Science &
Pharmaceuticals cluster in 1998:
<TABLE>
<CAPTION>
Events Magazines
------------------ --------------------------------
Number of
our magazines
ranked
Net square Advertising #1 or #2
Sector Number footage (1) Number pages (2)(3)
- --------------------------- ------ ----------- ------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Healthcare................. 5 131,000 11 4,080 5 of 9
Science.................... 3 N/A(4) 5 1,432 3 of 3
Pharmaceuticals............ 7 40,000(4) 7 3,262 5 of 6
--- ------- --- ----- --------
Total.................... 15 171,000 23 8,774 13 of 18
</TABLE>
- --------
(1) Rounded to the nearest thousand.
(2) Of those for which data is available. For example, in the Healthcare
sector, there is competitive data available for nine of our
11 publications and five of those nine are either #1 or #2 in the market
segment served. Data is generally available only for U.S. and major
European markets.
(3) For purposes of these rankings, we have defined our markets narrowly as
the niche of businesses or professionals at which a publication is
exclusively or specifically targeted. Except where otherwise specifically
referenced and in the case of our nine healthcare publications, we have
based the rankings of our publications on the number of advertising pages
determined by Inquiry Management Systems Ltd., an independent third party.
In the case of our nine healthcare publications, we have based the
rankings of our publications on the number of advertising pages determined
by PERQ/HCI Research, a branch of VNU
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Business Information Services, Inc. and an independent third party. While we
believe our market definitions are appropriate, no independent source has
verified them.
(4) The three science events and six of the seven pharmaceutical events are
conferences. At a conference, there is no exhibition space.
Our publication portfolio for our Healthcare, Science & Pharmaceuticals
cluster positions us to expand geographically and launch related products as
well as demonstrates an opportunity to develop related trade shows,
conferences, sponsored projects and Internet services. We expect to launch
four new conferences in 1999. We have begun to leverage the success of
Pharmaceutical Technology, the #1 publication in its niche market segment,
through Pharmaceutical Technology Europe, Pharmaceutical Technology Asia and a
series of U.S. and European conferences. In addition to expanding our trade
shows and conferences, we plan to extend our publications to the Internet and
to expand special projects.
Moreover, as government regulation of marketing by pharmaceutical
companies becomes more permissive, product managers and marketing
professionals are increasingly targeting advertising and promotions directly
to consumers. According to Competitive Media Reporting, pharmaceutical
companies spent approximately $1.2 billion in 1998 on direct to consumer
marketing efforts. We believe this trend towards consumer advertising and
marketing presents another opportunity to serve our customers' needs for
education, research and information. We have launched DTC Times, a supplement
to PHARMACEUTICAL EXECUTIVE, to provide education, research and information
and, if demand warrants, we may launch a stand-alone publication.
Information Technology & Communications
Our Information Technology & Communications cluster serves the
information technology, telecommunications and call center and computer
telephony industry sectors. In 1998, we operated in these industry sectors
through 23 trade shows, 12 conferences, 16 magazines, four directories and
other publications, 31 marketing services products and 16 related web sites.
In the information technology sector, we are a highly targeted niche
exhibition organizer and publisher. The rapidly evolving, newly competitive
telecommunications sector is one of our most important and fastest growing
targeted markets. Through its global reach and rapid growth, our call center
and computer telephony sector serves as a primary example of our successful
market-focused expansion strategy. Our trade shows, conferences and
publications include:
. On Demand Digital Printing & Publishing Conference and Expo (the
second largest trade show and conference for the digital print and
publishing market) and CADALYST (the #2 publication targeted at
end users, managers and executives in the computer-aided design
and visualization market);
. the TeleCon shows (the largest trade shows in the United States
and Europe for the video conferencing and long distance learning
markets; they have no significant competitors);
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. Incoming Call Center Management Conference & Exhibition (the
largest U.S. trade show and conference for the call center market)
and Call Center Conference & Exposition. (a large U.S. trade show
and conference for the computer telephony market); and
. iEC, Internet and Electronic Commerce Conference and Exposition
(one of the largest U.S. trade shows and conferences serving the
rapidly growing market for electronic commerce through the
Internet, produced in partnership with The Gartner Group, Inc.).
The following table sets forth pro forma information relating to trade
shows, conferences and publications in our Information Technology and
Communications cluster in 1998:
<TABLE>
<CAPTION>
Events Magazines
------------------ ----------------------------------
Number of
our magazines
ranked
Net square Number Advertising #1 or #2
Sector Number footage (1) per year pages (2)(3)
- ------------------------ ------ ----------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Information Technology.. 7 231,000 5 2,137 2 of 3
Telecommunications...... 10 235,000(4) 7 2,451 6 of 6
Call Center/Computer
Technology............. 18 472,000 4 1,484 2 of 4
--- ------- --- ----- --------
Total................. 35 938,000 16 6,072 10 of 13
</TABLE>
- --------
(1) Rounded to the nearest thousand.
(2) Of those for which data is available. For example, in the Information
Technology sector, there is competitive data available for three of our
five publications and two of those three are either #1 or #2 in the market
segment served. Data is generally available only for U.S. and major
European markets.
(3) For purposes of these rankings, we have defined our markets narrowly as the
niche of businesses or professionals at which a publication is exclusively
or specifically targeted. Except where otherwise specifically referenced,
we have based the rankings of our publications on the number of advertising
pages determined by Inquiry Management Systems Ltd., an independent third
party. While we believe our market definitions are appropriate, no
independent source has verified them.
(4) Nine of the ten events are conferences. There is no exhibition space at a
conference.
Our Information Technology & Communications cluster serves some of our
fastest growing and most exciting industry sectors. We believe that we enjoy
many opportunities to grow this cluster by building on our trade shows to
expand geographically and into new market segments and to launch new products.
For example, we believe that our strong market position in the call center
industry provides an opportunity to extend and serve the customer relationship
management market segment. In addition, we believe that we are well positioned
to serve the needs of the rapidly growing digital media and professional
content creation market. We enhanced our position in this market in 1998 by
acquiring POST, a publication focused on film and video post-production,
repositioning PC Graphics & Video, formerly a monthly magazine covering PC
applications involving digital graphics and video, as Digital Content Creation,
a magazine targeted at computer software developers engaged in digital graphics
creation and video capture and manipulation, and launching Digital Content
Creation Expo, a directly related trade show and conference. In the
telecommunications sector, we are focused on international expansion and
increasing
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coverage of international markets as most major vendors in this sector operate
globally. We believe that our TeleCon trade shows will serve as a platform for
developing a more comprehensive set of business-to-business marketing
communications products and services, including publications, for the video
conferencing and long distance learning markets.
Manufacturing & Processing
Our Manufacturing & Processing cluster serves several niche market
segments of the applications technology industry sector and the OEM and
processing sector. In 1998, we delivered our business-to-business marketing
communications solutions to our customers in these industries through 13 trade
shows, one conference, ten magazines, eight directories and other publications,
28 marketing services products and 14 related web sites. In the application
technology sector, we focus on the automatic data capture, identification and
tracking systems (bar coding, magnetic stripe, smart cards, biometrics and the
associated systems) market and geospacial market (global positioning systems
and geographic information systems). For the OEM and processing sector, we
offer exhibitions and conferences and publications focused on equipment,
materials and intermediate products used in the manufacturing and processing of
a wide range of products. Our trade shows, conferences and publications
include:
. SCANTECH and SCANTECH EXPO Europe (the largest U.S. and European
trade show and conference, respectively, for the automatic data
capture, identification and tracking systems market) and AUTOMATIC
ID NEWS (the #2 publication in the U.S. and Europe for the
automatic data capture, identification and tracking systems
market); and
. Medical Device Technology Trade Show & Conference (a large
European trade show and conference for the medical device
equipment market).
The following table sets forth pro forma information relating to trade
shows, conferences and publications in our Manufacturing and Processing cluster
in 1998:
<TABLE>
<CAPTION>
Events Magazines
------------------ --------------------------------
Number of
our magazines
ranked
Net square Advertising #1 or #2
Sector Number footage (1) Number pages (2)(3)
- ---------------------------- ------ ----------- ------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Application Technology...... 4 162,000 7 1,352 5 of 6
OEM/Processing.............. 10 258,000 3 1,084 2 of 3
--- ------- --- ----- ------
Total..................... 14 420,000 10 2,436 7 of 9
</TABLE>
- --------
(1) Rounded to the nearest thousand.
(2) Of those for which data is available. For example, in the Application
Technology sector, there is competitive data available for six of our seven
publications and five of those six are either #1 or #2 in the market
segment served. Data is generally available only for U.S. and major
European markets.
(3) For purposes of these rankings, we have defined our markets narrowly as the
niche of businesses or professionals at which a publication is exclusively
or specifically targeted. Except where otherwise specifically referenced,
we have based the rankings of our publications on the number of advertising
pages
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<PAGE>
determined by Inquiry Management Systems Ltd., an independent third party.
While we believe our market definitions are appropriate, no independent
source has verified them.
Our Manufacturing & Processing cluster currently focuses on basic
products and technologies in the application technology and OEM and processing
sectors. We believe that these sectors will grow because of the introduction
of new technologies and applications. Therefore, we plan to grow the
Manufacturing & Processing cluster by leveraging our trade shows and
publications and widening our focus from basic products and technologies to
applications and systems. For example, our worldwide presence in the data
capture market, through our SCANTECH trade shows and conference and AUTOMATIC
I.D. NEWS publications, allows us to serve the data capture market and
positions us to provide business-to-business marketing communications
solutions to developers of integrated applications such as supply-chain
management. In addition, we believe that many of our products and services for
the OEM and processing sector, particularly Global Cosmetic Industry and
Medical Device TECHNOLOGY, focus on markets that are global and provide
natural opportunities for international expansion.
Market Development
We have grouped the balance of our products and services into a Market
Development cluster to focus on growing these products and services through
internal development or acquisitions. The Market Development cluster addresses
large and attractive market sectors in which we provide products and services
but do not have a significant presence. For example, prior to the acquisition
of MAGIC, our only participation in the fashion sector and specifically in the
apparel industry was in the intimate apparel market through the magazine BFiA
(body fashion/intimate apparel). We are in the process of integrating this
magazine and its related products into the Retail, Hospitality & Fashion
cluster. Our Market Development cluster serves the energy, landscape, pest
control, paper and building industry sectors. In 1999, we expect to launch one
new publication in our Market Development cluster. In 1998, we delivered our
business-to-business marketing communications solutions to our customers in
these industry sectors through five trade shows, seven magazines, 11
directories and other publications, 27 marketing services products and three
related web sites.
Competition
The market for our products and services is intensely competitive. In
the trade show and conference segment, we compete for trade show and
conference expenditures and attendees. In the publication segment, we compete
for advertising expenditures and readers. The competition is highly
fragmented, both by product offering and geography. On a global level, larger
international firms operate in many geographic markets and have broad product
offerings in trade shows, conferences, publications and marketing services. In
several industries, such as information technology and healthcare, we also
compete with large firms with a single-industry focus. Many of these large
international and single-industry firms are better capitalized than we are and
have substantially greater financial and other resources than we have.
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Within each particular industry sector, in addition to large firms, we
compete with a large number of small to medium-sized firms. While most small to
medium-sized firms operate in a single geographic market, in some cases, our
small to medium-size competitors operate in several geographic markets. In the
trade show and conference segment, we compete with trade associations and, in
several international markets, with exposition hall owners and operators. Trade
show and conference competition in each industry sector and geographic market
occurs on many levels. The venues and dates of trade shows drive competition.
Historically, successful shows have been held at desirable locations and on
desirable dates. Given the availability of alternative venues and the ability
to define events for particular market segments, the range of competition for
exhibitor dollars, sponsorships, attendees and conferees is extensive. In the
publications segment, we typically have between two and five direct competitors
which target the same industry sector and many indirect competitors which
define industry segments differently than we do and thus may be alternatives
for either readers or advertisers. The significance of the content to readers
and the efficiency of the target audience to advertisers determine the
competitive performance of a publication. Historically, publications which
deliver relevant and up-to-date industry-specific information attract audiences
to which business-to-business advertisers seek to disseminate information about
their products.
Intellectual Property
We have developed strong brand awareness for our principal products and
services. Accordingly, we consider our trademarks, service marks, copyrights,
trade secrets and similar intellectual property as important to our success,
and we rely on trademark, servicemark, copyright and trade secret laws, as well
as licensing and confidentiality agreements, to protect our intellectual
property rights. We generally register our material trademarks and service
marks in the United States and in other key countries in which these trademarks
and service marks are used. Effective trademark, service mark and trade secret
protection may not be available in every country in which our products and
services are available.
Employees
As of March 31, 1999, we had approximately 1,300 full-time equivalent
employees. None of our U.S. employees is represented by a labor union. We
consider our relationships with our employees to be good.
Facilities
Our finance and administration, circulation, fulfillment, production and
other necessary operational support facilities are located in Duluth,
Minnesota. We have executive marketing, sales and editorial offices in other
cities in the United States, including: Boston, Massachusetts; Chicago,
Illinois; Cleveland, Ohio; Coral Gables, Florida; Edison, New Jersey; Eugene,
Oregon; Honolulu, Hawaii; Los Angeles, California; Marrietta, Georgia; Milford,
Connecticut; New York, New York; Orlando, Florida; Santa Ana, California;
Sherman Oaks, California; Washington, District of Columbia; Waterloo, Iowa; and
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Woodland Hills, California. In addition, we have offices in Sao Paulo and Rio
de Janeiro, Brazil; Toronto, Canada; Hong Kong, China; Mexico City, Mexico; and
Chester and London, United Kingdom.
We generally lease our offices from third parties. In addition, we own
our operations offices in Duluth and Cleveland. We believe that our properties
are in good operating condition and that suitable additional or alternative
space will be available on commercially reasonable terms for future expansion.
Legal Proceedings
We are not a party to any legal proceedings other than ordinary course,
routine litigation which is not material to our business, financial condition
or results of operations.
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<PAGE>
MANAGEMENT
Directors, Executive Officers and Key Employees
The following table sets forth certain information as of March 31, 1999
regarding our directors, executive officers and key employees.
<TABLE>
<CAPTION>
Name Age Title
--------------------------------- --- ----------------------------------
<C> <C> <S>
Robert L. Krakoff................ 64 Chairman of the Board and Chief
Executive Officer
James M. Alic.................... 56 Vice Chairman and Director
Martin C. ("Skip") Farber........ 46 Executive Vice President--Business
Development
David W. Montgomery.............. 41 Vice President--Finance, Chief
Financial Officer and Secretary
Eric I. Lisman................... 42 Vice President and General Counsel
William J. Cooke................. 47 Executive Vice President
Alexander S. DeBarr.............. 39 Executive Vice President
Morris R. Levitt................. 58 Executive Vice President
Joseph Loggia.................... 40 President--MAGIC
Kenneth T. Berliner.............. 39 Director
Mitchell R. Cohen................ 35 Director
John M. Pasquesi................. 39 Director
</TABLE>
Executive Officers
Robert L. Krakoff has served as our Chairman and Chief Executive Officer
since he joined Advanstar in July 1996. From January 1993 to June 1996, he was
the Chairman and Chief Executive Officer of Reed Publishing USA, a division of
Reed Elsevier Inc. which included Cahners Publishing Company, a trade
publications business, and Reed Exhibition Companies, an exposition and
conference business. From January 1993 to June 1996, he was also a member of
the board of directors of Reed Elsevier PLC.
James M. Alic has served as our Vice Chairman since he joined Advanstar
in July 1996. From June 1995 to June 1996, he was Vice President and Controller
of IBM Corporation, a computer hardware and software manufacturer. From
September 1994 to May 1995, he was Chairman of Reed Exhibition Companies. From
August 1991 to August 1994, he was President of Reed Exhibitions North America.
Martin C. ("Skip") Farber has served as our Executive Vice President--
Business Development since he joined Advanstar in October 1996. From February
1993 to September 1996, he was Vice President for Business Development of Reed
Publishing USA., which included Cahners Publishing Company and Reed Exhibition
Companies. From July 1995 to September 1996, Mr. Farber also had responsibility
for Cahners Direct Marketing Services, a division of Reed Elsevier Inc.
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<PAGE>
David W. Montgomery has served as our Vice President--Finance and Chief
Financial Officer since January 1994. From July 1989 to December 1993, he was
our Director of Corporate Finance. In July 1992, he became our Secretary. From
January 1981 to June 1989, he was a practicing CPA with McGladrey & Pullen in
Minneapolis, St. Paul, Minnesota.
Eric I. Lisman has served as our Vice President and General Counsel since
September 1998. From November 1997 to August 1998, he engaged in a private
legal practice. From August 1996 to July 1997, he was a Senior Vice President
and General Counsel of Cahners Publishing Company. From July 1993 to July 1996,
he was a Vice President and General Counsel of Reed Publishing USA.
Key Employees
William J. Cooke has served as our Executive Vice President since June
1997 and is responsible for the OEM industry sector, the Market Development
cluster and marketing services. In addition, Mr. Cooke is responsible for
corporate marketing and corporate training. From July 1995 to May 1997, he was
Group Vice President of Advanstar. From July 1993 to June 1995, he was our
President of the Marketing Services Division. From 1988 until June 1993, Mr.
Cooke was Vice President of Strategic Planning and Marketing for Dun &
Bradstreet Corporation.
Alexander S. DeBarr has served as our Executive Vice President since June
1997 and is responsible for the art, beauty, travel and hospitality, motor
vehicle and application technology sectors. From February 1995 to May 1997, he
was a Group Vice President of Advanstar. Mr. DeBarr also served as a Group
Publisher of Advanstar from February 1993 until January 1995.
Morris R. Levitt joined us in March 1999 as our Executive Vice President
with responsibility for the Healthcare, Science & Pharmaceuticals cluster. From
October 1991 to February 1999, he headed the Advanced Technology Division of
PennWell Publishing Company, a publisher of trade publications and an operator
of trade shows.
Joseph Loggia has served as MAGIC's President and Chief Executive Officer
since May 1997, President from August 1996 and Chief Operating Officer
beginning in 1995. From January 1993 to August 1996, he was Chief Financial
Officer of MAGIC. Prior to joining MAGIC, Mr. Loggia, who is a certified public
accountant, was a manager at the accounting firm of Coopers & Lybrand
responsible for Fraud & Financial Investigations.
Directors
Kenneth T. Berliner has served as a director of Advanstar since May 1996,
from the date Hellman & Friedman Capital Partners acquired Advanstar. Since
1992, Mr. Berliner has been employed by Peter J. Solomon Company, an investment
banking firm. He is currently a Managing Director at Peter J. Solomon Company.
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<PAGE>
Mitchell R. Cohen has served as a director of Advanstar since May 1996,
from the date Hellman & Friedman Capital Partners acquired Advanstar. Since
January 1998, Mr. Cohen has been a Managing Director of Hellman & Friedman LLC,
a private equity investment firm. From January 1993 to December 1997, Mr. Cohen
was a General Partner of Hellman & Friedman. Mr. Cohen is also a director of
Western Wireless Corporation and MobileMedia Corporation.
John M. Pasquesi has served as a director of Advanstar since May 1996,
from the date Hellman & Friedman Capital Partners acquired Advanstar. Since
January 1998, Mr. Pasquesi has been a Managing Director of Hellman & Friedman
LLC, a private equity investment firm. From January 1989 to December 1997, Mr.
Pasquesi was a General Partner of Hellman & Friedman. Mr. Pasquesi is also a
director of The Covenant Group Inc.
Board of Directors
Additional Directors. We anticipate that the size of our Board of
Directors will be increased from five to seven directors, and that two
additional directors who are not affiliates or present or former employees of
Advanstar will be elected to our Board of Directors. Each member of the Board
of Directors holds office until the next annual meeting of stockholders or
until his or her successor has been duly elected and qualified.
Committees. We have a Compensation Committee composed of two members of
the Board of Directors. Currently, there are no directors serving on the
Compensation Committee. The Compensation Committee reviews and acts on matters
relating to compensation levels and benefit plans for our executive officers
and key employees, including salary and stock options. The Compensation
Committee is also responsible for granting stock awards, stock options and
stock appreciation rights and other awards to be made under our existing
incentive compensation plans. We have also established an Audit Committee which
is responsible for reviewing the activities of the Company's independent
accounts and internal audit department. After the consummation of the
offerings, we will appoint two members to serve on our Audit Committee. The
Audit Committee's members will not be affiliated with the Company or Hellman &
Friedman Capital Partners as required by applicable New York Stock Exchange
rules.
Director Compensation
We do not compensate our directors for serving on the Board of Directors
or for their participation on any committee of the Board of Directors. Our
directors are reimbursed for out-of-pocket expenses incurred in attending
meetings of the Board of Directors. In the future, we may make grants of stock
options under our 1999 Stock Option and Incentive Plan to outside directors.
We indemnify our directors in accordance with our certificate of
incorporation and by-laws to the fullest extent permitted under Delaware law.
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<PAGE>
Executive Compensation
The compensation of executive officers is determined by our Board of
Directors, except for the salaries and bonuses of Mr. Krakoff, Mr. Alic and Mr.
Farber. The salary and bonus of Mr. Krakoff, Mr. Alic and Mr. Farber are fixed
by their respective employment agreements with Advanstar. See "--Certain Plans
and Employment Agreements". The following table sets forth certain information
concerning compensation received by the Chief Executive Officer and the other
executive officers (the "Named Executive Officers") for services rendered to
Advanstar for the years ended December 31, 1998 and 1997.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
----------------------------- All Other Total
Name and Principal Position Year Salary ($) Bonus ($) (1) Compensation ($) Compensation ($)
- --------------------------- ---- ---------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Robert L. Krakoff......... 1998 $415,385 $150,000 $18,138(3) $583,523
Chairman of the Board 1997 400,000 150,000 12,449(2) 562,449
and Chief Executive
Officer
James M. Alic............. 1998 $311,538 $115,000 $ 8,310(3) $434,848
Vice Chairman 1997 300,000 112,500 7,260(3) 419,760
Martin C. ("Skip")
Farber................... 1998 $284,615 $120,000 $ 6,436(3) $411,051
Executive Vice 1997 250,000 87,000 2,713(3) 339,713
President--Business
Development
David W. Montgomery....... 1998 $186,538 $ 74,000 $ 5,918(3) $266,456
Vice President--Finance, 1997 170,000 60,000 5,860(3) 235,860
Chief Financial Officer
and Secretary
Eric I. Lisman(4)......... 1998 $ 72,692 $ 25,012 $ 199(2) $ 97,903
Vice President and
General Counsel
</TABLE>
- --------
(1) Bonuses are reported in the year earned, even though they were actually
paid in the subsequent year.
(2) Constitutes value of group term life insurance benefits paid for by
Advanstar.
(3) Constitutes value of group term life insurance benefits paid for by
Advanstar and contributions made by the Company to a defined contribution
plan.
(4) Mr. Lisman commenced employment on September 8, 1998.
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<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth each grant of stock options made by
Advanstar during the year ended December 31, 1998 pursuant to the 1996 Stock
Option Plan to each of the Named Executive Officers. We have not granted any
stock appreciation rights.
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------- Potential Realizable
Number of Value at Assumed
Securities % of Total Annual Rates of
Underlying Options Granted Exercise Stock Price
Options to Employees In Price Expiration Appreciation
Name Granted Fiscal Year ($/Share)(1) Date for Option Term(2)
---- ---------- --------------- ------------ ---------- -------------------- --- ---
5% 10%
------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert L. Krakoff....... -- -- -- -- -- --
James M. Alic........... -- -- -- -- -- --
Martin C. ("Skip") Far-
ber.................... 140,324 19.5% $6.42 2008 -- $ 1,279,335
David W. Montgomery..... 20,000 2.8 6.42 2008 -- 182,340
Eric I. Lisman(3)....... 100,000 13.9 6.42 2008 -- 881,872
</TABLE>
- --------
(1) The options granted vest on a five-year schedule in 20% increments on each
anniversary of the date of grant. On May 31 of each year, the exercise
price per option increases by 10% over the previous year's exercise price.
The exercise price per option increases by a pro rated amount of such 10%
increase in the case of exercises which do not occur after May 31.
Effective upon the closing of the offerings, these stock options will be
exchanged for an equal number of stock options with a fixed exercise price
of $6.66.
(2) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compounded rates of appreciation of the Common
Stock over the term of the options. The exercise prices of the options
increases 10% per year over the life of the option. These numbers are
calculated based on rules promulgated by the Securities and Exchange
Commission and do not reflect our estimate of future stock price growth.
Actual gains, if any, on stock option exercises and common stock holdings
are dependent on the timing of such exercises and the future performance of
our common stock. There can be no assurance that the rates of appreciation
assumed in this table can be achieved or that the amounts reflected will be
received by the individuals.
(3) On September 8, 1998, Mr. Lisman was granted stock options to purchase
100,000 shares of our common stock.
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<PAGE>
Option Exercises and Holdings
The following table sets forth, for each of the officers named in the
Summary Compensation Table, certain information concerning stock options
exercised during 1998, and the number of shares subject to both exercisable and
unexercisable stock options as of December 31, 1998. Also reported are values
for "in-the-money" options that represent the positive spread between the
respective exercise prices of outstanding stock options and the fair market
value of our common stock as of December 31, 1998.
Aggregated Option Exercises in 1998
and December 31, 1998 Option Values
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Unexercised Options In-the-Money
Number of at Fiscal Options at Fiscal
Shares Year-End Year-End (1)
Acquired on Value ------------------------- -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------------ ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Krakoff....... -- -- -- -- -- --
James M. Alic........... -- -- -- -- -- --
Martin C. ("Skip") Far-
ber.................... -- -- 99,640 306,484 $318,848 $980,748
David W. Montgomery..... -- -- 68,000 132,000 217,600 422,400
Eric I. Lisman.......... -- -- 100,000 320,000
</TABLE>
- --------
(1) Amount based on the fair market value of our common stock on December 31,
1998 as determined by our Board of Directors, less the exercise payable for
such shares.
(2) On September 8, 1998, Mr. Lisman was granted a stock option to purchase
100,000 shares of our common stock.
Certain Plans and Employment Agreements
Amended and Restated 1996 Stock Option Plan. Our Amended and Restated
1996 Stock Option Plan provides for the issuance of a maximum of 1,811,124
shares of our common stock pursuant to the grant of non-qualified stock options
to our employees and other individuals who render services to Advanstar. The
1996 Plan does not permit grants of incentive stock options as defined under
the Code. The 1996 Plan prohibits the regrant of any previously granted stock
options which have been surrendered or canceled.
The 1996 Plan is administered by the Compensation Committee. Subject to
the provisions of the 1996 Plan, the Compensation Committee selects the
individuals to whom options will be granted and determines the option exercise
price and other terms of each award.
With the exception of the stock options granted to Mr. Loggia, each stock
option is subject to a five-year vesting schedule pursuant to which the options
vest in increments of approximately 20% on each of the first five anniversaries
of the date of grant. Each outstanding stock option shall become fully
exercisable in the event of a "change of
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control." A "change of control" means the acquisition by any person or group of
persons, other than an affiliate or affiliates of Hellman & Friedman Capital
Partners, of more than 50% of the outstanding shares of Advanstar common stock
or shares of capital stock constituting more than 50% of our voting capital
stock, or of all or substantially all of our assets. The Compensation Committee
may, in its discretion and in accordance with the provisions of the 1996 Plan,
accelerate the vesting of any stock option.
As of March 31, 1999, options to purchase 1,811,124 shares of our common
stock at a weighted average exercise price of $6.56 were outstanding under the
1996 Plan, and no options had been exercised. The exercise price of each of
these stock options increases 10% annually on May 31. Effective upon the
closing of the offerings, these stock options will be exchanged for an equal
number of stock options exercisable at a fixed exercise price of $6.66 and
otherwise on the same terms and conditions.
1999 Stock Option and Incentive Plan. Our 1999 Stock Option and Incentive
Plan provides for the issuance of a maximum of 2,500,000 shares of our common
stock. Under the terms of the 1999 Plan, our Board of Directors is authorized
to grant incentive stock options as defined under the Code, non-qualified stock
options, stock awards or opportunities to make direct purchases of common stock
to employees, officers, directors, consultants and advisors of Advanstar.
The 1999 Plan is administered by the Compensation Committee. The
Compensation Committee selects the individuals to whom stock options or awards
will be granted and determines the option exercise price and other terms of
each award, as authorized by the 1999 Plan. A stock option is not transferable
by the recipient except by will or by the laws of descent and distribution, or
in the case of non-qualified stock options, only to the extent set forth in the
agreement relating to the non-qualified stock option or pursuant to a valid
domestic relations order. No stock options may be exercised following
termination of employment for cause. The term of the 1999 Plan is ten years,
unless sooner terminated by vote of the Board of Directors. To date, no options
have been granted under the 1999 Plan. At the commencement of the offerings,
based on an assumed initial public offering price of $14.50, we will grant
under the 1999 Plan stock options to Robert L. Krakoff to purchase 439,940
shares of our common stock and to James M. Alic to purchase 137,480 shares of
our common stock. The exercise price of these stock options will be the initial
public offering price. These stock options will be subject to a five-year
vesting schedule pursuant to which the options will vest in increments of
approximately 20% on each of the first five anniversaries of the closing of the
offerings.
401(k) Plan. We have an Employees' 401(k) Plan and Trust. All current and
future employees who have completed one year of service with Advanstar or any
other domestic subsidiary of Advanstar and are at least 21 years-of-age are
eligible to participate in the Plan. Participants in the 401(k) Plan may not
contribute more than the lesser of a specified statutory amount, $10,000 in
1998, or 15% of his or her pre-tax total compensation. We are
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<PAGE>
required to make a matching contribution to the 401(k) Plan, which vests in
equal installments over five years, as follows:
. with respect to the employee's elective contribution in an amount
up to two percent (2%) of the employee's gross compensation, the
matching contribution is required to be equal to 100% of the
employee's contribution;
. with respect to the employee's elective contribution in excess of
2% and not in excess of six percent (6%) of gross compensation,
the matching contribution is required to be equal to 25% of such
employee's contribution; and
. with respect to the employee's elective contribution in excess of
6% of gross compensation, there shall be no matching contribution.
Employment Agreements. Mr. Krakoff and Mr. Alic entered into employment
agreements with us dated as of April 20, 1999, which as of the closing date of
the offerings, supersede their previous employment arrangements with us. We
also entered into an employment agreement dated as of April 19, 1999 with
Martin C. ("Skip") Farber. Each agreement provides for a three-year term
commencing of the date on which the offerings will close. Under these
employment agreements, Mr. Krakoff is entitled to an annual base salary of not
less than $500,000, Mr. Alic is entitled to an annual base salary of not less
than $400,000 and Mr. Farber is entitled to an annual base salary of not less
than $310,000. Mr. Krakoff and Mr. Alic are entitled to annual bonuses based on
our EBITDA for any year, up to a maximum bonus in any one year of 100% of base
salary. In addition, we have agreed to grant stock options to Mr. Krakoff and
Mr. Alic at the commencement of the offerings at the initial public offering
price. The agreements provide for indemnification of the executives to the
extent permissible under Delaware law. The agreements provide for severance
benefits equal to one year's base salary, benefits and a pro rated bonus upon
termination of employment by Advanstar without "cause" or by the executive for
"good reason" which includes a change of control. Mr. Krakoff and Mr. Alic also
entered into noncompetition and confidentiality agreements with us. The
noncompete period is one year after termination of employment unless employment
is terminated by Advanstar without cause or by the executive for good reason,
in which case the noncompetition period is six months. During the
noncompetition period, neither Mr. Krakoff nor Mr. Alic may hire any Advanstar
employee or solicit any trade show or publishing business from a third party
which has a relationship or contract with Advanstar.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Stockholders Agreement
On May 15, 1997, Advanstar, AHI Advanstar LLC, Robert L. Krakoff, James
M. Alic, Peter J. Solomon Company and Hellman & Friedman Capital Partners
entered into a stockholders agreement. The stockholders agreement will
terminate upon the closing of the offerings, except for the provisions relating
to rights to cause our common stock to be registered for sale under the
Securities Act of 1933. See "Description of Capital Stock--Registration
Rights."
Other Transactions
Prior to joining Advanstar as a full time employee on September 8, 1998,
Eric I. Lisman provided legal services to Advanstar for which he received fees
of approximately $200,000. From November 1997 through August 1998, Mr. Lisman
engaged in private legal practice and, during this period of time, provided
legal services to Advanstar as an independent contractor.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of our common stock as of March 31, 1999, and as adjusted to reflect
the shares of common stock to be issued and sold in the offerings by Advanstar
and the selling stockholders, by:
. each person known to us to be the beneficial owner of more than 5%
of the outstanding shares of our common stock,
. our Named Executive Officers,
. our directors and
. all executive officers and directors as a group.
Unless otherwise noted below, the address of each person listed on the
table is c/o Advanstar, Inc., 545 Boylston Street, Boston, Massachusetts 02116.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. For the purposes of calculating the number
of shares and the percentage beneficially owned by a person or entity, shares
of common stock issuable by Advanstar to that person or entity pursuant to
options which may be exercised within 60 days after March 31, 1999 are deemed
to be beneficially owned and outstanding. Except as otherwise indicated, each
stockholder named in the following table has sole voting and investment power
with respect to the shares set forth opposite that stockholder's name.
The following table assumes the distribution by AHI Advanstar LLC to its
members of all shares of common stock held of record thereby based on an
assumed initial public offering price of $14.50.
H&F Investors III, a California general partnership, is the sole general
partner of Hellman & Friedman Capital Partners III, L.P., a California limited
partnership, H&F Orchard Partners III, L.P., a California limited partnership,
and H&F International Partners III, L.P., a California limited partnership.
Messrs. Pasquesi and Cohen are Managing Directors of Hellman & Friedman LLC, an
affiliate of H&F Investors III. The managing general partner of H&F Investors
III is Hellman & Friedman Associates III, L.P., a California limited
partnership, and the general partners of Hellman & Friedman Associates III are
H&F Management III, L.L.C., a California limited liability company, and H&F
Investors III, Inc., a California corporation. The sole shareholder of H&F
Investors III, Inc. is the Hellman Family Revocable Trust. If the underwriters
exercise their over-allotment options, Hellman & Friedman Capital Partners III
will sell up to an additional 1,916,250 shares of our common stock, H&F Orchard
Partners will sell up to an additional 141,330 shares of our common stock and
H&F International Partners will sell up to an additional 42,420 shares of our
common stock.
The investment decisions of H&F Investors III, Inc. and Management III
LLC are made by an executive committee, of which Mr. Pasquesi is a member. The
executive
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committee indirectly exercises voting and investment power with respect to the
shares of Advanstar common stock held by Hellman & Friedman Capital Partners
III, H&F Orchard Partners and H&F International Partners, and could be deemed
to beneficially own such shares. The executive committee disclaims such
beneficial ownership except to the extent of its indirect pecuniary interest in
such shares.
Of the 1,891,635 shares of our common stock beneficially owned by Robert
L. Krakoff, 527,042 shares are subject to vesting over the period ending on
June 30, 2002. Of the 547,254 shares of our common stock beneficially owned by
James M. Alic, 164,796 shares are subject to vesting over the period ending on
June 30, 2001. Any unvested shares of our common stock that are forfeited by
either Mr. Krakoff or Mr. Alic will be forfeited to AHI Advanstar LLC. Over 98%
of any forfeited shares will be distributed to Hellman & Friedman Capital
Partners.
As of March 31, 1999, the beneficial ownership of Mr. Farber consisted of
99,640 shares of Advanstar common stock issuable pursuant to presently
exercisable stock options, and the beneficial ownership of Mr. Montgomery
consisted of 68,000 shares of Advanstar common stock issuable pursuant to
presently exercisable stock options. All of our other directors and officers
collectively owned 167,640 shares of our common stock issuable pursuant to
presently exercisable stock options as of March 31, 1999.
The beneficial ownership of Mr. Berliner consists of shares of our common
stock held by Peter J. Solomon Company. Mr. Berliner is a Managing Director of
Peter J. Solomon Company and beneficially owns 40% of the shares of our common
stock held by it. Mr. Berliner disclaims beneficial ownership of the balance of
the shares held by Peter J. Solomon Company.
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Mr. Cohen and Mr. Pasquesi each disclaim beneficial ownership of all
shares of Advanstar common stock held by Hellman & Friedman Capital Partners
III, H&F Orchard Partners and H&F International Partners, except to the extent
of their individual indirect pecuniary interest in those shares.
<TABLE>
<CAPTION>
Shares Percentage of Shares
Beneficially Owned Beneficially Owned
--------------------- ------------------------
Before After Before After
Name and Address of Beneficial Owner Offering Offering Offering Offering
- ------------------------------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Hellman & Friedman Capital
Partners III, L.P. ......... 28,114,909 21,727,409 83.6% 53.5%
c/o Hellman & Friedman LLC
One Maritime Plaza
San Francisco, CA 94111
H&F Orchard Partners III,
L.P. ....................... 2,073,571 1,602,471 6.2% 3.9%
c/o Hellman & Friedman LLC
One Maritime Plaza
San Francisco, CA 94111
H&F International Partners
III, L.P. .................. 622,379 480,979 1.9% 1.2%
c/o Hellman & Friedman LLC
One Maritime Plaza
San Francisco, CA 94111
Robert L. Krakoff............ 1,891,635 1,891,635 5.6% 4.7%
James M. Alic................ 547,234 547,234 1.6% 1.3%
Martin C. ("Skip") Farber.... 99,640 99,640 * *
David W. Montgomery.......... 68,000 68,000 * *
Eric I. Lisman............... 152,109 152,109 * *
Kenneth T. Berliner.......... 152,109 152,109 * *
Mitchell R. Cohen............ -- -- -- --
John M. Pasquesi............. -- -- -- --
All directors and executive
officers as a group (8
persons).................... 2,758,618 2,758,618 8.2% 6.8%
</TABLE>
- --------
* Represents less than 1% of the outstanding shares of our common stock.
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DESCRIPTION OF CAPITAL STOCK
The following description of our certificate of incorporation, by-laws,
outstanding capital stock and existing registration rights reflects (1) the
distribution by AHI Advanstar LLC to its members of all shares of common stock
held of record thereby and (2) the effectiveness, upon the closing of the
offerings, of an Amended and Restated Certificate of Incorporation and Amended
and Restated By-Laws of Advanstar, Inc.
By the terms of our certificate of incorporation, or otherwise referred
to as the Charter, Advanstar's authorized capital stock consists of 200,000,000
shares of common stock, with a par value of $.01 per share, and 20,000,000
shares of preferred stock, with a par value of $.01 per share.
Common Stock
As of March 31, 1999, there were 33,630,000 shares of common stock
outstanding and held of record by six stockholders. Based upon the number of
shares outstanding as of March 31, 1999 and giving effect to the issuance of
the shares of common stock offered by Advanstar hereby, there will be
40,630,000 shares of common stock outstanding upon the closing of the
offerings. In addition, as of March 31, 1999, there were outstanding stock
options for the purchase of a total of 1,811,124 shares of common stock.
Holders of common stock are entitled to one vote per share for each share
held of record on all matters submitted to a vote of stockholders. The holders
of common stock are entitled to receive ratably such lawful dividends as may be
declared by our Board of Directors. Such dividends, however, are subject to
preferences that may be applicable to the holders of any outstanding shares of
preferred stock. In the event of a liquidation, dissolution or winding up of
the affairs of Advanstar, whether voluntary or involuntary, the holders of
common stock will be entitled to receive pro rata all of the remaining assets
of Advanstar available for distribution to its stockholders. Any such pro rata
distribution would be subject to the rights of the holders of any outstanding
shares of preferred stock. The common stock has no preemptive, redemption,
conversion or subscription rights. All outstanding shares of common stock are
fully paid and non-assessable. The shares of common stock to be issued by
Advanstar in this offering will be fully paid and non-assessable. The rights,
powers, preferences and privileges of holders of common stock are subject to,
and may be adversely affected by, the rights of the holders of shares of any
series of preferred stock which Advanstar may designate and issue in the
future.
Preferred Stock
Our Board of Directors is authorized, subject to any limitations
prescribed by Delaware law, without further stockholder approval, to issue from
time to time shares of preferred stock, in one or more series. Our Board of
Directors is also authorized, subject to the limitations prescribed by Delaware
law, to establish the number of shares to be included in each series and to fix
the voting powers, preferences, qualifications and special or relative rights
or privileges of each series. Our Board of Directors is authorized to issue
preferred
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stock with voting, conversion and other rights and preferences that could
adversely affect the voting power or other rights of the holders of common
stock.
Advanstar has no current plans to issue any preferred stock. The issuance
of preferred stock or of rights to purchase preferred stock, however, could
have the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, a majority of the
outstanding voting stock of Advanstar.
Registration Rights
On May 15, 1997, Advanstar, AHI Advanstar LLC, Robert L. Krakoff, James
Alic, Peter J. Solomon Company and Hellman & Friedman Capital Partners entered
into a stockholders agreement providing Mr. Krakoff, Mr. Alic, Peter J. Solomon
Company and Hellman & Friedman Capital Partners, the holders of an aggregate of
26,630,000 shares of our common stock after the offerings, with certain rights
to cause their shares to be registered for sale under the Securities Act of
1933, as amended.
If, at any time after the offerings, we propose to register any of our
securities under the Securities Act, either for our own account or for the
account of any of our security holders, Mr. Krakoff, Mr. Alic, Peter J. Solomon
Company and Hellman & Friedman Capital Partners are each entitled to notice of
such registration and to include their shares of our common stock in such
registration. In the event of a registration pursuant to an underwritten public
offering of our common stock, however, the underwriters shall have the right,
subject to certain conditions, to limit the number of shares included in such
registration.
Once we have qualified to use a registration statement on Form S-3 to
register securities under the Securities Act, Mr. Krakoff, Mr. Alic, Peter J.
Solomon Company and Hellman & Friedman Capital Partners have the right to
request that we file a registration statement on Form S-3 or any successor
thereto for a public offering of all or any portion of their shares of our
common stock, provided that the reasonably anticipated aggregate price to the
public of such offering would not be less than $2,500,000.
In general, we will bear all fees, costs and expenses of such
registrations (other than applicable underwriting discounts and selling
commissions). In addition, we have agreed to indemnify Mr. Krakoff, Mr. Alic,
Peter J. Solomon Company and Hellman & Friedman Capital Partners against, and
provide contribution with respect to, certain liabilities relating to any
registration in which any their shares of our common stock are sold under the
Securities Act.
Anti-Takeover Effects of Provisions of Advanstar's Amended and Restated
Certificate of Incorporation, Amended and Restated By-Laws and Delaware Law
The Charter, Advanstar's by-laws, or otherwise referred to as the By-
Laws, and Delaware law contain certain provisions that could be deemed to have
anti-takeover effects. These provisions could discourage, delay or prevent a
change in control of Advanstar or an
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acquisition of Advanstar at a price which many stockholders may find
attractive. The existence of these provisions could limit the price that
investors might be willing to pay in the future for shares of our common stock.
Certificate of Incorporation and By-Laws
The By-Laws provide that only our Board of Directors may increase the
number of directors constituting the whole Board. The By-Laws further provide
that, except as otherwise provided by law or the Charter, newly created
directorships resulting from an increase in the authorized number of directors
or vacancies on our Board may be filled by:
. a majority of stockholders,
. our Board, provided that a quorum is then in office and present,
. a majority of the directors then in office, if less than a quorum
is then in office or
. the sole remaining director.
These provisions prevent a stockholder from enlarging our Board of
Directors and filling the new directorships with such stockholder's own
nominees without Board approval.
These provisions of the By-Laws may have the effect of discouraging a
third party from initiating a proxy contest, making a tender offer or otherwise
attempting to gain control of Advanstar, or of attempting to change the
composition or policies of our Board of Directors, even though such attempts
might be beneficial to Advanstar or its stockholders.
The Charter and the By-Laws provide that, unless otherwise prescribed by
law or the Charter, only a majority of our Board, the Chairman of the Board or
the President is able to call a special meeting of stockholders. The Charter
and the By-Laws also provide that, unless otherwise prescribed by law or the
Charter, stockholder action may be taken only at a duly called and convened
annual or special meeting of stockholders and may not be taken by written
consent. These provisions, taken together, prevent stockholders from forcing
consideration by the stockholders of stockholder proposals over the opposition
of our Board, except at an annual meeting.
The By-Laws also establish an advance notice procedure for stockholders
to make nominations of candidates for election as director, or to bring other
business before an annual meeting of stockholders of Advanstar. Under this
advance notice procedure, notice of stockholder nominations or proposals to be
made at an annual or special meeting in lieu of an annual meeting generally
must be received by Advanstar not less than 60 days nor more than 90 days prior
to the scheduled date of the meeting. If less than 70 days notice or prior
public disclosure of the date of the meeting is given, however, then notice
must be received not later than the 10th day following the earlier of the day
such notice was mailed or the day such public disclosure was made. Notice of
stockholder nominations or proposals to be made at a special meeting, unless
being called and convened in lieu of an annual meeting, must be
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received not later than the 10th day following the earlier of the day such
notice was mailed or the day such public disclosure was made. These notices
must contain certain prescribed information.
The advance notice procedure for stockholder action affords our Board of
Directors an opportunity to consider the qualifications of proposed director
nominees or the merit of stockholder proposals, and, to the extent deemed
appropriate by our Board, to inform stockholders about such matters. The
advance notice procedure also provides a more orderly procedure for conducting
annual meetings of stockholders. The By-Laws do not give our Board any power to
approve or disapprove stockholder nominations for the election of directors or
proposals for action. The advance notice procedure for stockholder action,
however, may prevent a contest for the election of directors or the
consideration of stockholder proposals. This could deter a third party from
conducting a solicitation of proxies to elect its own slate of directors or to
approve its own proposal if the proper advance notice procedures are not
followed, without regard to whether consideration of such nominees or proposals
might be harmful or beneficial to Advanstar and its stockholders.
Delaware Law
Advanstar is subject to Section 203 of the Delaware General Corporation
Law which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the date that such stockholder became an
interested stockholder.
Section 203 does not apply if:
. prior to such date, the board of directors of the corporation
approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder;
. upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced,
excluding for purposes of determining the number of shares
outstanding those shares owned by persons who are directors and
also officers and by employee stock plans in which employee
participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a
tender or exchange offer; or
. on or subsequent to such date, the business combination is
approved by the board of directors and authorized at an annual or
special meeting of stockholders, and not by written consent, by
the affirmative vote of at least two-thirds of the outstanding
voting stock which is not owned by the interested stockholder.
The application of Section 203 may limit the ability of stockholders to
approve a transaction that they may deem to be in their best interests.
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Section 203 defines "business combination" to include:
. any merger or consolidation involving the corporation and the
interested stockholder;
. any sale, transfer, pledge or other disposition of 10% or more of
the assets of the corporation to or with the interested
stockholder;
. subject to certain exceptions, any transaction which results in
the issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder;
. any transaction involving the corporation which has the effect of
increasing the proportionate share of the stock of any class or
series of the corporation beneficially owned by the interested
stockholder; or
. the receipt by the interested stockholder of the benefit of any
loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation.
In general, Section 203 defines an "interested stockholder" as any
entity or person beneficially owning 15% or more of the outstanding voting
stock of the corporation and any entity or person associated with, affiliated
with or controlling or controlled by such entity or person.
Limitation of Liability
The Charter provides that no director of Advanstar shall be personally
liable to Advanstar or to its stockholders for monetary damages for breach of
fiduciary duty as a director, except that the limitation shall not eliminate
or limit liability to the extent that the elimination or limitation of such
liability is not permitted by the Delaware General Corporation Law as the same
exists or may hereafter be amended.
The Charter further provides for the indemnification of Advanstar's
directors and officers to the fullest extent permitted by Section 145 of the
Delaware General Corporation Law, including circumstances in which
indemnification is otherwise discretionary. A principal effect of these
provisions is to limit or eliminate the potential liability of Advanstar's
directors for monetary damages arising from breaches of their duty of care,
subject to certain exceptions. These provisions may also shield directors from
liability under federal and state securities laws.
Stock Transfer Agent
The transfer agent and registrar for the common stock is The Bank of New
York.
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DESCRIPTION OF INDEBTEDNESS
The summary of our credit facility and 9 1/4% Senior Subordinated Notes
due 2008 set forth below does not purport to be complete and is qualified in
its entirety by reference to all the provisions of our credit facility and the
Indenture, copies of which are filed as an exhibit to the Registration
Statement of which this prospectus is a part.
Credit Facility
General. Our credit facility consists of three components: a tranche A
term loan facility in the aggregate principal amount of $100 million; a tranche
B term loan facility in the aggregate principal amount of $150 million; and a
revolving credit facility in the maximum aggregate amount of $60 million.
Subject to compliance with customary conditions precedent, the revolving credit
facility, which includes sublimits for the issuances of letters of credit, is
available to be drawn from time to time by our wholly-owned subsidiary,
Advanstar Communications Inc., for working capital and general corporate
purposes, including permitted acquisitions.
Guarantees and Security. The obligations of Advanstar Communications
under the Credit Facility and any related interest rate protection agreements
are guaranteed by Advanstar and all domestic subsidiaries of Advanstar
Communications. Advanstar Communications' obligations in connection with the
credit facility and the obligations of the guarantors are secured by liens on
all of their respective tangible and intangible assets.
Maturity. After giving effect to the use of proceeds from the offerings,
approximately $175.3 million in term loans will be outstanding and the term
loans will amortize in quarterly installments totaling approximately $0.0
million in 1999, $4.7 million in 2000, $9.8 million in 2001, $11.3 million in
2002, $18.6 million in 2003, $59.2 million in 2004 and $71.7 million in 2005.
Principal amounts outstanding under the revolving credit facility will be due
and payable in full on October 31, 2003.
Interest. Interest on outstanding borrowings accrues, at the option of
Advanstar Communications, at the customary Alternate Base Rate of The Chase
Manhattan Bank or at a reserve adjusted Eurodollar Rate plus, in each case, a
margin. The margin is a percentage that varies in accordance with a pricing
matrix based upon a leverage ratio. The maximum margin for Revolving Loans and
Tranche A Term Loans will equal 1.25% for loans based on the Alternate Base
Rate and 2.25% for loans based on the Eurodollar Rate. The maximum margin for
Tranche B Term Loans will equal 1.50% in the case of loans based on the
Alternate Base Rate and 2.50% in the case of loans based on the Eurodollar
Rate.
Prepayments. Subject to certain exceptions, the following amounts are
required to be applied, as mandatory prepayments, to prepay the term loans:
^ 50% of the net cash proceeds of certain issuances of equity by
Advanstar or its subsidiaries,
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^ 100% of the net cash proceeds of the incurrence of certain
indebtedness by Advanstar or any of its subsidiaries,
^ 100% of the net cash proceeds of any sale or other disposition by
Advanstar Communications or any of its subsidiaries of any assets,
excluding sales in the ordinary course of business, and subject to
a limited exception for reinvestment of such proceeds within 270
days, and
^ 50% of excess cash flow for each fiscal year.
Mandatory prepayments will be applied pro rata to the unpaid installments
of the tranche A term loans and the tranche B term loans, provided, that as
long as any tranche A term loans remain outstanding, each holder of a tranche B
term loan will have the right to refuse any such mandatory prepayment otherwise
allocable to it, in which case the amount so refused will be applied as an
additional prepayment of the tranche A term loans. Advanstar Communications
also has the right at its option to prepay loans under the Credit Facility,
without premium, in whole or in part. Amounts applied as prepayments of the
revolving credit facility may be reborrowed; amounts prepaid in respect of the
term loans may not.
Covenants. Subject to customary exceptions, covenants include, but are
not limited to, restrictions on fundamental changes; liens; indebtedness;
investments; dividend payments; lines of business; transactions with
affiliates; use of proceeds; certain matters respecting ownership of
subsidiaries; negative pledge clauses and clauses restricting subsidiary
distributions; modifications of certain documents including the Indenture;
prepayments of the Notes; and activities of holding companies. Financial
covenants include a minimum fixed charge coverage ratio and a maximum leverage
ratio.
Events of Default. Events of default include nonpayment of principal when
due; nonpayment of interest, fees or other amounts after a three-day grace
period; material inaccuracy of representations and warranties; violation of
covenants, subject, in the case of certain covenants, to a 30-day grace period
after notice; cross-default to other material indebtedness; bankruptcy events;
certain ERISA events; material judgments; material environmental claims; actual
or asserted invalidity of any guarantee, security interest or subordination
provisions; and a change of control.
9 1/4% Senior Subordinated Notes due 2008
General. Advanstar Communications issued $150.0 million of its 9 1/4%
Senior Subordinated Notes due 2008 in connection with its acquisition of MAGIC
pursuant to the Indenture among Advanstar Communications, as issuer, Advanstar
and Advanstar Communications' wholly-owned domestic subsidiaries, including
MAGIC, as guarantors, and The Bank of New York, as trustee. On October 30,
1998, Advanstar Communications consummated an offer to exchange such notes for
the Notes registered under the Securities Act of 1933, as amended.
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Principal, Maturity and Interest. The Indenture is limited in aggregate
principal amount to $250.0 million of which $150.0 million in aggregate
principal amount is represented by the 9 1/4% Senior Subordinated Notes due
2008. These Notes will mature on May 1, 2008. Interest on these Notes accrues
at 9.25% per annum and is payable semiannually in arrears on May 1 and November
1 of each year.
Note Guarantees. The 9 1/4% Senior Subordinated Notes due 2008 are
unsecured senior subordinated general obligations of Advanstar Communications
and are unconditionally guaranteed on a senior subordinated and unsecured basis
by Advanstar and each existing and future domestic subsidiary of Communications
that is not designated an "Unrestricted Subsidiary" in accordance with the
Indenture, including MAGIC.
Redemption and Repurchase Upon Change of Control. Except under limited
circumstances (described below), the 9 1/4% Senior Subordinated Notes due 2008
are not redeemable at Advanstar Communications' option prior to May 1, 2003.
Thereafter, the Notes are subject to redemption at the option of Advanstar
Communications, in whole or in part, at premiums declining to par in May 2006.
In addition, at any time on or before May 1, 2001, Advanstar Communications may
redeem up to 35% of the original aggregate principal amount of the Notes with
the net proceeds of a public equity offering at a redemption price equal to
109.250% of the principal amount thereof, plus accrued and unpaid interest
thereon, if any, to the date of redemption. Advanstar does not intend to use
any portion of the net proceeds of the offerings to Advanstar to redeem the 9
1/4% Senior Subordinated Notes due 2008. See "Use of Proceeds."
At any time prior to May 1, 2003, upon the occurrence of a change of
control, Advanstar Communications has the option to redeem the Notes, in whole
but not in part, at a premium, together with accrued and unpaid interest, if
any, to the date of redemption.
Unless Advanstar Communications exercises its right to redeem its 9 1/4%
Senior Subordinated Notes due 2008, upon a change of control of Advanstar
Communications or Advanstar, each holder of Notes has the right to require
Advanstar Communications to repurchase all or any part of such holder's Notes
at a purchase price in cash equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest thereon. After consummation of the
offerings, a change of control for this purpose means:
. a person or group has become the beneficial owner of 50% or more
of the voting stock of Advanstar Communications or Advanstar;
. during any period of two consecutive calendar years, individuals,
who at the beginning of the period constituted the Board of
Directors of Advanstar Communications or Advanstar, cease to be a
majority of the directors of Advanstar Communications or Advanstar
then in office;
. the sale of all or substantially all of the assets of Advanstar
Communications and its subsidiaries; or
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. the adoption by the stockholders of Advanstar Communications of a
plan of liquidation or dissolution.
Covenants. The Indenture restricts, among other things, Advanstar
Communications' ability to incur additional indebtedness; to pay dividends or
make certain other restricted payments; to incur liens to secure pari passu or
subordinated indebtedness; to engage in any sale and leaseback transaction; to
sell stock of subsidiaries; to sell assets; to merge or consolidate with any
other person; to sell, assign, transfer, lease, convey or otherwise dispose of
substantially all of its assets; or to enter into certain transactions with
affiliates.
Events of Default. The Indenture contains standard events of default,
including: defaults in the payment of principal, premium or interest, defaults
in the compliance with covenants contained in the Indenture, cross defaults on
more than $5.0 million of other indebtedness, failure to pay more than $5.0
million of judgments, and certain events of bankruptcy with respect to
Advanstar Communications and certain of its subsidiaries.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offerings, there will be 40,630,000 shares of our
common stock outstanding. There were also approximately 1,811,124 shares
covered by vested options outstanding at March 31, 1999, which are not
considered to be outstanding shares. Of the outstanding shares, the 14,000,000
shares of common stock sold in the offerings will be freely tradable without
restriction under the Securities Act, except that any shares purchased in this
offering by our affiliates, as that term is defined in Rule 144 under the
Securities Act, may generally only be resold in compliance with applicable
provisions of Rule 144.
The remaining 26,630,000 shares of our common stock outstanding will be
"restricted securities" as that term is defined in Rule 144. These restricted
securities may be sold in the public market only if registered or if they
qualify for an exemption from registration under Rules 144, 144(k) or 701
promulgated under the Securities Act. These rules are summarized below. Of
these restricted securities,
. no shares will be available for immediate sale in the public
market on the date of this prospectus pursuant to Rule 144(k); and
. 26,630,000 or all of such shares will be eligible for sale in the
public market 90 days after the date of this prospectus, subject
to volume restrictions and other conditions, pursuant to Rule 144.
All of these shares are held by our affiliates and are subject to
the lock-up agreements described below.
Our executive officers and directors and substantially all of our
security holders, have agreed pursuant to certain lock-up agreements that they
will not, without the prior written consent of Merrill Lynch, Pierce, Fenner &
Smith Incorporated, offer, sell or otherwise dispose of the shares of common
stock beneficially owned by them for a period of 180 days from the date of this
prospectus.
Under Rule 144, a stockholder, including an affiliate, who has
beneficially owned his or her restricted securities for at least one year from
the later of the date such securities were acquired from us or, if applicable,
the date they were acquired from an affiliate, is entitled to sell, within any
three-month period, a number of such shares that does not exceed the greater of
1% of the then outstanding shares of common stock or the average weekly trading
volume in the common stock during the four calendar weeks preceding the date on
which notice of such sale was filed under Rule 144, provided certain
requirements concerning availability of public information, manner of sale and
notice of sale are satisfied. In addition, under Rule 144(k), if a period of at
least two years has elapsed between the later of the date restricted securities
were acquired from us or, if applicable, the date they were acquired from one
of our affiliates, a stockholder who is not an affiliate of Advanstar at the
time of sale and has not been our affiliate for at least three months prior to
the sale is entitled to sell his or her shares of common stock immediately
without compliance with the foregoing requirements under Rule 144.
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Securities issued in reliance on Rule 701, such as shares of common stock
acquired prior to the offerings or the exercise of stock options, are also
restricted securities. These restricted securities may be sold by stockholders
other than our affiliates, beginning 90 days after the date of this prospectus,
subject only to the manner of sale provisions of Rule 144 and by our
affiliates, beginning 90 days after the date of this prospectus, subject to all
provisions of Rule 144 except the one-year holding period requirement.
Prior to the offerings, there has been no public market for our common
stock. No prediction can be made as to the effect, if any, that market sales of
shares or the availability of shares for sale will have on the market price of
our common stock prevailing from time to time. We are unable to estimate the
number of shares that may be sold in the public market pursuant to Rule 144,
since this will depend on the market price of the common stock, the personal
circumstances of the sellers and other factors. Nevertheless, sales of
significant amounts of our common stock in the public market could adversely
affect the market price of the common stock and could impair our ability to
raise capital through an offering of our equity securities.
In addition, we intend to register as soon as practicable after the
effective date of the offerings a total of 4,311,124 shares of common stock
subject to outstanding options or reserved for issuance under our stock
incentive plans. All shares of our common stock reserved for issuance upon
exercise of outstanding stock options are subject to the lockup agreements
described above.
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CERTAIN U.S. FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF COMMON STOCK
The following is a general discussion of certain U.S. federal income and
estate tax consequences of the ownership and disposition of our common stock
applicable to Non-U.S. Holders. In general, a "Non-U.S. Holder" is any holder
other than:
. a citizen or resident of the United States,
. a corporation or partnership created or organized in the United
States or under the laws of the United States or of any state,
. an estate, the income of which is includable in gross income for
U.S. federal income tax purposes regardless of its source or
. a trust if (a) a court within the United States is able to
exercise primary supervision over the administration of the trust,
and (b) one or more U.S. persons have the authority to control all
substantial decisions of the trust.
This discussion is based on current law and is for general information
only. This discussion does not address aspects of U.S. federal taxation other
than income and estate taxation and does not address all aspects of income and
estate taxation, nor does it consider any specific facts or circumstances that
may apply to a particular Non-U.S. Holder, including certain U.S. expatriates.
Accordingly, prospective investors are urged to consult their tax advisors
regarding the U.S. federal, state, local and non-U.S. income and other tax
consequences of holding and disposing of shares of our common stock.
An individual may, subject to certain exceptions, be deemed to be a
resident alien, as opposed to a non-resident alien, by virtue of being present
in the United States for at least 31 days in the calendar year and for an
aggregate of at least 183 days during a three year period ending in the current
calendar year (counting for such purposes all of the days present in the
current year, one-third of the days present in the immediately preceding year,
and one-sixth of the days present in the second preceding year). In addition to
the "substantial presence test" described in the immediately preceding
sentence, an alien may be treated as a resident alien if he (a) meets a lawful
permanent residence test (a so-called "green card" test) or (b) elects to be
treated as a U.S. resident and meets the "substantial presence test" in the
immediately following year. Resident aliens are subject to U.S. federal income
tax as if they were U.S. citizens.
Dividends
In general, dividends paid to a Non-U.S. Holder will be subject to U.S.
withholding tax at a 30% rate, or a lower rate prescribed by an applicable tax
treaty, unless the dividends are either (a) effectively connected with a trade
or business carried on by the Non-U.S. Holder within the United States, or (b)
if certain income tax treaties apply, attributable to a permanent establishment
in the United States maintained by the Non-U.S. Holder. Dividends effectively
connected with such a U.S. trade or business or attributable to such a U.S.
permanent establishment generally will not be subject to U.S. withholding tax
(if the Non-
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U.S. Holder files certain forms, including Internal Revenue Service Form 4224,
with the payor of the dividend) and generally will be subject to U.S. federal
income tax on a net income basis, in the same manner as if the Non-U.S. Holder
were a resident of the United States. A Non-U.S. Holder that is a corporation
may be subject to an additional branch profits tax at a rate of 30% (or such
lower rate as may be specified by an applicable treaty) on the repatriation
from the United States of its "effectively connected earnings and profits,"
subject to certain adjustments. To determine the applicability of a tax treaty
providing for a lower rate of withholding, dividends paid to an address in a
foreign country are presumed under current Treasury regulations to be paid to a
resident of that country absent knowledge to the contrary. Under recently
finalized Treasury regulations that will generally be effective for
distributions in taxable years after December 31, 1999, the "address rule"
described above will no longer apply. Instead, Non-U.S. Holders who wish to
claim the benefits of applicable tax treaties will be required to certify that
they are eligible for treaty benefits. These final Treasury regulations
describe in detail how particular Non-U.S. Holders, including partnerships or
other fiscally transparent entities, should state their eligibility for treaty
benefits. Non-U.S. Holders who wish to claim the benefits of applicable tax
treaties should consult their tax advisors concerning the applicability of
these rules to their particular circumstances. A Non-U.S. Holder that is
eligible for a reduced rate of U.S. withholding tax pursuant to a tax treaty
may obtain a refund of any excess amounts withheld by filing an appropriate
claim for refund with the Internal Revenue Service.
Sale of Our Common Stock
In general, a Non-U.S. Holder will not be subject to U.S. federal income
tax on any gain realized upon the disposition of that holder's shares of our
common stock unless:
. the gain either is (a) effectively connected with a trade or
business carried on by the Non-U.S. Holder within the United
States or (b) if certain tax treaties apply, is attributable to a
permanent establishment in the United States maintained by the
Non-U.S. Holder (and, in either case, the branch profits tax
discussed above may also apply if the Non-U.S. Holder is a
corporation);
. the Non-U.S. Holder is an individual who holds shares of our
common stock as a capital asset and is present in the United
States for 183 days more in the taxable year of disposition, and
either (a) that individual has a "tax home" (as defined for U.S.
federal income tax purposes) in the United States (unless the gain
from the disposition is attributable to an office or other fixed
place of business maintained by such Non-U.S. Holder in a foreign
country and such gain has been subject to a foreign income tax
equal to at least 10% of the gain derived from such disposition),
or (b) the gain is attributable to an office or other fixed place
of business maintained by that individual in the United States; or
. Advanstar is or has been a U.S. real property holding corporation
(a "USRPHC") for U.S. federal income tax purposes at any time
within the
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shorter of (a) the five-year period preceding the disposition of
our common stock and (b) that Non-U.S. Holder's holding period.
If a Non-U.S. Holder who is an individual is subject to the rules
described in the first bullet point above, he or she will, unless an
applicable tax treaty provides otherwise, be taxed on the net gain derived
from the sale at regular graduated U.S. federal income tax rates. If an
individual Non-U.S. Holder falls under the second bullet point above, he or
she will be subject to a flat 30% tax on the gain derived from the sale. If a
Non-U.S. Holder that is a corporation falls under the first bullet point
above, it will be taxed on the net gain from the sale at regular graduated
U.S. federal income tax rates and may be subject to an additional branch
profits tax at a rate of 30% (or such lower rate as may be specified by an
applicable tax treaty) on the repatriation from the United States of its
"effectively connected earnings and profits," subject to certain adjustments.
If Advanstar were or were to become a USRPHC at any time during this
period, gains realized upon a disposition of our common stock by a Non-U.S.
Holder who or which did not directly or indirectly own more than 5% of our
common stock during this period generally would not be subject to U.S. federal
income tax, provided that our common stock is regularly traded on an
established securities market. Advanstar is not, and does not anticipate
becoming, a USRPHC.
Estate Tax
Any shares of our common stock owned or treated as owned by an
individual who is not a citizen or resident (as defined for U.S. federal
estate tax purposes) of the United States at the time of death will be
includable in the individual's gross estate for U.S. federal estate tax
purposes (unless an applicable estate tax treaty provides otherwise), and
therefore may be subject to U.S. federal estate tax.
Backup Withholding, Information Reporting and Other Reporting Requirements
Advanstar must report annually to the Internal Revenue Service and to
each Non-U.S. Holder the amount of dividends paid to, and the tax withheld
with respect to, each Non-U.S. Holder. These reporting requirements apply
regardless of whether withholding was reduced or eliminated by an applicable
tax treaty. Copies of this information also may be made available under the
provisions of a specific treaty or agreement with the tax authorities in the
country in which the Non-U.S. Holder resides or is established.
U.S. backup withholding tax (which generally is imposed at the rate of
31% on certain payments to persons that fail to furnish the information
required under the U.S. information reporting requirements) and information
reporting requirements (other than those discussed above under "Dividends")
generally will not apply to dividends paid on our common stock to a Non-U.S.
Holder at an address outside the United States. Backup withholding and
information reporting generally will apply, however, to dividends paid on
shares of our common stock to a Non-U.S. Holder at an address in the United
States, if such holder fails to establish an exemption or to provide certain
other information to the payor.
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However, under recently finalized Treasury regulations, dividend payments
generally will be subject to information reporting and backup withholding
unless applicable certification requirements are satisfied.
The payment of proceeds from the disposition of our common stock or
through a U.S. office of a broker will be subject to information reporting and
backup withholding unless the owner, under penalties of perjury, certifies,
among other things, its status as a Non-U.S. Holder or otherwise establishes an
exemption. The payment of proceeds from the disposition of our common stock to
or through a non-U.S. office of a non-U.S. broker generally will not be subject
to backup withholding and information reporting except as noted below. Unless
the broker has documentary evidence in its files that the owner of our common
stock is a Non-U.S. Holder (and has no actual knowledge to the contrary), the
non-U.S. broker will be subject to information reporting (but not backup
withholding) if those proceeds are paid to or through a non-U.S. office and
that broker is:
. a U.S. person,
. a "controlled foreign corporation" for U.S. federal income tax
purposes,
. a foreign person 50% or more of whose gross income from certain
periods is effectively connected with a U.S. trade or business or
. in the case of payments made after December 31, 1999, a foreign
partnership with certain connections to the United States, a U.S.
branch of a foreign bank or a foreign insurance company, as more
completely described in the recently finalized Treasury
regulations.
Backup withholding is not an additional tax. Any amounts withheld under
the backup withholding rules from a payment to a Non-U.S. Holder will be
refunded or credited against the Non-U.S. Holder's U.S. federal income tax
liability, if any, provided that the required information is furnished to the
Internal Revenue Service.
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<PAGE>
UNDERWRITING
We intend to offer our common stock in the United States and Canada
through a number of U.S. underwriters as well as outside the United States and
Canada through a group of international managers. Merrill Lynch, Pierce, Fenner
& Smith Incorporated and Bear, Stearns & Co. Inc. are acting as U.S.
representatives for each of the U.S. underwriters named below. Subject to the
terms and conditions set forth in the U.S. purchase agreement among us, the
selling stockholders and the U.S. underwriters, and concurrently with the sale
of shares of common stock to the international managers, we and the selling
stockholders have agreed to sell to the U.S. underwriters, and each of the U.S.
underwriters severally and not jointly has agreed to purchase from us and the
selling stockholders, the number of shares of common stock set forth opposite
its name below.
<TABLE>
<CAPTION>
Number
U.S. Underwriters of Shares
----------------- ----------
<S> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.........................................
Bear, Stearns & Co. Inc...................................
Lehman Brothers Inc.......................................
Morgan Stanley & Co. Incorporated.........................
Salomon Smith Barney Inc..................................
--- ----------
Total................................................ 11,900,000
=== ==========
</TABLE>
We and the selling stockholders have also entered into an international
purchase agreement with certain underwriters outside the United States, whom
collectively we call the international managers and for whom Merrill Lynch
International and Bear, Stearns International Limited are acting as lead
managers. Subject to the terms and conditions set forth in the international
purchase agreement, and concurrently with the sale of 11,900,000 shares of
common stock to the U.S. underwriters pursuant to the U.S. purchase agreement,
we and the selling stockholders have agreed to sell to the international
managers, and the international managers have severally agreed to purchase from
the selling stockholders and us, an aggregate of 2,100,000 shares of common
stock. The initial public offering price per share of common stock and the
underwriting discount per share of common stock are identical under the U.S.
purchase agreement and the international purchase agreement.
In the U.S. purchase agreement and the international purchase agreement,
the several U.S. underwriters and the several international managers,
collectively, the underwriters, have agreed, subject to the terms and
conditions set forth in the respective purchase agreements, to purchase all of
the shares of common stock being sold pursuant to each such purchase
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<PAGE>
agreement if any of the shares of common stock being sold pursuant to each such
purchase agreement are purchased. Under certain circumstances, the commitments
of non-defaulting U.S. underwriters or international managers (as the case may
be) may be increased. The purchase of common stock by the U.S. underwriters is
conditioned upon the purchase of common stock by the international managers and
vice versa.
The U.S. representatives have advised the selling stockholders and us
that the U.S. underwriters propose initially to offer the shares of our common
stock to the public at the initial public offering price set forth on the cover
page of this prospectus, and to certain dealers at such price less a concession
not in excess of $ per share of common stock. The U.S. underwriters may
allow, and such dealers may reallow, a discount not in excess of $ per share
of our common stock on sales to certain other dealers. After the initial public
offering, the public offering price, concession and discount may be changed.
The following table shows the per share and total underwriting discounts
to be paid by us and the selling stockholders to the U.S. underwriters and the
international managers and the proceeds before expenses to us and the selling
stockholders. This information is presented assuming either no exercise or full
exercise by the underwriters of the overallotment option.
<TABLE>
<CAPTION>
Per Without With
share option option
----- ------- ------
<S> <C> <C> <C>
Public Offering Price......................................
Underwriting Discount......................................
Proceeds, before expenses, to Advanstar....................
Proceeds to Selling Stockholders...........................
</TABLE>
We will not receive any of the proceeds from the sale of shares of our
common stock by the selling stockholders. The expenses of the offerings are
estimated at $1,300,000 and are payable by us.
The selling stockholders have granted an option to the U.S. underwriters,
exercisable for 30 days after the date of this prospectus, to purchase up to an
aggregate of 1,785,000 additional shares of our common stock at the initial
public offering price set forth on the cover page of this prospectus, less the
underwriting discount. The U.S. underwriters may exercise this option solely to
cover over-allotments, if any, made on the sale of common stock offered hereby.
To the extent that the U.S. underwriters exercise this option, each U.S.
underwriter will be obligated, subject to certain conditions, to purchase a
number of additional shares of common stock proportionate to such U.S.
underwriter's initial amount reflected in the foregoing table. The selling
stockholders have also granted an option to the international managers,
exercisable for 30 days after the date of this prospectus, to purchase up to an
aggregate of 315,000 additional shares of our common stock to cover over-
allotments, if any, on terms similar to those granted to the U.S. underwriters.
At our request, the U.S. underwriters and the international managers have
reserved for sale, at the initial public offering price, up to 700,000 of the
shares of our common stock
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<PAGE>
offered hereby to be sold to certain of our employees and certain other
persons. The number of shares of common stock available for sale to the general
public will be reduced to the extent such persons purchase such reserved
shares. Any reserved shares which are not orally confirmed for purchase within
one day of the pricing of the offerings will be offered by the underwriters to
the general public on the same terms as the other shares offered hereby.
We, our executive officers and directors and substantially all of our
existing securityholders have agreed not to directly or indirectly, (1) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant for
the sale of, or otherwise dispose of or transfer any shares of Advanstar common
stock or any securities convertible into or exchangeable or exercisable for
Advanstar common stock, whether now owned or hereafter acquired by the person
executing the agreement or with respect to which the person executing the
agreement thereafter acquires the power of disposition, or (2) enter into any
swap or any other agreement or any transaction that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership of
Advanstar common stock, whether any such swap or transaction is to be settled
by delivery of common stock or other securities, in cash or otherwise, without
the prior written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated
for a period of 180 days after the date of the U.S. purchase agreement.
The U.S. underwriters and the international managers have entered into an
intersyndicate agreement that provides for the coordination of their
activities. Pursuant to the intersyndicate agreement, the U.S. underwriters and
the international managers are permitted to sell shares of our common stock to
each other for purposes of resale at the initial public offering price, less an
amount not greater than the selling concession. Under the terms of the
intersyndicate agreement, the U.S. underwriters and any dealer to whom they
sell shares of common stock will not offer to sell or resell shares of common
stock to persons who are non-U.S. or non-Canadian persons or to persons they
believe intend to resell to persons who are non-U.S. or non-Canadian persons,
and the international managers and any dealer to whom they sell shares of
common stock will not offer to sell or resell shares of common stock to U.S. or
Canadian persons or to persons they believe intend to resell to U.S. or
Canadian persons, except in the case of transactions pursuant to the
intersyndicate agreement.
Prior to the offerings, there has been no public market for our common
stock. Consequently, the initial public offering price for the shares of common
stock included in the offering has been determined by negotiations between us
and the U.S. representatives. Among the factors considered in determining such
price were the history of and prospects for our business and the industry in
which we compete, an assessment of our management and the present state of our
development, our past and present revenues and earnings, the prospects for
growth of our revenues and earnings, the current state of the economy in the
United States, the current level of economic activity in the industry in which
we compete and in related or comparable industries, and currently prevailing
conditions in the securities markets, including current market valuations of
publicly traded companies which are comparable to us. There can be no assurance
that an active trading market will develop for
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our common stock or that our common stock will trade in the public market
subsequent to the offerings at or above the initial public offering price.
We intend to apply for a listing of the common stock on the New York
Stock Exchange under the symbol "ADS." To meet the requirements for listing of
our common stock on that exchange, the U.S. underwriters and the international
managers have undertaken to sell lots of 100 or more shares to a minimum of
2,000 beneficial owners.
We and the selling stockholders have agreed to indemnify the U.S.
underwriters and international managers against liabilities arising from the
offerings, including liabilities under the Securities Act, or to contribute to
payments the U.S. underwriters or international managers may be required to
make in respect thereof.
Until the distribution of common stock is completed, certain rules of the
Securities and Exchange Commission may limit the ability of the U.S.
representatives and lead managers to bid for and purchase shares of common
stock. As an exception to these rules, the U.S. representatives are permitted
to engage in certain transactions that stabilize the price of the common stock.
Such transactions consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the common stock.
If the U.S. underwriters or the international managers create a short
position in the stock in connection with the offerings (i.e., if they sell more
shares of common stock than are set forth on the cover page of this
prospectus), the U.S. representatives may reduce the short position by
purchasing shares in the open market. The U.S. representatives may also elect
to reduce any short position through the exercise of all or part of the over-
allotment option described above.
The U.S. representatives may also impose a penalty bid on certain U.S.
underwriters and selling group members. This means that if the U.S.
representatives purchase shares in the open market to reduce the U.S.
underwriters' short position or to stabilize the price of the common stock,
they may reclaim the amount of the selling concession from the U.S.
underwriters and selling group members who sold those shares as part of the
offering.
In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid may also have an effect on the price of the common stock to the extent that
it discourages resales of the shares.
Neither we nor any of the selling stockholders nor any of the U.S.
underwriters makes any representation or prediction as to the direction or
magnitude of any effect that the transactions described above may have on the
price of our common stock. In addition, neither we nor any of the selling
stockholders nor any of the underwriters makes any representation that the U.S.
representatives will engage in such transactions or that such transactions,
once commenced, will not be discontinued without notice.
Affiliates of certain underwriters are lenders under our credit facility.
Certain of the U.S. underwriters have from time to time provided investment
banking financial advisory services to us and our affiliates, for which they
have received customary compensation, and may continue to do so in the future.
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<PAGE>
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Advanstar by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts. Certain
legal matters will be passed upon for the underwriters by Cahill Gordon &
Reindel (a partnership including a professional corporation), New York, New
York. Certain legal matters will be passed upon for the selling stockholders by
Heller Ehrman White & McAuliffe, San Francisco, California.
EXPERTS
The audited financial statements included in this prospectus and
elsewhere in the Registration Statement, to the extent and for the periods
indicated in their reports, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
The consolidated balance sheets of MAGIC as of May 31, 1996 and 1997 and
the consolidated statements of income, stockholders' equity and cash flows for
each of the years in the three year period ended May 31, 1997 included in this
prospectus have been audited by PricewaterhouseCoopers LLP, independent
accountants, as indicated in their reports thereon, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing.
The financial statements of Universal Media, Inc., as of December 31,
1997 and for the year then ended, included in this prospectus and elsewhere in
the Registration Statement, have been audited by Mahoney Cohen & Company, CPA,
P.C., independent certified public accountants, as indicated in their report
with respect thereto and are included herein in reliance upon the authority of
said firm as experts in accounting and auditing in giving said report.
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ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to the common stock. This prospectus does not
contain all of the information contained in the registration statement, and the
exhibits and schedules to the registration statement. For further information
with respect to us and our common stock, we refer you to the registration
statement, and the exhibits and schedules filed as part of the registration
statement. Statements in this prospectus concerning the contents of any
contract or any other document are not necessarily complete. If a contract or
document has been filed as an exhibit to the registration statement, we refer
you to that exhibit. Each statement in this prospectus relating to a contract
or document filed as an exhibit to the registration statement is qualified by
the filed exhibits.
In addition, we file reports, proxy statements and other information with
the SEC. You may read and copy any document we file, including the registration
statement, at the SEC's public reference rooms in Washington, D.C., New York,
New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public on the SEC's website at http://www.sec.gov.
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<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
ADVANSTAR, INC. AND SUBSIDIARIES (AND PREDECESSOR)
<S> <C>
Report of Independent Public Accountants................................. F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998 and March
31, 1999 (unaudited).................................................... F-3
Consolidated Statements of Operations for the five months ended May 31,
1996, seven months ended December 31, 1996, years ended December 31,
1997 and 1998 and three months ended March 31, 1998 and 1999
(unaudited)............................................................. F-4
Consolidated Statements of Stockholder's Equity for the five months ended
May 31, 1996, seven month ended December 31, 1996 and years ended
December 31, 1997 and 1998.............................................. F-5
Consolidated Statements of Cash Flows for the five months ended May 31,
1996, seven months ended December 31, 1996, years ended December 31,
1997 and 1998 and three months ended March 31, 1998 and 1999
(unaudited)............................................................. F-6
Notes to Consolidated Financial Statements............................... F-7
MEN'S APPAREL GUILD IN CALIFORNIA, INC.
Report of Independent Public Accountants................................. F-27
Report of Independent Accountants........................................ F-28
Consolidated Balance Sheets as of May 31, 1996 and 1997 and February 28,
1998.................................................................... F-29
Consolidated Statements of Income for the fiscal years ended May 31,
1995, 1996 and 1997 and the nine months ended February 28, 1998......... F-30
Consolidated Statements of Cash Flows for the fiscal years ended May 31,
1995, 1996 and 1997 and the nine months ended February 28, 1998......... F-31
Consolidated Statements of Shareholders' Equity for the fiscal years
ended May 31, 1995, 1996 and 1997 and the nine months ended February 28,
1998.................................................................... F-32
Notes to Consolidated Financial Statements............................... F-33
UNIVERSAL MEDIA, INC.
Report of Independent Auditors........................................... F-40
Balance Sheet as of December 31, 1997.................................... F-41
Statement of Operations for the year ended December 31, 1997............. F-42
Statement of Stockholder's Deficiency for the year ended December 31,
1997.................................................................... F-43
Statement of Cash Flows for the year ended December 31, 1997............. F-44
Notes to Financial Statements............................................ F-45
Condensed Balance Sheet as of June 30, 1998 (unaudited).................. F-51
Condensed Statement of Income for the six month periods ended June 30,
1997 and 1998 (unaudited)............................................... F-52
Condensed Statement of Cash Flows for the six month periods ended June
30, 1997 and 1998 (unaudited)........................................... F-53
Notes to Condensed Financial Statements (unaudited)...................... F-54
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Advanstar, Inc.:
We have audited the accompanying consolidated balance sheets as of
December 31, 1997 and 1998 and the consolidated statements of operations,
stockholder's equity and cash flows of Advanstar, Inc. (formerly Advanstar
Holdings, Inc.) (a Delaware corporation) and subsidiaries and its predecessor
for the five-month period ended May 31, 1996, the seven-month period ended
December 31, 1996, and the years ended December 31, 1997 and 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Advanstar,
Inc. and subsidiaries and its predecessor as of December 31, 1997 and 1998 and
the results of their operations and their cash flows for the five-month period
ended May 31, 1996, the seven-month period ended December 31, 1996, and the
years ended December 31, 1997 and 1998, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Minneapolis, Minnesota,
February 5, 1999, except for the matters discussed
in Note 1, as to which the date
is April 21, 1999
F-2
<PAGE>
ADVANSTAR, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<TABLE>
<CAPTION>
December 31, March 31,
------------------ -----------
1997 1998 1999
-------- -------- -----------
(unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.................... $ 7,024 $ 14,016 $ 12,930
Accounts receivable, net of allowance of
$553, $574 and $556 (unaudited), at December
31, 1997, 1998 and March 31, 1999,
respectively................................ 18,819 27,976 26,412
Prepaid expenses............................. 9,607 14,784 11,860
Other........................................ 2,256 2,097 1,912
-------- -------- --------
Total current assets....................... 37,706 58,873 53,114
-------- -------- --------
PROPERTY, PLANT AND EQUIPMENT
Land and improvements........................ 2,514 2,526 2,526
Buildings.................................... 5,041 5,110 5,149
Furniture, machinery and equipment........... 9,229 13,706 14,219
Leasehold improvements....................... 517 973 930
-------- -------- --------
17,301 22,315 22,824
Accumulated depreciation .................... (5,155) (8,190) (8,927)
-------- -------- --------
Net property, plant and equipment.......... 12,146 14,125 13,897
-------- -------- --------
INTANGIBLE ASSETS, net
Goodwill..................................... 176,103 495,144 488,903
Other intangibles............................ 72,542 92,084 87,424
-------- -------- --------
Total intangible assets.................... 248,645 587,228 576,327
-------- -------- --------
$298,497 $660,226 $643,338
======== ======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt......... $ 15,350 $ 8,253 $ 10,609
Accounts payable............................. 10,938 13,311 15,682
Accrued compensation......................... 6,809 6,146 3,761
Income taxes payable......................... 1,552 1,329 1,604
Other accrued liabilities.................... 2,312 11,660 14,629
Deferred revenue............................. 21,105 45,643 26,380
-------- -------- --------
Total current liabilities.................. 58,066 86,342 72,665
-------- -------- --------
LONG-TERM DEBT, net of current maturities...... 148,873 418,615 408,384
OTHER LONG-TERM LIABILITIES.................... 1,824 3,227 2,086
MINORITY INTEREST.............................. -- 17,282 17,675
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY
Common stock, $.01 par value; 40,000 shares
authorized; 21,800, 33,466 and 33,630
(unaudited) shares issued and outstanding at
December 31, 1997 and 1998, and March 31,
1999 respectively........................... 218 335 336
Capital in excess of par..................... 108,782 183,042 186,038
Accumulated deficit.......................... (19,309) (47,745) (39,596)
Accumulated other comprehensive income
(loss)...................................... 43 (872) (4,250)
-------- -------- --------
Total stockholder's equity................. 89,734 134,760 142,528
-------- -------- --------
$298,497 $660,226 $643,338
======== ======== ========
</TABLE>
The accompanying notes to financial statements
are an integral part of these consolidated statements.
F-3
<PAGE>
ADVANSTAR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Predecessor
------------
Seven
Months Year Ended Three Months Ended
Five Months Ended December 31, March 31,
Ended December 31, ------------------ -----------------------
May 31, 1996 1996 1997 1998 1998 1999
------------ ------------ -------- -------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net revenue............. $68,286 $ 82,720 $187,656 $259,825 $62,063 $99,084
------- -------- -------- -------- ------- -------
Operating expenses:
Cost of production.... 15,764 18,394 39,096 54,330 13,189 20,515
Selling, editorial and
circulation.......... 28,071 35,166 87,243 114,705 26,412 37,956
General and
administrative....... 10,031 15,446 27,514 36,883 8,207 13,129
Amortization of
goodwill and other
intangible assets.... 1,588 13,171 24,326 48,752 5,652 9,656
Depreciation.......... 1,423 1,882 2,964 2,579 584 722
------- -------- -------- -------- ------- -------
Total operating
expenses........... 56,877 84,059 181,143 257,249 54,044 81,978
------- -------- -------- -------- ------- -------
Operating income
(loss)................. 11,409 (1,339) 6,513 2,576 8,019 17,106
Other income (expense)
Interest expense,
net.................. (6,963) (7,511) (15,117) (27,862) (3,814) (8,827)
Other income
(expense), net....... 23 (488) 292 (1,926) (14) (15)
------- -------- -------- -------- ------- -------
Income (loss) before
income taxes and
minority interest...... 4,469 (9,338) (8,312) (27,212) 4,191 8,264
Provision for income
taxes.................. 13 1,076 583 1,264 54 494
Minority interest in
earnings of
subsidiary............. -- -- -- 40 304 379
------- -------- -------- -------- ------- -------
Net income (loss)....... $ 4,456 $(10,414) $ (8,895) $(28,436) $ 4,441 $ 8,149
======= ======== ======== ======== ======= =======
Earnings (loss) per
share
Basic................. $ 3.86 $ (0.54) $ (0.41) $ (0.96) $ 0.20 $ 0.24
Diluted............... 3.86 (0.54) (0.41) (0.96) 0.20 0.24
======= ======== ======== ======== ======= =======
Weighted average shares
outstanding
Basic................. 1,154 19,400 21,768 29,652 21,800 33,494
Diluted............... 1,154 19,400 21,768 29,652 21,800 34,486
======= ======== ======== ======== ======= =======
</TABLE>
The accompanying notes to financial statements
are an integral part of these consolidated statements.
F-4
<PAGE>
ADVANSTAR, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
Accumulated
Common Capital in Other
----------------- Excess of Comprehensive Accumulated
Shares Amount Par Value Income Deficit Total
---------- ------ ---------- ------------- ----------- --------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996
(Predecessor).......... 1,154,444 $ 11 $ 53,214 $ 105 $(181,633) $(128,304)
Comprehensive income:
Net Income........... -- -- -- -- 4,456
Translation
adjustment.......... -- -- -- (105) --
Total comprehensive
income.............. -- -- -- -- -- 4,351
---------- ----- -------- ------ --------- ---------
Balance, May 31, 1996
(Predecessor).......... 1,154,444 $ 11 $ 53,214 $ -- $(177,177) $(123,953)
========== ===== ======== ====== ========= =========
Balance, May 31, 1996
(Successor)............ 19,400,000 $ 194 $ 96,806 $ -- $ -- $ 97,000
Comprehensive income:
Net loss............. -- -- -- -- (10,414)
Translation
adjustment.......... -- -- -- 253 --
Total comprehensive
loss................ -- -- -- -- -- (10,161)
---------- ----- -------- ------ --------- ---------
Balance, December 31,
1996
(Successor)............ 19,400,000 194 96,806 253 (10,414) 86,839
Comprehensive income:
Net loss............. -- -- -- -- (8,895)
Translation
adjustment.......... -- -- -- (210) --
Total comprehensive
loss................ -- -- -- -- -- (9,105)
Issuance of common
stock................. 2,400,000 24 11,976 -- -- 12,000
---------- ----- -------- ------ --------- ---------
Balance, December 31,
1997
(Successor)............ 21,800,000 218 108,782 43 (19,309) 89,734
Comprehensive income:
Net loss............. -- -- -- -- (28,436)
Translation
adjustment.......... -- -- -- (915) --
Total comprehensive
loss................ -- -- -- -- -- (29,351)
Stock option
compensation.......... -- -- 3,397 -- -- 3,397
Issuance of common
stock................. 11,666,666 117 70,863 -- -- 70,980
---------- ----- -------- ------ --------- ---------
Balance, December 31,
1998................... 33,466,666 $ 335 $183,042 $ (872) $ (47,745) $ 134,760
========== ===== ======== ====== ========= =========
</TABLE>
The accompanying notes to financial statements
are an integral part of these consolidated statements.
F-5
<PAGE>
ADVANSTAR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended Three Months Ended
Predecessor Seven December 31, March 31,
------------ Months ------------------- -----------------------
Five Months Ended
Ended December 31,
May 31, 1996 1996 1997 1998 1998 1999
------------ ------------ -------- --------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).................................. $ 4,456 $ (10,414) $ (8,895) $ (28,436) $ 4,441 $ 8,149
Adjustments to reconcile net income (loss) to net
cash provided by operating activities
Depreciation and amortization..................... 3,019 15,120 26,371 39,158 6,347 10,524
Non-cash interest................................. 963 (4) 934 960 238 266
Asset impairment writedowns....................... -- -- 1,155 12,665 -- --
Non-cash stock compensation....................... -- -- -- 3,397 -- 2,997
(Gain) loss on sales of assets and other.......... (28) 8 (228) 1,968 (304) 396
Changes in operating assets and liabilities.......
Accounts receivable, net......................... (422) (2,010) (2,098) (6,064) (932) 1,564
Inventories...................................... 257 (45) (317) 657 2 83
Prepaid expenses................................. 2,055 (2,206) (2,001) (670) 3,256 2,924
Accounts payable and accrued liabilities......... (5,820) 6,169 (2,591) 7,338 884 (14)
Deferred revenue................................. (5,320) 5,745 290 3,674 (7,063) (19,263)
Other............................................ (171) 253 (28) (1,994) (3,500) 2,103
------- --------- -------- --------- -------- --------
Net cash provided by (used in) operating
activities..................................... (1,011) 12,616 12,592 32,653 3,369 9,729
------- --------- -------- --------- -------- --------
INVESTING ACTIVITIES
Additions to property, plant and equipment......... (365) (780) (2,260) (4,154) (1,240) (791)
Change in notes receivable......................... 34 235 (235) (124) 47 102
Acquisition of publications and trade shows, net... -- (18,379) (31,871) (358,315) (25,901) (2,621)
Proceeds from sale of publishing and other assets.. 57 -- 1,043 4,332 30 13
------- --------- -------- --------- -------- --------
Net cash used in investing activities........... (274) (18,924) (33,323) (358,261) (27,064) (3,297)
------- --------- -------- --------- -------- --------
FINANCING ACTIVITIES
Acquisition-related financing transactions
Redemption of common stock, options and warrants.. -- (57,002) -- -- -- --
Repayment of long-term debt....................... -- (171,162) -- -- -- --
Repayment of revolving credit loan................ -- (6,898) -- -- -- --
Proceeds from capital contributions............... -- 97,000 -- -- -- --
Proceeds from long-term debt...................... -- 140,000 -- -- -- --
Proceeds from revolving credit loan............... -- 4,000 -- -- -- --
Transaction costs and loan origination fees....... -- (5,699) -- -- -- --
Net proceeds from (payments on) revolving credit
loan.............................................. 4,332 13,000 (15,000) 27,000 26,500 (7,000)
Proceeds from long-term debt....................... 245 -- 40,000 399,613 -- --
Payments of long-term debt......................... (2,500) (6,000) (11,776) (163,993) (3,726) (885)
Proceeds from sale of common stock, capital
contributions and other........................... 150 -- 12,000 70,980 -- --
Dividends paid to minority interest holders........ -- -- -- (1,000) -- --
Purchase of interest rate cap agreements and
origination/underwriters fees..................... -- (1,295) -- -- -- --
------- --------- -------- --------- -------- --------
Net cash provided by financing activities....... 2,227 5,944 25,224 332,600 22,774 (7,885)
------- --------- -------- --------- -------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS........................................ -- -- -- -- (168) 367
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................................ 942 (364) 4,493 6,992 (1,089) (1,086)
CASH AND CASH EQUIVALENTS, beginning of period...... 1,953 2,895 2,531 7,024 7,024 14,010
------- --------- -------- --------- -------- --------
CASH AND CASH EQUIVALENTS, end of period............ $ 2,895 $ 2,531 $ 7,024 $ 14,016 $ 5,935 $ 12,930
- --------------------------------------------------
======= ========= ======== ========= ======== ========
</TABLE>
The accompanying notes to financial statements
are an integral part of these consolidated statements.
F-6
<PAGE>
ADVANSTAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Business
The accompanying consolidated financial statements include the accounts
of Advanstar, Inc., formerly Advanstar Holdings, Inc. (Holdings), and its
wholly-owned subsidiary Advanstar Communications Inc. (Communications) and
Communications' majority-owned subsidiaries (collectively, Advanstar or the
Company). All intercompany accounts and transactions between consolidated
entities have been eliminated.
The Company operates and manages trade shows and conferences; publishes
controlled circulation trade and professional periodicals; and markets a broad
range of marketing, direct mail and database products and services.
On May 31, 1996, Holdings acquired for cash all of the outstanding stock
of Communications. Holdings was established expressly for the purpose of
effecting the acquisition of Communications (the HFCP III Acquisition). The
aggregate purchase price for Communications was approximately $267.0 million,
consisting of $97.0 million cash equity, $144.0 million debt and approximately
$26.0 million of assumed liabilities and transaction costs.
Due to the effects of the HFCP III Acquisition on the recorded bases of
goodwill, intangibles, property and shareholders' equity, as discussed below,
the financial statements prior to and subsequent to the HFCP III Acquisition
are not comparable. Periods prior to June 1, 1996 represent the accounts of the
Predecessor.
On June 10, 1998, Holdings merged into its parent holding company, AHI
Holdings Corp. (AHI). AHI had no operations independent of Holdings. In
connection with the merger, AHI Holdings Corp. changed its name to Advanstar
Holdings, Inc. All references to the number of common shares and per share
amounts have been adjusted to reflect the capitalization of the merged entity.
On March 17, 1999, Advanstar Holdings, Inc. changed its name to Advanstar, Inc.
On April 20, 1999, the Company's board of directors approved a two-for-
one stock split, which was effected as a stock dividend. On April 21, 1999,
stockholder's were issued one additional share of Common Stock for each share
of Common Stock held on the record date of April 20, 1999. All references to
the number of common shares and per share amounts have been adjusted to reflect
the stock split on a retroactive basis.
2. Summary of Significant Accounting Policies
Cash and Cash Equivalents
Cash and cash equivalents include cash on deposit and highly liquid
investments with original maturities of three months or less. Cash equivalents
are stated at cost, which
F-7
<PAGE>
ADVANSTAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
approximates their fair market value. The effect of foreign currency
translation on cash held by foreign operations is immaterial.
Prepaid Expenses and Other Current Assets
Prepaid expenses consist primarily of prepaid trade show and conference
expenses, prepaid publication production costs and miscellaneous deposits.
Event and publication expenses are charged to operations at the time of the
occurrence of the related event and at the time of publication issuance. Other
current assets consist of paper inventories and notes receivable.
Property, Plant and Equipment
Property, plant and equipment additions are recorded at cost. For
financial reporting purposes, depreciation is provided on a straight-line basis
over the following estimated useful lives:
<TABLE>
<CAPTION>
Estimated Useful Lives
----------------------
<S> <C>
Land improvements................................... 10-15 years
Buildings........................................... 20-40 years
Furniture, machinery and equipment.................. 3-10 years
Leasehold improvements.............................. Life of lease
</TABLE>
For tax reporting purposes, certain assets have different estimated useful
lives.
Goodwill
All acquisitions have been accounted for using the purchase method of
accounting, with the purchase price in excess of the fair values of specific
identifiable tangible and intangible assets acquired allocated to goodwill.
Goodwill, which is being amortized on a straight-line basis over an
average of one to 23 years, is recorded in the accompanying consolidated
balance sheet net of accumulated amortization of $11.9 million and $29.4
million at December 31, 1997 and 1998, respectively.
Intangible Assets
Intangible assets related to the HFCP III Acquisition consist primarily
of advertiser, paid subscriber and trade show exhibitor lists, computer
software, the value assigned to Advanstar's assembled workforce and fulfillment
agreements. Such intangibles are being amortized on a straight-line basis over
one to 20 years. Intangible assets associated with acquired businesses consist
primarily of identifiable intangibles and are being amortized on a straight-
line basis over one to eight years. Accumulated amortization was $25.6 million
and $41.1 million at December 31, 1997 and 1998, respectively.
F-8
<PAGE>
ADVANSTAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Impairment of Long-Lived Assets
The Company evaluates the carrying value of long-lived assets, including
identifiable intangibles and goodwill, for impairment when events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. If impairment indicators are present and the estimated future non-
discounted cash flows are less than the carrying value of the assets and any
related goodwill, the carrying value is reduced to the estimated fair value as
measured by the discounted cash flows.
During 1998, the Company identified certain properties which, due to
changes in market conditions and portfolio management direction, the Company
elected to discontinue. As a result, a total non-cash charge of $12.7 million
was recorded to write down the carrying value of the related operating assets
and intangibles, and is included in amortization of goodwill and other
intangible assets on the consolidated statements of operations.
Revenue Recognition
Trade show and conference revenue is recognized in the accounting period
in which the event is conducted. Subscription revenue is recognized on a pro
rata basis as publications are issued to fulfill the subscription obligations.
Advertising revenue is recognized as the publication with the respective
advertisement is published. Deferred revenue is recorded when cash is received
in advance of providing the related service.
Deferred revenue consisted of the following at December 31 (in
thousands):
<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
Deferred trade show and conference revenue................ $16,529 $41,468
Deferred advertising and subscription revenue............. 4,576 4,175
------- -------
Total deferred revenue.................................... $21,105 $45,643
======= =======
</TABLE>
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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Ultimate results could differ from these estimates. On an
ongoing basis, management reviews its estimates, including those affecting
doubtful accounts, valuation of goodwill and intangible assets, compensation
related to stock options, and income taxes. Changes in facts and circumstances
may result in revised estimates.
F-9
<PAGE>
ADVANSTAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Foreign Currency Translation
The Company accounts for translation investments in foreign entities in
accordance with Statement of Financial Accounting Standards (SFAS) No. 52,
"Foreign Currency Translation."
Stock-Based Compensation
The Company accounts for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees," and related Interpretations.
Accordingly, due to the variable features of option grants under the Company's
stock option plan, the Company measures compensation cost as the difference
between the exercise price of the options and the fair value of the shares
under option at the end of each period, and recognizes compensation expense to
provide for such difference.
Comprehensive Income
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." This statement established rules for the reporting of
comprehensive income and its components. Comprehensive income reflects the
change in equity of a business enterprise during a period from transactions and
other events and circumstances from non-owner sources. Comprehensive income
consists of net income and foreign currency translation adjustments and is
presented in the consolidated statement of stockholder's equity. The adoption
of SFAS No. 130 had no impact on total shareholder's equity. Prior year
financial statements have been reclassified to conform to the SFAS No. 130
requirements.
Segments
Effective January 1, 1998, the Company adopted SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information". The Statement
establishes standards for the reporting of information about operating segments
in annual financials statements and requires that those businesses report
selected information about operating segments in interim financial reports.
SFAS No. 131 also establishes standards for related disclosures about products
and services, geographic areas, and major customers. The adoption of SFAS No.
131 did not affect results of operations or financial position, but did require
additional disclosure.
Reclassifications
Certain reclassifications have been made to amounts reported in prior
years in order to conform to the current year presentation.
F-10
<PAGE>
ADVANSTAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Recently Issued Accounting Standards
SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities" is effective for fiscal years beginning after June 15, 1999.
Because of the Company's minimal use of derivatives, management does not
anticipate that the adoption of the new Statement will have a significant
effect on earnings or the financial position of the Company.
In March 1998, the AICPA issued Statement of Position (SOP) 98-1,
"Accounting For the Costs of Computer Software Developed For or Obtained For
Internal use." The SOP, which was adopted as of the beginning of 1998, requires
capitalization of certain costs incurred in connection with developing or
obtaining internal use software. In the prior year, the Company expensed such
costs as incurred. The effect of adopting the SOP was not material to the
Company's 1998 net income.
3. Acquisitions
On April 30, 1998, the Company acquired Men's Apparel Guild in
California, Inc. (MAGIC), which operates apparel trade shows (the MAGIC
Acquisition). The acquisition was accounted for as a purchase. The purchase
price was approximately $234.3 million in cash and assumed liabilities.
Concurrent with the MAGIC Acquisition, the Company renegotiated its credit
agreement (the Original Credit Facility) to provide additional borrowing
capacity (as so amended, the First Amended Credit Facility) and issued
$150.0 million of senior subordinated notes (Notes). The Company also received
an additional equity contribution of approximately $71.0 million.
On August 17, 1998, the Company acquired certain travel-related
publication and trade show assets of Universal Media Inc. (the Travel Agent
Acquisition), including Travel Agent (collectively, Travel Agent). The
acquisition was accounted for as a purchase. The purchase price was
approximately $68.0 million in cash plus approximately $1.0 million in assumed
liabilities. Concurrent with the Travel Agent Acquisition, the Company
undertook an additional amendment to its credit agreement to further increase
its borrowing capacity thereunder by $40.0 million (as so amended, the Second
Amended Credit Facility, and together with the Original Credit Facility and the
First Amended Credit Facility, the Amended Credit Facility), and financed the
balance of the cash purchase price with its available cash and revolving credit
facility.
From January 1, 1998 through December 31, 1998, the Company completed 11
other acquisitions of trade shows, conferences and publishing properties, with
a cumulative purchase price totaling approximately $89.1 million. Certain
entities acquired in 1998 have minority ownership interests.
F-11
<PAGE>
ADVANSTAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following are unaudited pro forma operating results as if the
acquisitions had taken place at January 1, 1997 (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
Year ended December
31
--------------------
1997 1998
--------- ---------
<S> <C> <C>
Total revenues...................................... $ 270,039 $ 306,666
========= =========
Operating income.................................... $ 14,242 $ 15,140
========= =========
Net loss............................................ $ (17,314) $ (23,679)
========= =========
Loss per share--basic and diluted................... $ (0.80) $ (0.80)
========= =========
</TABLE>
The unaudited pro forma financial information is provided for
informational purposes only. It is based on historical information and does not
purport to be indicative of the results that would have occurred had the
acquisitions been made at January 1, 1998, or of future results.
During 1996 and 1997, the Company purchased certain trade shows and
publishing properties for an aggregate purchase price of $18.3 million and
$39.7 million, respectively. The cost of these acquired entities in excess of
the fair market value of net assets acquired has been recorded as goodwill and
intangibles. Due to the timing of these acquisitions the incremental pro forma
affect on the results of operations was not material.
4. Earnings Per Share
Earnings per share are calculated in accordance with Statement of
Financial Accounting Standards (SFAS) No. 128 "Earnings Per Share".
The following table is a reconciliation of the earnings numerator and the
weighted-average shares denominator used in the calculations of basic and
diluted earnings per share (in thousands, except per share data):
<TABLE>
<CAPTION>
Year ended Three Months Ended
December 31 March 31,
----------------- -----------------------
1997 1998 1998 1999
------- -------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net income (loss)
Basic and diluted earnings
per share.................. $(8,895) $(28,436) $4,441 $ 8,149
Weighted Average Shares
Basic....................... 21,768 29,652 21,800 33,494
Adjustments for dilutive se-
curities:
Employee stock options..... -- -- -- 992
Diluted..................... 21,768 29,652 21,800 34,486
======= ======== ====== =======
Basic earnings (loss) per
share....................... $ (0.41) $ (0.96) $ 0.20 $ 0.24
======= ======== ====== =======
Diluted earnings (loss) per
share....................... $ (0.41) $ (0.96) $ 0.20 $ 0.24
======= ======== ====== =======
</TABLE>
F-12
<PAGE>
ADVANSTAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. Debt
Amended Credit Facility
In August 1998, the Company amended its credit facility. The Amended
Credit Facility consists of three components: Tranche A, a 5 1/2-year term loan
in an aggregate principal amount equal to $100.0 million; Tranche B, a 7-year
term loan in an aggregate principal amount equal to $150.0 million; and a 5
1/2-year revolving credit facility in the maximum amount of $60.0 million. In
addition, the Company has purchased interest rate cap agreements for a notional
amount of $75.0 million to fix its interest rate exposure at 8.0-8.5%.
The obligations of the Company under the Amended Credit Facility are
guaranteed by the domestic wholly-owned subsidiaries of the Company and are
collateralized by substantially all tangible and intangible assets of the
Company and pledges of the Company and substantially all of its subsidiaries'
capital stock.
The Amended Credit Facility requires the Company to apply certain amounts
to prepay the term loans, including (i) proceeds from certain issuances of
equity or indebtedness by the Company; (ii) the net cash proceeds of certain
sales or other dispositions by the Company of any assets; and (iii) 50% of
excess cash flow (as defined) for each fiscal year starting on January 1, 2000.
The Company will also have the right to optionally prepay the loans, without
premium, in whole or in part. Amounts applied as prepayments of the revolving
credit facility may be reborrowed; amounts prepaid in respect of the term loans
may not.
The Amended Credit Facility contains certain restrictive financial
covenants, including a minimum fixed charge coverage ratio and a maximum
leverage ratio. The Company was in compliance with all covenants as of December
31, 1998.
Senior Subordinated Notes
The senior subordinated notes (Notes) issued in conjunction with the
MAGIC acquisition are unsecured obligations of Communications, limited to
$150.0 million aggregate principal amount, and will mature on May 1, 2008. Each
Note bears interest at 9 1/4%, payable semiannually. The Notes are redeemable
at Communications' option after May 1, 2003 through April 30, 2006 at specified
premiums, and at par thereafter. A portion of the Notes may be redeemed at a
premium prior to May 1, 2001 with proceeds of certain equity offerings made by
the Company, and the Notes may also be redeemed at a premium prior to May 1,
2003 upon a qualifying change of control of Advanstar.
F-13
<PAGE>
ADVANSTAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Restrictive financial covenants under the Notes include a minimum fixed
charge coverage ratio and limitations on certain asset dispositions and
dividend, distribution, and other restricted payments. The Company was in
compliance with all covenants as of December 31, 1998.
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
At December 31
------------------ At March 31,
1997 1998 1999
-------- -------- ------------
(unaudited)
<S> <C> <C> <C>
Tranche A term loan, interest at LIBOR plus
2.25%, 7.88% at December 31, 1998 (7.19% at
March 31, 1999--unaudited), due October 31,
2003........................................ $ 51,500 $ 98,529 $ 97,794
Tranche A2 term loan, interest at LIBOR plus
2.75%....................................... 38,850 -- --
Tranche B term loan, interest at LIBOR plus
2.50%, 8.13% at December 31, 1998 (7.19% at
March 31, 1999--unaudited), due April 30,
2005........................................ 71,873 149,700 149,550
Revolving credit loan, interest at LIBOR plus
2.25%, 7.88% at December 31, 1998 (7.19% at
March 31, 1999--unaudited), due October 31,
2003........................................ 2,000 29,000 22,000
Senior subordinated notes at 9.25%, due May
31, 2008,
Net of discount.............................. -- 149,639 149,649
-------- -------- --------
164,223 426,868 418,993
Less--Current maturities..................... (15,350) (8,253) (10,609)
-------- -------- --------
$148,873 $418,615 $408,384
======== ======== ========
</TABLE>
Based on the borrowing rates currently available to the Company for bank
loans with similar terms and average maturities, the fair value of long-term
debt was substantially the same as its carrying value at December 31, 1997 and
1998. Cash paid during 1996, 1997, 1998 and for the three months ended March
31, 1998 and 1999 for interest was $16.2 million, $15.4 million, $25.3 million,
$3.7 million (unaudited), and $5.2 million (unaudited), respectively.
Annual maturities of long-term debt for the next five years are as
follows (in thousands):
<TABLE>
<S> <C>
1999................................. $ 8,253
2000................................. 15,906
2001................................. 20,023
2002................................. 22,965
2003................................. 66,082
</TABLE>
6. Comprehensive Income
The table below presents comprehensive income, defined as changes in the
equity of the Company excluding changes resulting from investments by and
distributions to shareholders (in thousands).
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1998 1999
----------- -----------
(unaudited) (unaudited)
----------- -----------
<S> <C> <C>
Net income (loss)....................................... $ 4,441 $ 8,149
Change in cumulative translation adjustment............. (168) (3,378)
------- -------
Comprehensive income (loss)............................. $ 4,273 $ 4,771
======= =======
</TABLE>
F-14
<PAGE>
ADVANSTAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. Stockholder's Equity
Stock Option Plan
In November 1996, the Company implemented a nonqualified stock option
plan (the Plan) in which certain members of the Company's management are
eligible to participate. The term of the options runs for ten years, with
options vesting 20% in each of the first five years of the option term. The
exercise price for these options increases at a 10% annually compounded rate.
Options become immediately exercisable upon a change of control of the Company,
or at the discretion of the Company's Board of Directors. If the Company does
not complete an initial public offering by January 1, 2001, option holders may
agree with the Company to sell the shares under option to the Company at a fair
market value price to be determined by the Board of Directors. However, the
Company is not obligated to agree to any such repurchase under the terms of the
Plan. In addition, the Company has certain repurchase rights under the Plan.
Under the Plan, up to 3,000,000 options may be granted at the discretion of the
the Company's Board of Directors.
The Company accounts for the options using the intrinsic value method
outlined in APB Opinion No. 25, "Acounting for Stock Issued to Employees."
Accordingly, and because of the variable features of the Plan, the Company
measures compensation cost as the difference between the exercise price of the
options and the fair value of the shares under option at the end of each
period, and recognizes compensation expense to provide for such difference. No
compensation expense was recognized during 1996 or 1997 because the fair value
of Holdings' shares was less than the exercise price of the related options. As
of December 31, 1998, compensation expense of $3.4 million was recognized under
the Plan. The Company's net income (loss) on a pro forma basis would have been
unchanged from historical amounts for fiscal years 1996 and 1997. If the
Company had elected to recognize compensation cost based on the fair value of
the options granted as prescribed by SFAS No. 123, a net loss on a pro forma
basis would have been increased to $28.5 million or $0.97 loss per diluted
share for fiscal year 1998.
For purposes of computing compensation cost of stock options granted, the
fair value of each stock option grant was estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Expected dividend yield......................... -- -- --
Expected stock price volatility................. 34.2% 32.4% 30.6%
Risk-free interest rate......................... 6.0% 5.8% 5.6%
Expected life of options........................ 5 years 5 years 5 years
</TABLE>
F-15
<PAGE>
ADVANSTAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A summary of stock option activity under the Plan is as follows:
<TABLE>
<CAPTION>
Options Weighted Average
Outstanding Exercise Price
----------- ----------------
<S> <C> <C>
Outstanding at January 1, 1996................ -- --
Granted..................................... 1,247,400 $5.00
Exercised................................... -- --
Cancelled................................... -- --
Outstanding at December 31, 1996.............. 1,247,400 5.00
Granted..................................... 223,400 6.50
Exercised................................... -- --
Cancelled................................... -- --
Outstanding at December 31, 1997.............. 1,470,800 5.82
Granted..................................... 720,324 6.09
Exercised................................... -- --
Cancelled................................... (380,000) 5.87
Outstanding at December 31, 1998.............. 1,811,124 6.42
</TABLE>
As of December 31, 1998, the outstanding stock options had a weighted-
average exercise price of $6.42 and a weighted-average remaining contractual
life of 8.7 years. 609,640 options were exercisable with a weighted-average
exercise price of $6.42. The weighted average fair value of grants during 1998,
as estimated using the Black-Scholes option pricing model, was $1.20 per
option.
8. Postretirement and Other Employee Benefits
Postretirement Benefits
Prior to June 1, 1995, the Company maintained a plan whereby employees
retiring from the Company on or after attaining age 62 who had rendered at
least 20 years of service were entitled to postretirement medical coverage and
life insurance. On June 1, 1995, as permitted by the provisions of the plan,
the Company terminated the plan for all employees, except current retirees and
active employees who were at least 57 years of age and will have 20 years of
service upon reaching age 62. The accumulated postretirement benefit obligation
for the unfunded plan is not material.
401(k) Plan
The Company has an Employees' 401(k) Plan and Trust (the "Plan")
available to employees of the Company and its domestic subsidiaries. All
current and future domestic employees who have completed one year of service
and are at least 21 years of age are eligible to participate in the Plan. The
Company is required to make a matching contribution to the Plan and may, at its
discretion, make discretionary contributions to the Plan. Eligible employees
are vested 100% in their own contributions. Contributions made by the Company
vest in equal installments over five years. Total contribution expense was $0.4
million, $0.9 million and $1.0 million for the 7 months ended December 31,
1996, and the years ended December 31, 1997, 1998, respectively.
F-16
<PAGE>
ADVANSTAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. Income Taxes
The Company utilizes the liability method for calculating deferred income
taxes, and deferred tax assets and liabilities are determined based on the
estimated future tax effects of differences between the financial statement and
tax bases of assets and liabilities pursuant to the provisions of enacted tax
laws. Significant components of the Company's deferred tax assets were as
follows (in thousands):
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------
1997 1998
----------- ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............. $ 4,900 $ 8,510
Foreign tax credit carryforwards............. 1,042 1,159
Charitable contribution carryover............ 9 24
Amortization of intangible assets............ 305 4,620
Postretirement benefits other than pension... 467 307
Depreciation................................. 572 508
Stock option compensation.................... -- 1,290
Other, primarily accrued expenses............ 823 666
----------- ------------
Gross deferred tax assets.................. 8,118 17,084
Deferred tax liabilities:
Prepaid expenses............................. (1,736) (1,674)
----------- ------------
Valuation allowance............................ (6,382) (15,410)
----------- ------------
Deferred income taxes.......................... $ -- $ --
=========== ============
</TABLE>
A valuation allowance has been provided because of the Company's history
of operating losses. Net operating loss carry-forwards total $22.4 million at
December 31, 1998, of which $1.2 million is subject to certain limitations. Net
operating loss carry-forwards expire through 2012. The foreign tax credit
carry-forwards substantially expire in 2001.
10. Commitments and Contingencies
Leases
The Company has long-term operating leases for office space and office
equipment. The leases generally require the Company to pay maintenance,
insurance, taxes and other expenses in addition to minimum annual rentals.
Building and equipment rent expense was $2.6, $3.0 and $3.4 million for 1996,
1997 and 1998, respectively. Future minimum lease commitments under operating
leases with initial terms of one year or more are as follows (in thousands):
<TABLE>
<S> <C>
1999............................................................... $ 4,490
2000............................................................... 3,674
2001............................................................... 2,845
2002............................................................... 2,281
2003............................................................... 1,710
Thereafter......................................................... 18,510
</TABLE>
F-17
<PAGE>
ADVANSTAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Employment Agreements
Two senior executives of the Company entered into four-year employment
agreements with Holdings dated as of July 1, 1996. Pursuant to the agreements,
the executives are entitled to annual base salaries and annual bonuses based on
the Company's EBITDA for any year. The agreements also provide for severance
benefits equal to one year's base salary and benefits (and a pro rated bonus)
upon termination of employment by Holdings without "cause" or by the executive
for "good reason". The executives also entered into non-competition and
confidentiality agreements with the Company. The non-compete period is one year
after termination of employment unless employment is terminated by the Company
without cause or by the executive for good reason, in which case the non-
competition period is six months. During the non-competition period, the
executives may not hire any employee of the Company or solicit any trade show
or publishing business from a third party who has a relationship or contract
with the Company. Compensation expense for these executives is included in
general and administrative expense of the Company.
Litigation
The Company is a defendant in legal proceedings arising in the ordinary
course of business. Although the outcome of these proceedings cannot presently
be determined, in the opinion of management, disposition of these proceedings
will not have a material effect on the results of operations or financial
position of the Company.
11. Segments
The Company has three reportable segments: trade shows and conferences,
trade publications, and marketing services. The trade show and conference
segment allows exhibitors a cost effective means to showcase and sell products
and services while developing business relationships with many potential
customers in a short time period. The Company's trade publications segment
provides key new product and educational information to readers and allows
advertisers to reach highly targeted and select business audiences. The
marketing services segment offers customers mailing lists from the Company's
subscriber and attendee databases; editorial and advertising reprints; direct
mail postcards; and classified, recruitment and industry directory advertising.
The Company evaluates the performance of, and allocates resources to, its
segments based on gross profit. The accounting policies of the reportable
segments are the same as those described in the summary of significant
accounting policies. There are no intersegment sales or transfers. Segment
assets are primarily prepaid expenses and accounts receivables.
F-18
<PAGE>
ADVANSTAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Trade Shows Corporate
Trade and Marketing and
Publications Conferences Services Other Totals
------------ ----------- --------- --------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Seven months ended December 31, 1996
Revenues.................. $ 60,636 $ 13,929 $ 7,929 $ 226 $ 82,720
Gross profit.............. 19,649 4,954 4,331 226 29,160
Segment assets............ 18,827 3,055 1,625 253,666 277,173
-------- -------- ------- -------- --------
Year ended December 31, 1997
Revenues.................. 111,611 61,608 13,900 537 187,656
Gross profit.............. 33,801 19,799 7,180 537 61,317
Segment assets............ 21,337 7,761 1,832 267,567 298,497
-------- -------- ------- -------- --------
Year ended December 31, 1998
Revenues.................. 130,442 113,066 15,647 670 259,825
Gross profit.............. 37,715 44,528 8,102 445 90,790
Segment assets............ 30,119 10,962 2,254 616,891 660,226
-------- -------- ------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
Trade Shows Corporate
Trade and Marketing and
Publications Conferences Services Other Totals
------------ ----------- --------- --------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Three months ended March 31, 1998
(Unaudited)
Revenues.................. $26,132 $32,302 $3,395 $ 234 $ 62,063
Gross profit.............. 5,195 15,714 1,407 146 22,462
Segment assets............ 20,169 4,825 1,662 303,167 329,823
------- ------- ------ -------- --------
Three months ended March 31, 1999
(Unaudited)
Revenues.................. 33,272 61,573 4,084 155 99,084
Gross profit.............. 6,872 32,101 1,630 10 40,613
Segment assets............ 28,549 8,146 2,133 604,510 643,338
------- ------- ------ -------- --------
</TABLE>
Intangible assets represent 93.1%, 92.9% and 95.2% at December 31, 1996,
1997 and 1998, respectively and 93.3% (unaudited) and 95.3% (unaudited) at
March 31, 1998 and 1999, respectively, of corporate and other assets.
The reconciliation of total segment gross profit to consolidated pre-tax
income are as follows (in thousands):
<TABLE>
<CAPTION>
Seven months
ended Years ended Three Months Ended
December 31, December 31, March 31,
------------ ------------------ -----------------------
1996 1997 1998 1998 1999
------------ -------- -------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Total segment gross
profit................. $ 29,160 $ 61,317 $ 90,790 $22,462 $ 40,613
General and
administrative
expense................ (15,446) (27,514) (36,883) (8,207) (13,129)
Depreciation and
amortization........... (15,053) (27,290) (51,331) (6,236) (10,378)
Other expense........... (7,999) (14,825) (29,748) (3,828) (8,842)
-------- -------- -------- ------- --------
Consolidated pre-tax
loss................... $ (9,338) $ (8,312) $(27,172) $ 4,191 $ 8,264
======== ======== ======== ======= ========
</TABLE>
F-19
<PAGE>
ADVANSTAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Financial information relating to the Company's operations by geographic
area for the seven months ended December 31, 1996, and for the years ended
December 31, 1997 and 1998 was as follows (in thousands):
Revenues
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
United States........................................ $ 72,066 $164,197 $225,104
International........................................ 10,654 23,459 34,721
-------- -------- --------
$82,720 $187,656 $259,825
======== ======== ========
Revenues are primarily attributed to countries based on the location of
customers.
Long-Lived Assets
<CAPTION>
At December 31,
--------------------------
1996 1997 1998
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
United States........................................ $249,589 $257,057 $573,734
International........................................ 381 3,734 27,619
-------- -------- --------
$249,970 $260,791 $601,353
======== ======== ========
</TABLE>
12. Supplemental Guarantor Condensed Consolidating Financial Statements
Basis of presentation
The Notes are fully and unconditionally guaranteed on a senior
subordinated basis, jointly and severally, by Communications' wholly-owned
domestic subsidiaries and by Holdings. The subsidiary guarantors are Art
Expositions International, Inc.; MAGIC; Magic Kids, Inc.; Applied Business
TeleCommunications; and Expocon Management Associates, Inc. As of December 31,
1998, On Demand Marketing, Inc. and Technology Events Company, LLC, two former
guarantor subsidiaries, were merged with and into Communications. The
condensed consolidating financial statements of the guarantors are presented
below and should be read in connection with the Consolidated Financial
Statements of the Company. Separate financial statements of the guarantors are
not presented because the guarantors are jointly, severally and
unconditionally liable under the guarantees and the Company believes the
condensed consolidating financial statements presented are more meaningful in
understanding the financial position of the guarantors.
There are no significant restrictions on the ability of the Subsidiary
Guarantors to make distributions to the Company. Condensed consolidating
financial information has not been presented for 1996 and 1997 because the
Company had no non-guarantor subsidiaries in 1996 and 1997.
F-20
<PAGE>
ADVANSTAR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
At December 31, 1998
(in thousands)
<TABLE>
<CAPTION>
Guarantor Non-Guarantor
Holdings Communications Magic MagicKids ABC Expocon Subsidiaries Subsidiaries Elimination
-------- -------------- -------- --------- ------- ------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents..... $ -- $ 8,270 $ (108) $ 4 $ 8 $ (372) $ (468) $ 6,214 $ --
Accounts
receivable,
net............. -- 22,620 597 -- 430 1,138 2,165 3,191 --
Prepaid
expenses........ -- 7,818 3,600 54 190 451 4,295 2,671 --
Intercompany
receivable
(payable)....... 124 (22,330) 31,811 3,493 (1,189) (2,181) 31,934 (9,604) (124)
Other........... -- 1,556 -- -- -- -- -- 541 --
-------- -------- -------- ------ ------- ------- -------- ------- ---------
Total current
assets.......... 124 17,934 35,900 3,551 (561) (964) 37,926 3,013 (124)
-------- -------- -------- ------ ------- ------- -------- ------- ---------
Property, plant
and equipment,
net.............. -- 12,173 396 10 84 513 1,003 949
Investments in
subsidiaries..... 134,760 298,689 -- -- -- -- -- -- (433,449)
Net intangible
assets, net...... -- 293,146 209,613 -- 19,009 11,492 240,114 53,968 --
-------- -------- -------- ------ ------- ------- -------- ------- ---------
$134,884 $621,942 $245,909 $3,561 $18,532 $11,041 $279,043 $57,930 $(433,573)
======== ======== ======== ====== ======= ======= ======== ======= =========
LIABILITIES AND
SHAREHOLDER'S
EQUITY
Current
liabilities:
Current portion
of long-term
debt............ $ -- $ 8,253 $ -- $ -- $ -- $ -- $ -- $ -- $ --
Accounts
payable......... 124 9,109 1,439 27 48 17 1,531 2,671 (124)
Deferred
revenue......... -- 17,672 16,713 805 2,189 1,911 21,618 6,353 --
Accrued
liabilities..... -- 13,024 2,854 182 641 96 3,773 2,338 --
-------- -------- -------- ------ ------- ------- -------- ------- ---------
Total current
liabilities..... 124 48,058 21,006 1,014 2,878 2,024 26,922 11,362 (124)
-------- -------- -------- ------ ------- ------- -------- ------- ---------
Long term debt,
net of current
maturities....... -- 418,615 -- -- -- -- -- -- --
Other long term
liabilities...... -- 3,227 -- -- -- -- -- -- --
Minority
interest......... -- 17,282 -- -- -- -- -- -- --
Shareholder
interest
Common stock.... 335 20 2 -- 4 2 8 664 (692)
Capital in
excess of par
value........... 183,042 183,357 220,626 1,430 15,737 9,592 247,385 44,592 (475,334)
Retained
earnings
(deficit)....... (47,745) (47,745) 4,275 1,117 (87) (577) 4,728 1,312 41,705
Translation
adjustment...... (872) (872) -- -- -- -- -- -- 872
-------- -------- -------- ------ ------- ------- -------- ------- ---------
Total
shareholders'
equity.......... 134,760 134,760 224,903 2,547 15,654 9,017 252,121 46,568 (433,449)
-------- -------- -------- ------ ------- ------- -------- ------- ---------
$134,884 $621,942 $245,909 $3,561 $18,532 $11,041 $279,043 $57,930 $(433,573)
======== ======== ======== ====== ======= ======= ======== ======= =========
<CAPTION>
Consolidated
Total
------------
<S> <C>
ASSETS
Current assets:
Cash and cash
equivalents..... $ 14,016
Accounts
receivable,
net............. 27,976
Prepaid
expenses........ 14,784
Intercompany
receivable
(payable)....... --
Other........... 2,097
------------
Total current
assets.......... 58,873
------------
Property, plant
and equipment,
net.............. 14,125
Investments in
subsidiaries..... --
Net intangible
assets, net...... 587,228
------------
$660,226
============
LIABILITIES AND
SHAREHOLDER'S
EQUITY
Current
liabilities:
Current portion
of long-term
debt............ $ 8,253
Accounts
payable......... 13,311
Deferred
revenue......... 45,643
Accrued
liabilities..... 19,135
------------
Total current
liabilities..... 86,342
------------
Long term debt,
net of current
maturities....... 418,615
Other long term
liabilities...... 3,227
Minority
interest......... 17,282
Shareholder
interest
Common stock.... 335
Capital in
excess of par
value........... 183,042
Retained
earnings
(deficit)....... (47,745)
Translation
adjustment...... (872)
------------
Total
shareholders'
equity.......... 134,760
------------
$660,226
============
</TABLE>
F-21
<PAGE>
ADVANSTAR, INC.
CONDENSED STATEMENTS OF OPERATIONS
Year ended December 31, 1998
(in thousands)
<TABLE>
<CAPTION>
Art Guarantor Non-Guarantor
Holdings Communications Expo Magic MagicKids ABC Expocon Subsidiaries Subsidiaries Elimination
-------- -------------- ---- ------- --------- ------ ------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue...... $ -- $181,709 $-- $22,232 $1,999 $3,304 $8,165 $35,700 $42,416 $ --
Operating
expenses
Cost of sales
and selling,
editorial and
circulation..... -- 123,426 -- 8,162 852 2,395 5,672 17,081 28,528 --
General and
administrative.. -- 27,818 -- 1,520 27 346 865 2,758 6,307 --
Depreciation and
amortization.... -- 38,713 -- 8,335 3 641 1,262 10,241 2,377 --
-------- -------- ---- ------- ------ ------ ------ ------- ------- -------
Total operating
expenses........ -- 189,957 -- 18,017 882 3,382 7,799 30,080 37,212 --
Operating income
(loss)........... -- (8,248) -- 4,215 1,117 (78) 366 5,620 5,204 --
Other income
(expense):
Interest income
(expense), net.. -- (27,602) -- 60 -- -- 60 (320) --
Other income
(expense), net.. -- 2,812 -- -- 4 (888) (884) (3,854) --
-------- -------- ---- ------- ------ ------ ------ ------- ------- -------
Income (loss)
before income
taxes............ -- (33,038) -- 4,275 1,117 (74) (522) 4,796 1,030 --
Provision for
income tax....... -- 288 -- -- -- 13 13 963 --
Minority interest
in earnings...... -- 40 -- -- -- -- -- -- -- --
Equity in (loss)
of subsidiaries.. (28,436) 4,850 -- -- -- -- -- -- -- 23,586
-------- -------- ---- ------- ------ ------ ------ ------- ------- -------
Net income
(loss)........... $(28,436) $(28,436) $-- $ 4,275 $1,117 $ (87) $ (522) $ 4,783 $ 67 $23,586
======== ======== ==== ======= ====== ====== ====== ======= ======= =======
<CAPTION>
Consolidated
Total
------------
<S> <C>
Net revenue...... $259,825
Operating
expenses
Cost of sales
and selling,
editorial and
circulation..... 169,035
General and
administrative.. 36,883
Depreciation and
amortization.... 51,331
------------
Total operating
expenses........ 257,249
Operating income
(loss)........... 2,576
Other income
(expense):
Interest income
(expense), net.. (27,862)
Other income
(expense), net.. (1,926)
------------
Income (loss)
before income
taxes............ (27,212)
Provision for
income tax....... 1,264
Minority interest
in earnings...... 40
Equity in (loss)
of subsidiaries.. --
------------
Net income
(loss)........... $(28,436)
============
</TABLE>
F-22
<PAGE>
ADVANSTAR, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended December 31, 1998
(in thousands)
<TABLE>
<CAPTION>
Guarantor Non-Guarantor
Holdings Communications Art Expo Magic MagicKids ABC Expocon Subsidiaries Subsidiaries
-------- -------------- -------- --------- --------- -------- ------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating
Activities:
Net income
(loss)........... $(28,436) $(28,436) $ -- $ 4,275 $1,117 $ (87) $ (522) $ 4,783 $ 67
Adjustments to
reconcile net
income (loss) to
net cash provided
by operating
activities:
Depreciation and
amortization..... -- 39,205 -- 8,335 3 641 1,262 10,241 2,377
Non cash Items... -- 6,305 -- -- -- -- 20 20 --
Change in working
capital items.... -- (248,081) -- 194,992 (1,784) 17,884 3,469 214,561 31,611
-------- -------- ----- --------- ------ -------- ------- --------- --------
Net cash
provided by
(used in)
operating
activities...... (28,436) (231,007) 207,602 (664) 18,438 4,229 229,605 34,055
-------- -------- ----- --------- ------ -------- ------- --------- --------
Investment
Activities:
Net loss in
investment in
subsidiaries..... 28,436 -- -- -- -- -- -- -- --
Additions to
property, plant
and equipment,
net.............. -- 1,367 -- (171) (5) (49) (446) (671) (518)
Acquisitions of
publications and
trade shows...... -- (99,093) -- (207,539) 673 (18,381) (3,838) (229,085) (30,261)
-------- -------- ----- --------- ------ -------- ------- --------- --------
Net cash provided
by (used in)
investing
activities....... 28,436 (97,726) -- (207,710) 668 (18,430) (4,284) (229,756) (30,779)
-------- -------- ----- --------- ------ -------- ------- --------- --------
Financing
Activities:
Proceeds from
sale of common
stock and capital
contributions and
other............ -- 70,980 -- -- -- -- -- -- --
Dividends paid to
minority interest
holders.......... -- -- -- -- -- -- -- -- (1,000)
Borrowings of
long-term debt,
net.............. -- 262,620 -- -- -- -- -- -- --
-------- -------- ----- --------- ------ -------- ------- --------- --------
Net cash provided
by (used in)
financing
activities....... -- 333,600 -- -- -- -- -- -- (1,000)
-------- -------- ----- --------- ------ -------- ------- --------- --------
NET INCREASE
(DECREASE) IN CASH
AND CASH
EQUIVALENTS:...... -- 4,867 -- (108) 4 8 (55) (151) 2,276
CASH AND CASH
EQUIVALENTS,
beginning of
period:........... -- 3,403 -- -- -- -- (317) (317) 3,938
-------- -------- ----- --------- ------ -------- ------- --------- --------
CASH AND CASH
EQUIVALENTS, end
of period:........ $ -- $ 8,270 $ -- $ (108) $ 4 $ 8 $ (372) $ (468) $ 6,214
======== ======== ===== ========= ====== ======== ======= ========= ========
<CAPTION>
Consolidated
Elimination Total
----------- ------------
<S> <C> <C>
Operating
Activities:
Net income
(loss)........... $23,586 $ (28,436)
Adjustments to
reconcile net
income (loss) to
net cash provided
by operating
activities:
Depreciation and
amortization..... -- 51,823
Non cash Items... -- 6,325
Change in working
capital items.... 4,850 2,941
----------- ------------
Net cash
provided by
(used in)
operating
activities...... 28,436 32,653
----------- ------------
Investment
Activities:
Net loss in
investment in
subsidiaries..... (28,436) --
Additions to
property, plant
and equipment,
net.............. -- 178
Acquisitions of
publications and
trade shows...... -- (358,439)
----------- ------------
Net cash provided
by (used in)
investing
activities....... (28,436) (358,261)
----------- ------------
Financing
Activities:
Proceeds from
sale of common
stock and capital
contributions and
other............ -- 70,980
Dividends paid to
minority interest
holders.......... -- (1,000)
Borrowings of
long-term debt,
net.............. -- 262,620
----------- ------------
Net cash provided
by (used in)
financing
activities....... -- 332,600
----------- ------------
NET INCREASE
(DECREASE) IN CASH
AND CASH
EQUIVALENTS:...... -- 6,992
CASH AND CASH
EQUIVALENTS,
beginning of
period:........... -- 7,024
----------- ------------
CASH AND CASH
EQUIVALENTS, end
of period:........ $ -- $ 14,016
=========== ============
</TABLE>
F-23
<PAGE>
ADVANTSTAR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
At March 31, 1999
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor Consolidated
Holdings ACI Magic ABC Expocon Subsidiaries Subsidiaries Elimination Total
-------- -------- -------- ------- ------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents........... $ -- $ 6,156 $ 116 $ 6 $ (11) $ 111 $ 6,663 $ -- $ 12,930
Accounts receivable,
net................... -- 22,946 (124) (24) (41) (189) 3,655 -- 26,412
Prepaid expenses....... -- 6,033 1,877 69 793 2,739 3,088 -- 11,860
Intercompany receivable
(payable)............. 99 (30,071) 38,769 (219) 345 38,895 (8,824) (99) --
Other.................. -- 1,600 -- -- -- -- 312 -- 1,912
-------- -------- -------- ------- ------- -------- ------- --------- --------
Total current assets.. 99 6,664 40,638 (168) 1,086 41,556 4,894 (99) 53,114
-------- -------- -------- ------- ------- -------- ------- --------- --------
Property, plant and
equipment, net......... -- 12,140 359 41 489 889 868 13,897
Investments in
subsidiaries........... 142,528 311,986 -- -- -- -- -- (454,514) --
Net intangible assets,
net.................... -- 287,514 206,884 18,020 11,184 236,088 52,725 -- 576,327
-------- -------- -------- ------- ------- -------- ------- --------- --------
$142,627 $618,304 $247,881 $17,893 $12,759 $278,533 $58,487 $(454,613) $643,338
======== ======== ======== ======= ======= ======== ======= ========= ========
LIABILITIES AND
SHAREHOLDER'S EQUITY
Current liabilities:
Current portion of
long-term debt........ $ -- $ 10,609 $ -- $ -- $ -- $ -- $ -- $ -- $ 10,609
Accounts payable....... 124 8,307 3,171 194 3,365 4,010 (124) 15,682
Deferred revenue....... -- 14,193 1,390 1,793 4,592 7,775 4,412 -- 26,380
Accrued liabilities.... (25) 14,522 2,481 599 73 3,153 2,319 25 19,994
-------- -------- -------- ------- ------- -------- ------- --------- --------
Total current
liabilities.......... 99 47,631 7,042 2,586 4,665 14,293 10,741 (99) 72,665
-------- -------- -------- ------- ------- -------- ------- --------- --------
Long term debt, net of
current maturities..... -- 408,384 -- -- -- -- -- -- 408,384
Other long term
liabilities............ -- 2,086 -- -- -- -- -- -- 2,086
Minority interest....... -- 17,675 -- -- -- -- -- -- 17,675
Shareholder interest
Common stock........... 336 20 2 4 2 8 664 (692) 336
Capital in excess of
par value............. 186,038 186,354 220,626 15,737 9,592 245,955 45,529 (477,838) 186,038
Retained earnings
(deficit)............. (39,596) (39,596) 20,211 (434) (1,500) 18,277 1,553 19,766 (39,596)
Translation
adjustment............ (4,250) (4,250) -- -- -- -- -- 4,250 (4,250)
-------- -------- -------- ------- ------- -------- ------- --------- --------
Total shareholders'
equity............... 142,528 142,528 240,839 15,307 8,094 264,240 47,746 (454,514) 142,528
-------- -------- -------- ------- ------- -------- ------- --------- --------
$142,627 $618,304 $247,881 $17,893 $12,759 $278,533 $58,487 $(454,613) $643,338
======== ======== ======== ======= ======= ======== ======= ========= ========
</TABLE>
F-24
<PAGE>
ADVANTSTAR, INC.
CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended March 31, 1999
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Non-
Art Guarantor Guarantor Consolidated
Holdings ACI Expo Magic ABC Expocon Subsidiaries Subsidiaries Elimination Total
-------- ------- ---- ------- ----- ------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue............ $ -- $57,969 $-- $27,683 $ 829 $ -- $28,512 $12,603 $ -- $99,084
------ ------- ---- ------- ----- ----- ------- ------- -------- -------
Operating expenses
Cost of sales and
selling, editorial
and circulation...... -- 38,740 -- 9,522 942 428 10,892 8,839 -- 58,471
General and
administrative....... -- 11,236 -- 569 163 732 1,161 -- 13,129
Depreciation and
amortization......... -- 6,287 -- 2,774 234 332 3,340 751 -- 10,378
------ ------- ---- ------- ----- ----- ------- ------- -------- -------
Total operating
expenses............ -- 56,263 -- 12,865 1,176 923 14,964 10,751 -- 81,978
------ ------- ---- ------- ----- ----- ------- ------- -------- -------
Operating income
(loss)................ -- 1,706 -- 14,818 (347) (923) 13,548 1,852 -- 17,106
Other income (expense):
Interest income
(expense), net....... -- (8,518) -- 1 -- -- 1 (310) -- (8,827)
Other income
(expense), net....... -- 813 -- -- -- -- -- (828) -- (15)
------ ------- ---- ------- ----- ----- ------- ------- -------- -------
Income (loss) before
income taxes.......... -- (5,999) -- 14,819 (347) (923) 13,549 714 -- 8,264
Provision for income
tax................... -- (21) -- -- -- -- -- (473) -- (494)
Minority interest in
earnings.............. -- 379 -- -- -- -- -- -- -- 379
Equity in (loss) of
subsidiaries.......... 8,149 13,790 -- -- -- -- -- -- (21,939) --
------ ------- ---- ------- ----- ----- ------- ------- -------- -------
Net income (loss)...... $8,149 $ 8,149 $-- $14,819 $(347) $(923) $13,549 $ 241 $(21,939) $ 8,149
====== ======= ==== ======= ===== ===== ======= ======= ======== =======
</TABLE>
F-25
<PAGE>
ADVANTSTAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1999
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Non-
Art Guarantor Guarantor Consolidated
Holdings ACI Expo Magic ABC Expocon Subsidiaries Subsidiaries Elimination Total
-------- ------- ---- ------- ----- ------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Activities:
Net income (loss)... $8,149 $ 8,149 $-- $14,819 $(347) $(923) $13,549 $ 241 $(21,939) $ 8,149
Adjustments to
reconcile net
income (loss) to
net cash provided
by operating
activities:
Depreciation and
amortization...... -- 6,433 -- 2,774 234 332 3,340 751 -- 10,524
Non cash items..... -- 3,659 -- -- -- -- -- -- -- 3,659
Change in working
capital items..... -- (11,741) -- (17,346) (644) 954 (17,036) 2,384 13,790 (12,603)
------ ------- ---- ------- ----- ----- ------- ------ -------- -------
Net cash provided
by (used in)
operating
activities........ 8,149 6,500 247 (757) 363 (147) 3,376 (8,149) 9,729
------ ------- ------- ----- ----- ------- ------ -------- -------
Investment
Activities:
Net loss in
investment in
subsidiaries....... (8,149) -- -- -- -- -- -- -- 8,149 --
Additions to
property, plant and
equipment, net..... -- (642) -- (2) (2) (134) -- (778)
Acquisitions of
publications and
trade shows........ -- (454) -- (27) 755 728 (2,793) -- (2,519)
------ ------- ---- ------- ----- ----- ------- ------ -------- -------
Net cash provided
by (used in)
investing
activities........ (8,149) (1,096) -- (27) 755 (2) 726 (2,927) 8,149 (3,297)
------ ------- ---- ------- ----- ----- ------- ------ -------- -------
Financing Activities:
Proceeds from sale
of common stock and
capital
contributions and
other.............. -- -- -- -- -- -- -- -- -- --
Dividends paid to
minority interest
holders............ -- -- -- -- -- -- -- -- -- --
Borrowings of long-
term debt, net..... -- (7,885) -- -- -- -- -- -- -- (7,885)
------ ------- ---- ------- ----- ----- ------- ------ -------- -------
Net cash provided
by (used in)
financing
activities........ -- (7,885) -- -- -- -- -- -- -- (7,885)
------ ------- ---- ------- ----- ----- ------- ------ -------- -------
EFFECT OF EXCHANGE
RATE ON CASH........ 367 367
NET INCREASE
(DECREASE) IN CASH
AND CASH
EQUIVALENTS:........ -- (2,114) -- 220 (2) 361 579 449 -- (1,086)
CASH AND CASH
EQUIVALENTS,
beginning of
period.............. -- 8,270 -- (104) 8 (372) (468) 6,214 -- 14,016
------ ------- ---- ------- ----- ----- ------- ------ -------- -------
CASH AND CASH
EQUIVALENTS, end of
period.............. $ -- $ 6,156 $-- $ 116 $ 6 $ (11) $ 111 $6,663 $ -- $12,930
====== ======= ==== ======= ===== ===== ======= ====== ======== =======
</TABLE>
F-26
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Men's Apparel Guild in California, Inc.:
We have audited the accompanying consolidated balance sheet of Men's
Apparel Guild in California, Inc. and subsidiary as of February 28, 1998, and
the related consolidated statement of income, shareholders' equity and cash
flows for the nine-month period ended February 28, 1998. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Men's Apparel Guild in California, Inc. and subsidiary as of February 28,
1998, and the consolidated results of their operations and their cash flows for
the nine-month period ended February 28, 1998 in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Minneapolis, Minnesota,
March 20, 1998
F-27
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Men's Apparel Guild in California, Inc.:
We have audited the accompanying consolidated balance sheets of Men's
Apparel Guild in California, Inc. and subsidiary as of May 31, 1997 and 1996,
and the related consolidated statements of income, shareholders' equity and
cash flows for each of the years in the three year period ended May 31, 1997.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Men's Apparel Guild in California, Inc. and subsidiary as of May 31, 1997
and 1996, and the consolidated results of their operations and their cash flows
for each of the years in the three year period ended May 31, 1997 in conformity
with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Los Angeles, California
June 24, 1997
F-28
<PAGE>
MEN'S APPAREL GUILD IN CALIFORNIA, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
May 31, February 28,
------------------------ ------------
1996 1997 1998
----------- ----------- ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............. $ 8,773,384 $ 9,386,181 $19,707,338
Short-term investments................ 6,830,325 9,743,512 --
Other current assets.................. 1,691,956 1,688,580 3,370,926
----------- ----------- -----------
Total current assets................ 17,295,665 20,818,273 23,078,264
Property and equipment, net............. 201,768 343,788 292,336
Long-term investments................... 7,502,131 7,909,644 --
Intangible and other assets............. 14,098 911,243 989,963
----------- ----------- -----------
Total assets........................ $25,013,662 $29,982,948 $24,360,563
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses............................. $ 3,572,234 $ 1,648,838 $ 8,687,916
Deferred revenue...................... 8,140,750 8,064,014 890,025
Exhibitors' security deposits......... 1,875,576 1,909,760 1,909,497
----------- ----------- -----------
Total current liabilities........... 13,588,560 11,622,612 11,487,438
Commitments and contingencies (Notes 7,
8)
Shareholders' equity:
Common stock (no par value; 100,000
shares authorized 42,000, 40,000 and
33,523 shares issued and outstanding
at May 31, 1996 and 1997 and February
28, 1998, respectively).............. 161,204 153,528 128,668
Retained earnings..................... 11,342,077 18,241,367 12,744,457
Shareholders' note receivable......... (16,211) -- --
Unrealized loss on investments........ (61,968) (34,559) --
----------- ----------- -----------
Total shareholders' equity.......... 11,425,102 18,360,336 12,873,125
----------- ----------- -----------
Total liabilities and shareholders'
equity............................. $25,013,662 $29,982,948 $24,360,563
=========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
F-29
<PAGE>
MEN'S APPAREL GUILD IN CALIFORNIA, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Nine Months
Ended
Years Ended May 31, February 28,
----------------------------------- ------------
1995 1996 1997 1998
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Booth revenue................. $19,802,379 $24,716,709 $28,460,935 $35,692,946
Other operating revenue....... 1,931,848 1,890,940 2,691,582 3,001,601
----------- ----------- ----------- -----------
Total revenue............... 21,734,227 26,607,649 31,152,517 38,694,547
Direct costs.................. 10,067,269 13,036,535 14,491,101 14,562,032
----------- ----------- ----------- -----------
Gross profit................ 11,666,958 13,571,114 16,661,416 24,132,515
General and administrative
expenses..................... 3,423,456 3,109,448 4,303,749 3,262,179
Profit participation.......... 289,123 574,279 354,624 364,640
----------- ----------- ----------- -----------
Income from operations...... 7,954,379 9,887,387 12,003,043 20,505,696
Interest and investment
income....................... 677,381 986,603 1,194,568 653,738
----------- ----------- ----------- -----------
Income before provision for
income taxes............... 8,631,760 10,873,990 13,197,611 21,159,434
Provision for income taxes.... 3,089,209 3,965,213 4,805,997 7,696,565
----------- ----------- ----------- -----------
Net income.................. $ 5,542,551 $ 6,908,777 $ 8,391,614 $13,462,869
=========== =========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-30
<PAGE>
MEN'S APPAREL GUILD IN CALIFORNIA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months
Ended
Years Ended May 31, February 28,
------------------------------------- ------------
1995 1996 1997 1998
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income............... $ 5,542,551 $ 6,908,777 $ 8,391,614 $ 13,462,869
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization........... 459,391 282,778 243,905 211,974
Deferred income taxes... (85,791) 121,395 (91,401) 166,781
Loss on disposal of
fixed assets........... 65,635 -- -- --
Realized loss on sale of
investments............ -- -- -- 34,559
Changes in operating
assets and liabilities:
Prepaid expenses and
other current assets... (342,175) (138,448) (223,593) (844,945)
Prepaid income taxes.... (8,397) (509,194) 318,364 (1,132,002)
Other assets............ (100,000) 112,087 2,855 16,159
Accounts payable and
accrued expenses....... 468,185 (534,205) 911,604 7,039,078
Deferred revenue........ 1,366,910 924,116 (76,736) (7,173,989)
Exhibitors' security
deposits............... 266,715 370,861 34,184 (263)
Accrued loss on
leasehold.............. 250,470 (455,949) -- --
----------- ----------- ----------- ------------
Net cash provided by
operating activities.. 7,883,494 7,082,218 9,510,796 11,780,221
----------- ----------- ----------- ------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Net change in short-term
investments............. (4,023,766) (2,806,559) (2,913,187) 9,743,512
Proceeds from sale of
long-term investments... 3,416,011 4,150,613 3,596,778 7,875,085
Purchases of
investments............. (3,592,471) (4,575,474) (3,976,902) --
Investment in
subsidiary.............. -- -- (900,000) --
Purchases of fixed
assets.................. (335,932) (119,962) (385,899) (93,022)
----------- ----------- ----------- ------------
Net cash used in
investing activities.. (4,536,158) (3,351,382) (4,579,210) 17,525,575
----------- ----------- ----------- ------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Payment of dividends..... -- (2,835,000) (2,835,000) (2,835,000)
Repayments of
shareholders' notes
receivable.............. 85,660 60,933 16,211 --
Repurchases of common
stock................... (2,000) -- (1,500,000) (16,149,639)
----------- ----------- ----------- ------------
Net cash used in
financing activities.. 83,660 (2,774,067) (4,318,789) (18,984,639)
----------- ----------- ----------- ------------
Net increase in cash
and cash equivalents.. 3,430,996 956,769 612,797 10,321,157
CASH AND CASH EQUIVALENTS,
beginning of year........ 4,385,619 7,816,615 8,773,384 9,386,181
----------- ----------- ----------- ------------
CASH AND CASH EQUIVALENTS,
end of year.............. $ 7,816,615 $ 8,773,384 $ 9,386,181 $ 19,707,338
=========== =========== =========== ============
SUPPLEMENTARY INFORMATION:
Cash paid for income
taxes................... $ 3,138,397 $ 4,353,500 $ 4,583,000 $ 4,305,000
=========== =========== =========== ============
NONCASH INVESTING AND
FINANCING ACTIVITIES:
</TABLE>
The Company's Board of Directors declared a dividend of $67.50 per common
share on May 31, 1996. Payment of these dividends, totaling $2,835,000 was made
on June 14, 1996.
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-31
<PAGE>
MEN'S APPAREL GUILD IN CALIFORNIA, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED MAY 31, 1995, 1996 AND 1997
AND FOR THE NINE MONTHS ENDED FEBRUARY 28, 1998
<TABLE>
<CAPTION>
Unrealized
Common Stock Shareholders Gain (Loss)
---------------- Retained Notes on
Shares Amount Earnings Receivable Investments Total
------ -------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, May 31, 1994... 43,000 $163,204 $ 4,560,749 $(162,804) $ (58,897) $ 4,502,252
Change in unrealized
gain (loss) on
investments........... -- -- -- -- 113,868 113,868
Dividends declared on
common stock ($67.50
per share)............ -- -- (2,835,000) -- -- (2,835,000)
Repurchase of common
stock................. (1,000) (2,000) -- -- -- (2,000)
Repayments of notes
receivable from
shareholders.......... -- -- -- 85,660 -- 85,660
Net income............. -- -- 5,542,551 -- -- 5,542,551
------ -------- ----------- --------- --------- -----------
Balance, May 31, 1995... 42,000 161,204 7,268,300 (77,144) 54,971 7,407,331
Change in unrealized
gain (loss) on
investments........... -- -- -- -- (116,939) (116,939)
Dividends declared on
common stock ($67.50
per share)............ -- -- (2,835,000) -- -- (2,835,000)
Repayments of notes
receivable from
shareholders.......... -- -- -- 60,933 -- 60,933
Net income............. -- -- 6,908,777 -- -- 6,908,777
------ -------- ----------- --------- --------- -----------
Balance, May 31, 1996... 42,000 161,204 11,342,077 (16,211) (61,968) 11,425,102
Change in unrealized
gain (loss) on
investments........... -- -- -- -- 27,409 27,409
Repurchase of common
stock................. (2,000) (7,676) (1,492,324) -- -- (1,500,000)
Repayments of notes
receivable from
shareholders.......... -- -- -- 16,211 -- 16,211
Net income............. -- -- 8,391,614 -- -- 8,391,614
------ -------- ----------- --------- --------- -----------
Balance, May 31, 1997... 40,000 153,528 18,241,367 -- (34,559) 18,360,336
Change in unrealized
gain (loss) on
investments........... -- -- -- -- 34,559 34,559
Dividends declared on
common stock ($84.57
per share)............ -- -- (2,835,000) -- -- (2,835,000)
Repurchase of common
stock................. (6,477) (24,860) (16,124,779) -- -- (16,149,639)
Net income............. -- -- 13,462,869 -- -- 13,462,869
------ -------- ----------- --------- --------- -----------
Balance, February 28,
1998................... 33,523 $128,668 $12,744,457 $ -- $ -- $12,873,125
====== ======== =========== ========= ========= ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-32
<PAGE>
MEN'S APPAREL GUILD IN CALIFORNIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MAY 31, 1995, 1996 AND 1997
AND FOR THE NINE MONTHS ENDED FEBRUARY 28, 1998
1. Description of Business and Basis of Presentation:
The accompanying consolidated financial statements include the accounts
of Men's Apparel Guild in California (MAGIC) and its wholly owned subsidiary,
MAGIC KIDS, INC. (MAGIC Kids), collectively referred to as the Company. All
intercompany transactions have been eliminated in consolidation.
Nature of Operations
The Company has produced trade shows for the men's apparel industry for
over sixty years. For each of the periods presented in the accompanying
statements of operations, including the nine months ended February 28, 1998,
two trade shows have occurred (in February and August).
Basis of Presentation
During fiscal 1994, as a result of a private placement offering circular,
the Company converted from a nonprofit mutual benefit corporation to a for-
profit corporation status and issued common stock to its "charter" members. In
addition, the Company issued common stock to four individuals for notes
receivable (Note 6).
Joint Participation Agreement
During fiscal 1995, the Company entered into a joint participation
agreement to co-sponsor a women's apparel trade show with Fairchild
Publications under the name "WWD/Magic." In accordance with the cosponsor
agreement, 30% of show net income and 50% of publication net income related to
the WWD/Magic show has been allocated to the cosponsor of the show as profit
participation.
2. Summary of Significant Accounting Policies:
Cash Equivalents and Short-Term Investments
The Company considers all highly liquid investments with an initial
maturity of three months or less to be cash equivalents and are stated at cost,
which approximates their fair market value. Short-term investments principally
include United States Treasury bills with original maturities greater than
three months and are stated at fair value. The Company places its cash, cash
equivalents and short-term investments with high-credit quality financial
institutions. At times, bank balances may be in excess of the federally insured
limit. Bank balances were in excess of federally insured limits in the amounts
of $11,395,338 for the
F-33
<PAGE>
MEN'S APPAREL GUILD IN CALIFORNIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
nine-month period ended February 28, 1998 and $5,813,723 and $7,055,031 at May
31, 1997 and 1996, respectively.
Other Current Assets
Other current assets consist primarily of prepaid expenses, which
consists of prepaid show costs and prepaid taxes.
Property and Equipment
The Company's property and equipment are recorded at cost. For financial
reporting purposes depreciation and amortization of property and equipment are
provided on the straight-line method based on the estimated useful lives of the
respective assets. Leasehold improvements are amortized over the lesser of the
useful life or the term of the lease. Maintenance and repair costs are expensed
as incurred; renewals and betterments are capitalized. Upon the sale or
retirement of fixed assets, any resulting profit or loss is included in
operations. Estimated useful lives are as follows:
<TABLE>
<CAPTION>
Estimated
Useful Lives
------------
<S> <C>
Show equipment................................................ 2-5 years
Computer equipment............................................ 5 years
Office furniture, fixtures and equipment...................... 5 years
Leasehold improvements........................................ 3-10 years
</TABLE>
Intangible Assets and Other Assets
Intangible assets, consisting primarily of goodwill, are stated at cost
less accumulated amortization, and are amortized on a straight-line basis over
their estimated useful lives of approximately 10 years.
The Company periodically evaluates the realizability of its long-lived
and intangible assets. Based on its most recent analysis, no impairment exists
at May 31, 1997 or February 28, 1998.
Revenue Recognition
Revenue is recorded in the period in which the applicable shows are held.
Deferred revenue is recorded when cash is received in advance of the applicable
show.
Income Taxes
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes," which requires recognition of deferred tax
liabilities and
F-34
<PAGE>
MEN'S APPAREL GUILD IN CALIFORNIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
assets for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method,
deferred tax liabilities and assets are determined based on the difference
between the financial statement and the tax bases of assets and liabilities
using enacted tax rates in effect for the year in which the differences are
expected to reverse. If required, valuation allowances would be established to
reduce deferred tax assets to the amount expected to be realized.
Long-Term Investments
The Company accounts for its long-term investments in accordance with
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." For the years ended May 31, 1996 and 1997, all of the Company's
investments have been classified as available-for-sale. The Company utilizes
specific identification in computing realized and unrealized gains and losses
on investments. At May 31, 1996 and 1997, the Company had unrealized losses on
investments of $61,968 and $34,559, respectively, which is included as a
separate component of equity. The long-term investments had a fair market value
of $7,502,131 and a cost basis of $7,564,099 as of May 31, 1996 and a fair
market value of $7,909,644 and a cost basis of $7,944,203 as of May 31, 1997.
The Company's available-for-sale investments at May 31, 1997 consist primarily
of tax advantaged municipal bonds (54%), United States Treasury Notes (36%),
money market funds (6%) and corporate bonds (4%). Of the investments, other
than money market funds, 23% will mature in one year or less, 38% in two years,
30% in three years and 9% mature in four or more years.
During February 1998, the Company liquidated its investment portfolio
which approximated book value. At February 28, 1998, the Company is invested in
highly liquid investments with maturities of less than 60 days.
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
disclosure of contingent liabilities at the date of the financial statements,
and the reported amounts of revenues and expenses during the reporting period.
Ultimate results could differ from the estimates.
Recently Issued Accounting Standard
In March 1997, the Financial Accounting Standards Board issued SFAS No.
129, "Disclosure of Information About Capital Structure." The accounting or
disclosure requirements of this statement are effective for the Company's
fiscal year 1998. The Company is reviewing the potential impact of adopting the
new accounting standard.
F-35
<PAGE>
MEN'S APPAREL GUILD IN CALIFORNIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
During June 1997, the Financial Accounting Standards Board released
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," effective for fiscal years beginning after December 15,
1997. SFAS No. 130 establishes standards for the reporting and display in the
financial statements of total net income and the components of all other
nonowner changes in equity, referred to as comprehensive income. The Company
will adopt SFAS No. 130 in 1998 and has not yet determined the impact it will
have on the disclosures in its financial statements.
During June 1997, the Financial Accounting Standards Board released
Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures about
Segments of an Enterprise and Related Information," effective for fiscal years
beginning after December 15, 1997. SFAS No. 131 requires disclosure of business
and geographic segments in the consolidated financial statements of the
Company. The Company will adopt SFAS No. 131 in 1998 and is currently analyzing
the impact it will have on the disclosures in its financial statements.
3. Income Taxes:
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Nine
Months
Years Ended May 31, Ended
--------------------------------- February 28,
1995 1996 1997 1998
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Federal:
Current................... $2,920,000 $3,641,859 $4,722,243 $7,045,407
Deferred.................. (78,928) 121,395 (91,401) 157,766
---------- ---------- ---------- ----------
2,841,072 3,763,254 4,630,842 7,203,173
---------- ---------- ---------- ----------
State:
Current................... 255,000 201,959 175,155 484,377
Deferred.................. (6,863) -- -- 9,015
---------- ---------- ---------- ----------
248,137 201,959 175,155 493,392
---------- ---------- ---------- ----------
$3,089,209 $3,965,213 $4,805,997 $7,696,565
========== ========== ========== ==========
</TABLE>
The provision for income taxes differs from the amount obtained by
applying the federal statutory income tax rate primarily due to tax-exempt
interest and state income taxes.
F-36
<PAGE>
MEN'S APPAREL GUILD IN CALIFORNIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The tax effected amounts of temporary differences which give rise to the
Company's net deferred tax asset are as follows:
<TABLE>
<CAPTION>
Nine
Months
Years Ended May 31, Ended
---------------------------- February 28,
1995 1996 1997 1998
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
Accrued loss on contingency
and other.................... $ -- $111,099 $ 99,106 $ 96,498
Accrued loss on leasehold..... 168,593 -- -- --
Accrued compensation.......... 63,045 29,689 129,900 76,535
Accrued pension liability..... 38,973 -- -- --
Depreciation.................. (14,611) (6,183) (3,000) (26,813)
-------- -------- -------- --------
Net deferred tax asset........ $256,000 $134,605 $226,006 $146,220
======== ======== ======== ========
</TABLE>
No valuation allowance has been established since net deferred tax assets
are expected to be realized through either expected future taxable income or
taxable income in prior carryback years. At February 28, 1998, approximately
$4.2 million is included in accrued liabilities for income taxes payable.
4. Benefit Plans:
During fiscal 1994, the Company implemented a defined contribution plan
covering all full-time employees. The Company's contributions to this plan for
the years ended May 31, 1995, 1996 and 1997 and for the nine-month period ended
February 28, 1998 were $55,988, $40,365, $97,531 and $63,800, respectively.
In addition, the Company had a noncontributory defined benefit pension
plan (the Plan) which covered all full-time employees through May 31, 1993.
Effective May 31, 1993, the Company terminated this Plan. Upon formal approval
from the Internal Revenue Service, the Company distributed the assets of the
Plan during the year ended May 31, 1996.
5. Shareholders' Equity:
In July 1997, the Company's Board of Directors approved a stock
redemption plan under which a total amount not to exceed $50.0 million may be
repurchased. These repurchases are made through a "dutch auction" program at a
price range of $2,080 to $2,500 per share subject to certain restrictions.
Total shares repurchased during the nine month period ended February 28, 1998
were 6,477 for approximately $16.1 million including certain transaction costs.
6. Related-Party Transactions:
During fiscal year 1994, the Company issued 2,000 shares of common stock
to four board members who were not charter members in exchange for notes
receivable which were
F-37
<PAGE>
MEN'S APPAREL GUILD IN CALIFORNIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
due in three equal annual installments. Payments made during fiscal years 1995,
1996 and 1997 on these notes receivable totaled $85,660, $60,933 and $16,211,
respectively.
7. Executive Employment Agreement:
On July 16, 1996, the Company entered into an Executive Employment
Agreement (the Agreement) with an officer of the Company that effectively
granted the officer stock appreciation rights (SARs) with respect to 1,000
shares of the Company's common stock. The SARs granted by the Agreement become
vested in and exercisable by the officer in five equal installments each May 31
beginning May 31, 1996. The SARs become fully vested and exercisable by the
officer only in the event of a change of control or if the officer's employment
is terminated. The Agreement was amended in July 1997 to provide for additional
grants of SARs based on the Company's future performance. The future
compensation expense related to this Agreement (assuming change in control at
May 31, 1998) is estimated at $6.5 million. Due to the contingent nature of the
SARs, no compensation expense was recognized as of May 31, 1996 and 1997 or
February 28, 1998. No SARs have been exercised as of February 28, 1998.
8. Commitments and Contingencies:
Lease Commitments:
The Company leases facilities and various equipment under operating
leases. Leases that expire are expected to be renewed or replaced by leases on
other properties.
Future minimum rental payments as of May 31, 1997 for operating leases
having initial or remaining noncancellable lease terms in excess of one year
are as follows:
<TABLE>
<S> <C>
1998............................................................. $154,477
1999............................................................. 139,777
2000............................................................. 10,566
2001............................................................. 5,728
2002............................................................. 5,728
Thereafter....................................................... --
</TABLE>
Rent expense amounted to $112,244, $114,896, $244,403 and $217,856 for
the nine months ended February 28, 1998 and for the years ended May 31, 1997,
1996 and 1995, respectively.
The Company was obligated under a noncancellable operating lease for its
premises which would have expired on August 31, 2000. On April 11, 1996, the
Company entered into a lease termination agreement with its landlord to vacate
its premises prior to the scheduled expiration date of August 31, 2000. The
Company paid $275,000 to relinquish it
F-38
<PAGE>
MEN'S APPAREL GUILD IN CALIFORNIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
from all obligations under the lease after September 30, 1996. Rental payments
with respect to this lease were made through September 30, 1996.
9. Acquisition by Advanstar Communications Inc.:
On March 6, 1998, Advanstar Communications Inc. signed a merger agreement
to acquire the Company. The aggregate purchase price will consist of
approximately $230.2 million in cash subject to adjustment based on the
shareholders' equity of the Company on the closing date.
F-39
<PAGE>
INDEPENDENT AUDITORS' REPORT
Advanstar Communications Inc.
We have audited the accompanying balance sheet of Universal Media, Inc.
as of December 31, 1997, and the related statements of operations,
stockholder's deficiency and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and preform 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Universal Media,
Inc. as of December 31, 1997 and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted accounting
principles.
Mahoney Cohen & Company, CPA, P.C.
New York, New York
March 6, 1998, except for
Note 13, as to which the
date is August 17, 1998
F-40
<PAGE>
UNIVERSAL MEDIA, INC.
Balance Sheet
December 31, 1997
<TABLE>
<S> <C>
ASSETS (Note 5)
Current assets:
Cash............................................................ $ 515,734
Cash--restricted (Note 5)....................................... 50,000
Accounts receivable, net of allowance for doubtful accounts of
$270,000 (Notes 5 and 9)....................................... 3,330,255
Inventory (Note 5).............................................. 208,023
Prepaid expenses and other current assets....................... 286,386
-----------
Total current assets........................................ 4,390,398
Property and equipment, net (Note 3).............................. 206,500
Other assets:
Intangible assets, net (Note 4)................................. 493,468
Security deposits and other..................................... 64,141
-----------
Total other assets.......................................... 557,609
-----------
$ 5,154,507
===========
LIABILITIES AND STOCKHOLDER'S DEFICIENCY
Current liabilities:
Note payable--bank (Note 5)..................................... $ 505,000
Deferred subscription income.................................... 15,440
Current portion of long-term debt (Note 6)...................... 158,532
Accounts payable................................................ 704,825
Due to affiliates (Note 8)...................................... 2,988,061
Accrued expenses and other current liabilities (Note 12)........ 1,055,599
-----------
Total current liabilities................................... 5,427,457
Long-term debt (Note 6)........................................... 1,350,682
Subordinated notes payable--related party (Notes 6 and 7)......... 819,317
Deferred lease obligations........................................ 51,425
Commitments and contingencies (Note 11)
Stockholder's deficiency:
Common stock, no par value:
Authorized--1,500 shares
Issued and outstanding--100 shares............................ 600,000
Accumulated deficit............................................... (1,192,027)
Net advances to Affiliate (Note 8)................................ (1,902,347)
-----------
Total stockholder's deficiency.............................. (2,494,374)
-----------
$ 5,154,507
===========
</TABLE>
See accompanying notes.
F-41
<PAGE>
UNIVERSAL MEDIA, INC.
Statement of Operations
For the Year Ended December 31, 1997
<TABLE>
<S> <C>
Net revenues...................................................... $24,152,162
Operating expenses:
Production and mechanical....................................... 6,723,817
Selling, editorial and circulation.............................. 10,171,958
General and administrative...................................... 6,918,664
Depreciation expense............................................ 74,830
Amortization of intangible assets............................... 524,725
-----------
Total operating expenses...................................... 24,413,994
-----------
Loss from operations.............................................. (261,832)
Interest expense, net............................................. 206,021
-----------
Loss before income taxes.......................................... (467,853)
Income taxes...................................................... 59,883
-----------
Net loss.......................................................... $ (527,736)
===========
</TABLE>
See accompanying notes.
F-42
<PAGE>
UNIVERSAL MEDIA, INC.
STATEMENT OF STOCKHOLDER'S DEFICIENCY
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
Number Net advances Total
of Common Accumulated to Stockholder's
Shares Stock Deficit Affiliate Deficiency
------ -------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance, January 1,
1997................... 100 $600,000 $ (664,291) $(2,468,612) $(2,532,903)
Net change in advances
to Affiliate........... -- -- -- 566,265 566,265
Net loss................ -- -- (527,736) -- (527,736)
--- -------- ----------- ----------- -----------
Balance, December 31,
1997................... 100 $600,000 $(1,192,027) $(1,902,347) $(2,494,374)
=== ======== =========== =========== ===========
</TABLE>
See accompanying notes.
F-43
<PAGE>
UNIVERSAL MEDIA, INC.
STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1997
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss......................................................... $(527,736)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation of property and equipment.......................... 74,830
Amortization of intangible assets............................... 524,725
Deferred lease obligations...................................... 3,075
Bad debt expense................................................ 95,671
Change in assets and liabilities:
Accounts receivable............................................ (425,259)
Inventory...................................................... 12,882
Prepaid expenses and other current assets...................... 5,923
Deferred subscription income................................... 629
Accounts payable............................................... (165,186)
Accrued expenses and other current liabilities................. 345,340
---------
Net cash used in operating activities......................... (55,106)
---------
Cash flows from investing activities:
Purchase of property and equipment............................... (105,406)
Security deposits and other assets............................... 263
---------
Net cash used in investing activities......................... (105,143)
---------
Cash flows from financing activities:
Repayment of revolver loan....................................... (700,000)
Proceeds from revolver loan...................................... 505,000
Increase in advances from affiliates............................. 90,655
Repayment of advances to Affiliate............................... 566,265
Repayment of severance agreement................................. (47,991)
Repayment of restrictive covenant................................ (95,982)
---------
Net cash provided by financing activities..................... 317,947
---------
Net increase in cash.............................................. 157,698
Cash, beginning of year........................................... 408,036
---------
Cash, end of year................................................. $ 565,734
=========
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
Interest......................................................... $ 211,157
Taxes............................................................ $ 110,947
</TABLE>
See accompanying notes.
F-44
<PAGE>
UNIVERSAL MEDIA, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1--The Company
Universal Media, Inc. (the "Company") publishes and distributes primarily
Travel Agent, a trade national newsweekly magazine serving travel agencies and
the travel services industry. The Company is related by common ownership with
several uncombined entities with which it has significant transactions and
financial relationships. See Note 8 for further discussion.
Note 2--Summary of Significant Accounting Policies
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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reported
period. Actual results could differ from those estimates.
Revenue Recognition
Advertising and subscription revenue, net of estimated returns and
allowances, are recorded as magazines are shipped. Reprint income is recorded
when the reprints are mailed.
Inventory
Inventory is stated at the lower of cost (first-in, first-out method) or
market and consists of paper stock.
Property and Equipment
Property and equipment is recorded at cost. Expenditures for major
additions and betterments are capitalized. Maintenance and repairs are charged
to operations as incurred. Depreciation of property and equipment is computed
by both straight-line and accelerated methods over the assets' estimated lives
ranging from five to seven years. Leasehold improvements are amortized over the
lesser of the lease terms or the assets' useful lives. Upon sale or retirement
of property and equipment, the related cost and accumulated depreciation are
removed from the accounts and any gain or loss is reflected in operations.
F-45
<PAGE>
UNIVERSAL MEDIA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Intangible Assets
Intangible assets are being amortized by the straight-line method over
the following useful lives:
<TABLE>
<S> <C>
Subscriber list.................................................. 8 years
Trademarks....................................................... 40 years
Goodwill......................................................... 40 years
</TABLE>
Loan acquisition costs and related legal fees are deferred and amortized
using the straight-line method over the term of the related debt.
Deferred Subscription Income
The Company's magazine is sold on a subscription basis for periods up to
one year. Subscription funds received in advance of magazines being shipped is
recorded as deferred subscription income. Costs in connection with the
procurement of subscriptions are charged to expense as incurred.
Income Taxes
The Company elected treatment as a small business corporation under
Subchapter S of the Internal Revenue Code and the related provisions of the New
York State Franchise Tax law. Under the aforementioned provisions, corporate
income or loss and any tax credits earned are included in the stockholder's
individual federal and state income tax returns. Accordingly, no provision has
been made for federal income taxes for in the accompanying financial
statements. The Company is subject to New York State S corporation and New York
City corporate income taxes.
Note 3--Property and Equipment
Property and equipment consists of:
<TABLE>
<S> <C>
Computer equipment.............................................. $305,546
Furniture and equipment....................................... 239,152
Leasehold improvements........................................ 64,232
--------
608,930
Less: Accumulated depreciation and amortization............... 402,430
--------
$206,500
========
</TABLE>
F-46
<PAGE>
UNIVERSAL MEDIA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 4--Intangible Assets
Intangible assets consist of:
<TABLE>
<S> <C>
Restrictive covenant.......................................... $3,299,372
Subscriber list............................................... 1,600,000
Trademarks and copyrights..................................... 450,000
Goodwill...................................................... 82,542
Loan acquisition and sundry................................... 97,607
----------
5,529,521
Less: Accumulated amortization................................ 5,036,053
----------
$ 493,468
==========
</TABLE>
Note 5--Note Payable Bank
On June 18, 1997, the Company and an affiliated company under common
control ("Affiliate") entered into a $2,000,000 secured revolving line of
credit which expires on April 30, 1998. Interest is payable monthly at 1% above
the bank's prime rate (9.5% at December 31, 1997).
The revolving credit note is collateralized by a first priority lien and
security interest in the accounts receivable and inventory of the Company and
Affiliate. The loan agreement contains covenants which, among other matters,
require the Company and Affiliate to maintain certain levels of combined
operating income and compensating balances. At December 31, 1997, the Company
and Affiliate were in compliance with these covenants on a combined basis. The
principal stockholder has personally guaranteed the revolving credit note.
The Company and Affiliate, which are affiliated through common ownership,
each guarantee the bank indebtedness of the other. At December 31, 1997,
Affiliate had outstanding bank indebtedness of $50,000.
F-47
<PAGE>
UNIVERSAL MEDIA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 6--Long-Term Debt
Long-term debt consists of:
<TABLE>
<S> <C>
Deferred compensation payable to a former employee in forty
quarterly installments of $25,000 without interest through
October 2004(a).............................................. $ 503,071
Non-compete agreement payable to a former employee in forty
quarterly installments of $50,000 without interest through
October 2004(a).............................................. 1,006,143
----------
1,509,214
Less: Current portion of long-term debt....................... 158,532
----------
$1,350,682
==========
</TABLE>
(a) The financial statements include the present value of all future
payments at an imputed interest rate of 9.75% per annum.
At December 31, 1997, long-term debt matures as follows:
<TABLE>
<CAPTION>
For the Year Ending December 31,
--------------------------------
<S> <C>
1998........................................................ $ 158,532
1999........................................................ 174,563
2000........................................................ 192,215
2001........................................................ 211,653
2002........................................................ 233,056
Thereafter.................................................. 539,195
----------
$1,509,214
==========
</TABLE>
Note 7--Subordinated Note Payable--Related Party
Subordinated debt at December 31, 1997 consists of a note payable to an
entity related through common ownership in the amount of $819,317. The note is
subordinated to bank borrowings (see Notes 5 and 6) and is non-interest
bearing.
Note 8--Related Party Transactions
Management Advisory and General and Administrative Services
Certain management advisory and general and administrative services
including certain accounting, marketing, information systems support and other
services are received from entities under common ownership and control. For the
year ended December 31, 1997, $978,500 has been reflected as general and
administrative expenses in the statement of operations. This amount was
determined based on an estimate of time and related costs to perform such
services. Management believes that the allocation is reasonable.
F-48
<PAGE>
UNIVERSAL MEDIA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Due to affiliates
The Company has received advances (in the form of cash or as liquidation
of Company obligations) from entities affiliated with the Company by common
ownership. Such advances are non-interest bearing and are due on demand.
Net Advances to Affiliate
The Company has advanced funds to Affiliate and has received repayment of
certain amounts advanced. Such transactions, which do not have any effect on
the accompanying statement of income, have been treated as equity transactions
since ultimate repayment of the net advances to Affiliate is not assured.
Note 9--Concentration of Credit Risk
The Company performs ongoing credit evaluations of its customers'
financial condition and generally does not require collateral. Credit losses
have been within management's expectations.
The Company maintains cash balances at several banks. Accounts at each
institution are insured by the Federal Deposit Insurance Corporation up to
$100,000.
Note 10--401(k) Plan
The Company maintains a 401(k) plan for the benefit of its eligible
employees. Contributions to the plan are accrued and funded on a current basis
at amounts determined by the board of directors. 401(k) matching contributions
amounted to approximately $60,100 for the year ended December 31, 1997.
F-49
<PAGE>
UNIVERSAL MEDIA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 11--Commitments and Contingencies
Leases
The Company leases office space under operating leases expiring in
various years through December 31, 2005.
Minimum annual rentals under non-cancellable operating leases, excluding
escalations based upon increases in real estate taxes and operating expenses,
are due as follows:
<TABLE>
<CAPTION>
For the Year Ending December 31,
--------------------------------
<S> <C>
1998.......................................................... $367,873
1999.......................................................... 345,971
2000.......................................................... 345,924
2001.......................................................... 252,833
2002.......................................................... 193,452
Thereafter.................................................... 580,356
</TABLE>
Rent expense charged to operations for the year ended December 31, 1997
amounted to approximately $404,000.
Note 12--Accrued Expenses and other Current Liabilities
Accrued expenses and other current liabilities consist of the following:
<TABLE>
<S> <C>
Accrued salaries............................................... $ 264,065
Accrued commissions............................................ 365,079
Other.......................................................... 426,455
----------
$1,055,599
==========
</TABLE>
Note 13--Subsequent Event
On August 17, 1998, the Company entered into an Asset Purchase Agreement
with Advanstar Communications Inc. (the "Buyer"), wherein the Company sold its
primary business, Travel Agent, and certain other of its assets to the Buyer
for total consideration of approximately $69,000,000.
F-50
<PAGE>
UNIVERSAL MEDIA, INC.
Balance Sheet
<TABLE>
<CAPTION>
June 30,
1998
-----------
(unaudited)
<S> <C>
ASSETS (Note 6)
Current assets:
Cash............................................................ $ 374,706
Cash--restricted (Note 6)....................................... 50,000
Accounts receivables, net of allowance for doubtful accounts of
$270,000 (Notes 6 and 10)...................................... 3,871,302
Inventory (Note 6).............................................. 312,159
Prepaid expenses and other current assets....................... 154,703
-----------
Total current assets........................................ 4,762,870
Property and equipment, net (Note 4).............................. 219,236
Other assets:
Intangible assets, net (Note 5)................................. 457,537
Security deposits and other..................................... 61,510
-----------
Total other assets.......................................... 519,047
-----------
$ 5,501,153
===========
LIABILITIES AND STOCKHOLDER'S DEFICIENCY
Current liabilities:
Note payable--bank (Note 6)..................................... $ 655,000
Deferred subscription income.................................... 23,396
Current portion of long-term debt (Note 7)...................... 166,354
Accounts payable................................................ 742,532
Due to affiliates............................................... 1,502,793
Accrued expenses and other current liabilities.................. 606,851
-----------
Total current liabilities................................... 3,696,926
Long-term debt (Note 7)........................................... 1,265,502
Subordinated notes payable--related party (Notes 8 and 9)......... 819,317
Deferred lease obligations........................................ 52,962
Commitments and contingencies (Note 11)
Stockholder's deficiency:
Common stock, no par value:
Authorized--1,500 shares......................................
Issued and outstanding 100 shares............................. 600,000
Retained earnings............................................... 1,074,523
Net advances to Affiliate....................................... (2,008,077)
-----------
Total stockholder's deficiency.............................. (333,554)
-----------
$ 5,501,153
===========
</TABLE>
See accompanying notes.
F-51
<PAGE>
UNIVERSAL MEDIA, INC.
Statement of Income
For the Six Months Ended
<TABLE>
<CAPTION>
June 30, 1997 June 30, 1998
------------- -------------
(unaudited)
<S> <C> <C>
Revenues............................................ $12,506,068 $14,507,139
Operating expenses:
Production and mechanical......................... 3,486,668 3,949,622
Selling, editorial and circulation................ 4,973,211 5,395,945
General and administrative........................ 1,454,888 2,636,246
Depreciation expense.............................. 32,439 42,192
Amortization of intangible assets................. 262,364 36,931
----------- -----------
Total operating expenses........................ 10,209,570 12,060,936
----------- -----------
Income from operations.............................. 2,296,498 2,446,203
Interest expenses, net.............................. 110,407 101,996
----------- -----------
Income before income taxes.......................... 2,186,091 2,344,207
Income taxes........................................ 63,300 77,657
----------- -----------
Net income.......................................... $ 2,122,791 $ 2,266,550
=========== ===========
</TABLE>
See accompanying notes.
F-52
<PAGE>
UNIVERSAL MEDIA, INC.
STATEMENT OF CASH FLOWS
For the Six Months Ended June 30,
<TABLE>
<CAPTION>
1997 1998
----------- -----------
(unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income...................................... $ 2,122,791 $ 2,266,550
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of property and equipment......... 32,439 42,192
Amortization of intangible assets.............. 262,364 36,931
Deferred lease obligations..................... 1,536 1,537
Bad debt expense............................... 89,952 104,360
Change in assets and liabilities:
Accounts receivable........................... (671,227) (645,407)
Inventory..................................... (36,819) (104,136)
Prepaid expenses and other current assets..... 54,693 131,683
Deferred subscription income.................. 6,102 7,956
Accounts payable.............................. (231,126) 36,707
Accrued expenses and other current
liabilities.................................. 1,646 (448,748)
----------- -----------
Net cash provided by operating activities.... 1,632,351 1,429,625
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment.............. (19,760) (54,928)
Security deposits and other assets.............. 1,732 2,631
----------- -----------
Net cash used in investing activities........ (18,028) (52,297)
----------- -----------
Cash flows from financing activities:
Net proceeds/(repayment) of revolver loan....... 180,000 150,000
Decrease in advances from affiliates............ (1,606,952) (1,485,268)
Repayment of advances to (proceeds to)
Affiliate...................................... 158,121 (105,730)
Net repayment of long-term debt................. (70,253) (77,358)
----------- -----------
Net cash used in financing activities........ (1,339,084) (1,518,356)
----------- -----------
Net increase (decrease) in cash.................. 275,239 (141,028)
Cash, beginning of period........................ 408,036 565,734
----------- -----------
Cash, end of period.............................. $ 683,275 $ 424,706
=========== ===========
Supplemental Disclosures of Cash Flow
Information
Cash paid during the period for:
Interest........................................ $ 109,806 $ 103,751
Taxes........................................... $ 54,083 $ 22,725
</TABLE>
See accompanying notes.
F-53
<PAGE>
UNIVERSAL MEDIA, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1--Basis of Presentation
The accompanying condensed financial statements have been prepared by
management, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. The information furnished in the condensed
consolidated financial statements includes normal recurring adjustments and
reflects all adjustments which are, in the opinion of management, necessary for
a fair presentation of such financial statements. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. Although management believes
that the disclosures are adequate to make the information presented not
misleading, it is suggested that these condensed consolidated financial
statements be read in conjunction with the audited financial statements and the
notes thereto included elsewhere in the Advanstar Communications Inc.
(Advanstar) Registration Statement on Form S-4, relating to Advanstar's
exchange offer for its outstanding 9 1/4% Senior Subordinated Notes.
Revenues and operating results for the six months ended June 30, 1998 and
1997 are not necessarily indicative of the results to be expected for the full
year.
Note 2--The Company
Universal Media, Inc. (the "Company") publishes and distributes primarily
Travel Agent, a trade national newsweekly magazine serving travel agencies and
the travel services industry. The Company is related by Common ownership with
several uncombined entities with which it has significant transactions and
financial relationships. See Notes 6 and 9. On August 17, 1998, the Company
sold Travel Agent to Advanstar for total consideration of approximately
$69,000,000.
Note 3--Summary of Significant Accounting Policies
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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
Advertising and subscription revenue, net of estimated returns and
allowances, are recorded as magazines are shipped. Reprint income is recorded
when the reprints are mailed.
F-54
<PAGE>
UNIVERSAL MEDIA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Unaudited)
Inventory
Inventory is stated at the lower of cost (first-in, first-out method) or
market and consists of paper stock.
Property and Equipment
Property and equipment is recorded at cost. Expenditures for major
additions and betterments are capitalized. Maintenance and repairs are charged
to operations as incurred. Depreciation of property and equipment is computed
by both straight-line and accelerated methods over the assets' estimated lives
ranging from five to seven years. Leasehold improvements are amortized over the
lesser of the lease terms or the assets' useful lives. Upon sale or retirement
of property and equipment, the related cost and accumulated depreciation are
removed from the accounts and any gain or loss is reflected in operations.
Intangible Assets
Intangible assets are being amortized by the straight-line method over
the following useful lives:
<TABLE>
<S> <C>
Subscriber list................................................... 8 years
Trademarks........................................................ 40 years
Goodwill.......................................................... 40 years
</TABLE>
Loan acquisition costs and related legal fees are deferred and amortized
using the straight-line method over the term of the related debt.
Deferred Subscription Income
The Company's magazine is sold on a subscription basis for periods up to
one year. Subscription funds received in advance of shipment of the magazine is
recorded as deferred subscription income. Costs in connection with the
procurement of subscriptions are charged to expense as incurred.
Income Taxes
The Company elected treatment as a small business corporation under
Subchapter S of the Internal Revenue Code and the related provisions of the New
York State Franchise Tax law. Under the aforementioned provision, corporate
income or loss and any tax credits earned are included in the stockholder's
individual federal and state income tax returns. Accordingly, no provision has
been made for federal income taxes for in the accompanying financial
statements. The Company is subject to New York State S corporation and New York
City corporate income taxes.
F-55
<PAGE>
UNIVERSAL MEDIA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Unaudited)
Note 4--Property and Equipment
Property and equipment consists of:
<TABLE>
<S> <C>
Computer equipment............................................... $349,505
Furniture and equipment.......................................... 242,667
Leasehold improvements........................................... 71,667
--------
663,859
Less: Accumulated depreciation and amortization.................. 444,623
--------
$219,236
========
</TABLE>
Note 5--Intangible Assets
Intangible assets consist of:
<TABLE>
<S> <C>
Restrictive covenant........................................... $3,299,372
Subscriber list................................................ 1,600,000
Trademarks..................................................... 450,000
Goodwill....................................................... 82,542
Loan acquisition and sundry.................................... 97,607
----------
5,529,521
Less: Accumulated amortization................................. 5,071,984
----------
$ 457,537
==========
</TABLE>
Note 6--Note Payable--Bank
On June 18, 1997, the Company and an affiliated company under common
control ("Affiliate") entered into a $2,000,000 secured revolving line of
credit which expires on April 30, 1998. Interest is payable monthly at 1% above
the bank's prime rate (9.5% at June 30, 1998).
The revolving credit note is collateralized by a first priority lien and
security interest in the accounts receivable and inventory of the Company and
Affiliate. The loan agreement contains covenants which, among other matters,
require the Company and Affiliate to maintain certain levels of operating
income and compensating balances. At June 30, 1998, the Company and Affiliate
were in compliance with these covenants. The principal stockholder has
personally guaranteed the revolving credit note.
The Company and Affiliate, which are affiliated through common ownership,
each guarantee the indebtedness of the other. At June 30, 1998, Affiliate had
outstanding bank indebtedness of $50,000.
F-56
<PAGE>
UNIVERSAL MEDIA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Unaudited)
Note 7--Long-Term Debt
Long-term debt consists of:
<TABLE>
<S> <C>
Deferred compensation payable to a former employee in forty
quarterly installments of $25,000 without interest through
October 2004(a)............................................. $ 477,285
Non-compete agreement payable to a former employee in forty
quarterly installments of $50,000 without interest through
October 2004(a)............................................. 954,571
----------
1,431,856
Less: Current portion of long-term debt...................... 166,354
----------
$1,265,502
==========
</TABLE>
- --------
(a) The financial statements include the present value of all future payments
at an imputed interest rate of 9.75% per annum.
At June 30, 1998, long-term debt matures as follows:
<TABLE>
<CAPTION>
For the Year Ending December 31,
--------------------------------
<S> <C>
1998-Remainder................................................. $ 81,174
1999........................................................... 174,563
2000........................................................... 192,215
2001........................................................... 211,653
2002........................................................... 233,056
2003........................................................... 256,623
2004........................................................... 282,572
----------
$1,431,856
</TABLE>
Note 8--Subordinated Note Payable--Related Party
Subordinated debt at June 30, 1998 consists of a note payable to an
entity related through common ownership in the amount of $819,317. The note is
subordinated to bank borrowings (see Note 5 and 6) and is non-interest bearing.
Note 9--Related Party Transactions
Management advisory and general and administrative services, including
certain accounting, marketing, information systems support and other services,
are received from entities under common ownership and control. The value of
such services for the six months ended June 30, 1997 and 1998 was $475,000 and
$489,250, respectively and are included in general and administrative expenses
in the statement of income. These amounts were determined based on an estimate
of time and related costs to perform such services. Management believes the
allocations are reasonable.
F-57
<PAGE>
UNIVERSAL MEDIA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Unaudited)
Note 10--Concentration of Credit Risk
The Company performs ongoing credit evaluations of its customers'
financial condition and generally does not require collateral. Credit losses
have been within management's expectations.
The Company maintains cash balances at several banks. Accounts at each
institution are insured by the Federal Deposit Insurance Corporation up to
$100,000.
Note 11--Commitments and Contingencies
Leases
The Company leases office space under operating leases expiring in
various years through December 31, 2005.
Minimum annual rentals under non-cancellable operating leases, excluding
calculations based upon increases in real estate taxes and operating expenses,
are payable as follows:
<TABLE>
<CAPTION>
For the Year Ending December 31,
--------------------------------
<S> <C>
1998-Remainder................................................... $183,900
1999............................................................. 345,971
2000............................................................. 345,924
2001............................................................. 252,833
2002............................................................. 193,452
2003............................................................. 193,452
Thereafter....................................................... 386,904
</TABLE>
Rent expenses charged to operations for each of the six months ended June
30, 1997 and 1998 amounted to approximately $205,000.
Note 12--Net Advances to Affiliate
The Company has advanced funds to Affiliate and has received repayment of
certain amounts advanced. Such transactions have been treated as a reduction of
stockholder's equity since ultimate repayment of such net amount is not
assured.
F-58
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Through and including , 1999 (the 25th day after the date of
this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
14,000,000 Shares
ADVANSTAR, INC.
Common Stock
----------------
PROSPECTUS
----------------
Merrill Lynch & Co.
Bear, Stearns & Co. Inc.
Lehman Brothers
Morgan Stanley Dean Witter
Salomon Smith Barney
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting offers to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
INTERNATIONAL PROSPECTUS--ALTERNATE PAGE
Subject to Completion, dated April 22, 1999
PROSPECTUS
(LOGO)
14,000,000 Shares
Advanstar, Inc.
Common Stock
------------
This is Advanstar, Inc.'s initial public offering of common stock. Of the
shares being offered, Advanstar, Inc. is selling 7,000,000 shares of common
stock and certain of our stockholders are selling 7,000,000 shares of common
stock. We will not receive any of the proceeds from the sale of shares by the
selling stockholders. The U.S. underwriters will offer 11,900,000 shares in the
United States and Canada and the international managers will offer 2,100,000
shares outside the United States and Canada. The initial public offering price
and the underwriting discount per share are identical for both offerings.
We expect the public offering price to be between $12.50 and $16.50 per
share. Currently, no public market exists for the shares. We will apply to list
the common stock on the New York Stock Exchange under the symbol "ADS."
Investing in the common stock involves risks which are described in the
"Risk Factors" section beginning on page 13 of this prospectus.
------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public Offering Price................................. $ $
Underwriting Discounts and Commissions................ $ $
Net Proceeds, before expenses, to Advanstar, Inc...... $ $
Net Proceeds to Selling Stockholders.................. $ $
</TABLE>
The U.S. underwriters may also purchase from the selling stockholders up to
an additional 1,785,000 shares at the public offering price, less underwriting
discounts and commissions, within 30 days from the date of this prospectus to
cover over-allotments. The international managers may similarly purchase from
the selling stockholders up to an aggregate of an additional 315,000 shares.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
Merrill Lynch International is acting as book-running lead manager for this
offering. Merrill Lynch International and Bear, Stearns International Limited
are acting as joint lead managers. The shares of common stock will be ready for
delivery in New York, New York on or about , 1999.
------------
Merrill Lynch International Bear, Stearns International Limited
Joint Lead Managers
------------
Lehman Brothers International
Morgan Stanley Dean Witter
Salomon Smith Barney International
------------
The date of this prospectus is , 1999
<PAGE>
INTERNATIONAL PROSPECTUS--ALTERNATE PAGE--(continued)
UNDERWRITING
We intend to offer our common stock outside the United States and Canada
through a number of international managers as well as in the United States and
Canada through a group of U.S. underwriters. Subject to the terms and
conditions set forth in an international purchase agreement among us, the
selling stockholders and the international managers and concurrently with the
sale of our common stock to the U.S. underwriters, we and the selling
stockholders have agreed to sell to the international managers, and each of the
international managers, for whom Merrill Lynch International and Bear, Stearns
International Limited are acting as lead managers, severally and not jointly
has agreed to purchase from us and the selling stockholders, the number of
shares of our common stock set forth opposite its name below.
<TABLE>
<CAPTION>
Number of
International Managers Shares
---------------------- ---------
<S> <C>
Merrill Lynch International...................................
Bear, Stearns International Limited...........................
Lehman Brothers International.................................
Morgan Stanley & Co. International Limited....................
Salomon Brothers International Limited........................
---------
Total.................................................... 2,100,000
=========
</TABLE>
We and the selling stockholders have also entered into a U.S. purchase
agreement with certain underwriters in the United States and Canada, whom
collectively we call the U.S. underwriters and for whom Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Bear, Stearns & Co. Inc. are acting as the U.S.
representatives. Subject to the terms and conditions set forth in the U.S.
purchase agreement, and concurrently with the sale of 2,100,000 shares of our
common stock to the international managers pursuant to the international
purchase agreement, the selling stockholders and us have agreed to sell to the
U.S. underwriters, and the U.S. underwriters have agreed to purchase form the
selling stockholders and us, an aggregate of 11,900,000 shares of our common
stock. The initial public offering price per share of our common stock and the
underwriting discount per share of our common stock are identical under the
U.S. purchase agreement and the international purchase agreement.
In the U.S. purchase agreement and the international purchase agreement,
the several U.S. underwriters and the several international managers which,
collectively, we call the underwriters, have agreed, subject to the terms and
conditions set forth in the respective purchase agreements, to purchase all of
the shares of the common stock being sold pursuant to each such purchase
agreement if any of the shares of common stock being sold pursuant to each such
purchase agreement are purchased. Under certain circumstances, the
<PAGE>
INTERNATIONAL PROSPECTUS--ALTERNATE PAGE--(continued)
commitments of non-defaulting international managers or U.S. underwriters (as
the case may be) may be increased. The purchase of our common stock by the
international managers is conditioned upon the purchase of common stock by the
U.S. underwriters, and vice versa.
The lead managers have advised us and the selling stockholders that the
international managers propose initially to offer the shares of common stock to
the public at the initial public offering price set forth on the cover page of
this prospectus, and to certain dealers at such price less a concession not in
excess of $ per share of common stock. The international managers may allow,
and such dealers may reallow, a discount not in excess of $ per share of
common stock on sales to certain other dealers. After the initial public
offering, the public offering price, concession and discount may be changed.
The following table shows the per share and total underwriting discounts
to be paid by us and the selling stockholders to the U.S. underwriters and the
international managers, and the proceeds before expenses to us and the selling
stockholders. This information is presented while assuming either no exercise
or full exercise by the underwriters of the over-allotment option.
<TABLE>
<CAPTION>
Without With
Per share option option
--------- ------- ------
<S> <C> <C> <C>
Public Offering Price...........................
Underwriting Discount...........................
Proceeds, before expenses, to Advanstar.........
Proceeds to selling stockholders................
</TABLE>
We will not receive any of the proceeds from the sale of our common stock
by the selling stockholders. The expenses of the offerings are estimated at
$1,300,000 and are payable by us.
The selling stockholders have granted an option to the international
managers, exercisable for 30 days after the date of this Prospectus, to
purchase up to an aggregate of 315,000 additional shares of common stock at the
initial public offering price set forth on the cover page of this Prospectus,
less the underwriting discount. The international managers may exercise this
option solely to cover over-allotments, if any, made on the sale of the common
stock offered hereby. To the extent that the international managers exercise
this option, each international manager will be obligated, subject to certain
conditions, to purchase a number of additional shares of common stock
proportionate to such initial manager's initial amount reflected in the
foregoing table. The selling stockholders have also granted an option to the
U.S. underwriters, exercisable for 30 days after the date of this prospectus,
to purchase up to an aggregate of 1,785,000 additional shares of our common
stock to cover over-allotments, if any, on terms similar to those granted to
the international managers.
At our request, the U.S. underwriters and the international managers have
reserved for sale, at the initial public offering price, up to 700,000 of the
shares offered hereby to be sold to certain of our employees and
<PAGE>
INTERNATIONAL PROSPECTUS--ALTERNATE PAGE--(continued)
certain other persons. The number of shares of our common stock available for
sale to the general public will be reduced to the extent such persons purchase
such reserved shares. Any reserved shares which are not orally confirmed for
purchase within one day of the pricing of the offerings will be offered by the
underwriters to the general public on the same terms as the other shares
offered hereby.
We, our executive officers and directors and substantially all of our
existing stockholders, have agreed not to directly or indirectly, (1) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant for
the sale of, or otherwise dispose of or transfer any shares of our common stock
or any securities convertible into or exchangeable or exercisable for our
common stock, whether now owned or hereafter acquired by the person executing
the agreement or with respect to which the person executing the agreement
thereafter acquires the power of disposition or (2) enter into any swap or any
other agreement or any transaction that transfers, in whole or in part,
directly or indirectly, the economic consequence of ownership of our common
stock, whether any such swap or transaction is to be settled by delivery of
common stock or other securities, in cash or otherwise, without the prior
written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated for a
period of 180 days after the date of the U.S. purchase agreement.
The U.S. underwriters and the international managers have entered into an
intersyndicate agreement that provides for the coordination of their
activities. Pursuant to the intersyndicate agreement, the U.S. underwriters and
the international managers are permitted to sell shares of common stock to each
other for purposes of resale at the initial public offering price, less an
amount not greater than the selling concession. Under the terms of the
intersyndicate agreement, the U.S. underwriters and any dealer to whom they
sell shares of common stock will not offer to sell or sell shares of common
stock to persons who are non-U.S. or non-Canadian persons, or to persons whom
they believe intend to resell to persons who are non-U.S. or non-Canadian
persons, and the international managers and any dealer to whom they sell shares
of our common stock will not offer to sell or sell shares of our common stock
to U.S. persons or to Canadian persons, or to persons whom they believe intend
to resell to U.S. persons or to Canadian persons, except in the case of
transactions pursuant to the intersyndicate agreement.
Prior to the offerings, there has been no public market for our common
stock. Consequently, the initial public offering prices for the shares of
common stock included in the offering has been determined by negotiations
between us and the U.S. representatives. Among the factors considered in
determining such price were the history of an prospects for our business and
the industry in which we compete, an assessment of our management and the
present state of our development, our past and present revenues and earnings,
the prospects for growth of our revenues and earnings, the current state of the
economy in the United States, the current level of economic activity in the
industry in which we compete and in related or comparable industries, and
currently prevailing conditions in the securities
<PAGE>
INTERNATIONAL PROSPECTUS--ALTERNATE PAGE--(continued)
markets, including current market valuations of publicly traded companies which
are comparable to us. There can be no assurance that an active trading market
will develop for our common stock or that our common stock will trade in the
public market subsequent to the offerings at or above the initial public
offering price.
We intend to apply for a listing of the common stock on the New York
Stock Exchange under the symbol "ADS." To meet the requirements for listing of
our common stock on that exchange, the U.S. underwriters and the international
managers have undertaken to sell lots of 100 or more shares to a minimum of
2,000 beneficial owners.
We and the selling stockholders have agreed to indemnify the U.S.
underwriters and international managers against liabilities arising from the
offerings, including liabilities under the Securities Act, or to contribute to
payments the U.S. underwriters or international managers may be required to
make in respect thereof.
Until the distribution of common stock is completed, certain rules of the
Securities and Exchange Commission may limit the ability of the U.S.
representatives and lead managers to bid for and purchase shares of common
stock. As an exception to these rules, the U.S. representatives are permitted
to engage in certain transactions that stabilize the price of our common stock.
Such transactions consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of our common stock.
If the U.S. underwriters or the international managers create a short
position in the stock in connection with the offerings (i.e., if they sell more
shares of common stock than are set forth on the cover page of this
prospectus), the U.S. representatives may reduce the short position by
purchasing shares in the open market. The U.S. representatives may also elect
to reduce any short position through the exercise of all or part of the over-
allotment option described above.
The U.S. representatives may also impose a penalty bid on certain U.S.
underwriters and selling group members. This means that if the U.S.
representatives purchase shares in the open market to reduce the U.S.
underwriters' short position or to stabilize the price of the common stock,
they may reclaim the amount of the selling concession from the underwriters and
selling group members who sold those shares as part of the offerings.
In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid may also have an effect on the price of the common stock to the extent that
it discourages resales of the shares.
Neither we nor any of the selling stockholders or U.S. underwriters makes
any representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of our common
stock. In addition, neither we nor any of the selling stockholders or
underwriters makes any representation that
<PAGE>
INTERNATIONAL PROSPECTUS--ALTERNATE PAGE--(continued)
the U.S. representatives will engage in such transactions or that such
transactions, once commenced, will not be discontinued without notice.
Affiliates of certain underwriters are lenders under our credit facility.
Certain of the underwriters have from time to time provided investment banking
financial advisory services to us and our affiliates, for which they have
received customary compensation, and may continue to do so in the future.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INTERNATIONAL PROSPECTUS--ALTERNATE PAGE
Through and including , 1999 (the 25th day after the
date of this prospectus), all dealers effecting transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
14,000,000 Shares
ADVANSTAR, INC.
Common Stock
----------------
PROSPECTUS
----------------
Merrill Lynch International
Bear, Stearns International Limited
Lehman Brothers International
Morgan Stanley Dean Witter
Salomon Smith Barney International
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Estimated expenses (other than underwriting discounts and commissions)
payable in connection with the sale of the Common Stock offered hereby are as
follows:
<TABLE>
<S> <C>
SEC registration fee.......................................... $ 73,851
NASD filing fee............................................... $ 27,065
New York Stock Exchange listing fee........................... $ 116,100
Printing and engraving expenses............................... $ 240,000
Legal fees and expenses....................................... $ 550,000
Accounting fees and expenses.................................. $ 200,000
Blue Sky fees and expenses (including legal fees)............. $ 15,000
Transfer agent and registrar fees and expenses................ $ 25,000
Miscellaneous................................................. $ 52,985
----------
Total..................................................... $1,300,000
==========
</TABLE>
- --------
* To be filed by Amendment.
The Company will bear all expenses shown above.
Item 14. Indemnification of Directors and Officers.
The Delaware General Corporation law and the Company's certificate of
incorporation and by-laws provide for indemnification of the Company's
directors and officers for liabilities and expenses that they may incur in such
capacities. In general directors and officers are indemnified with respect to
actions taken in good faith in a manner reasonably believed to be in, or not
opposed to, the best interests of the Company and, with respect to any criminal
action or proceeding, actions that the indemnitee had no reasonable cause to
believe were unlawful. Reference is made to the Company's charter and by-laws
filed as Exhibits 3.1, 3.2, 3.3 and 3.4 hereto, respectively.
The Underwriting Agreement provides that the Underwriters are obligated,
under certain circumstances, to indemnify directors, officers and controlling
persons of Advanstar against certain liabilities, including liabilities under
the Securities Act of 1933, as amended (the "Securities Act"). Reference is
made to the form of purchase agreements filed as Exhibits 1.1 and 1.2 hereto.
In addition, the Company has an existing directors and officers liability
insurance policy.
Item 15. Recent Sales of Unregistered Securities
In the three years preceding the filing of this registration statement,
the Company has issued the following securities (after giving effect to a 100-
for-one stock split on May 23, 1997 and a two-for-one stock split effected on
April 21, 1999 in the form of a stock dividend) that were not registered under
the Act:
II-1
<PAGE>
On May 31, 1996, the Company issued 19,400,000 shares of its common
stock, par value $.01 per share, to AHI Advanstar, LLC for a total
consideration of $97,000,100;
On January 17, 1997, the Company issued 2,000,000 shares of its common
stock, par value $.01 per share, to AHI Advanstar LLC for a total consideration
of $10,000,000;
On May 15, 1997, the Company issued 400,000 shares of its common stock,
par value $.01 per share, to AHI Advanstar LLC for a total consideration of
$2,000,000; and
On April 27, 1998, the Company issued 11,666,666 shares of its common
stock, par value $.01 per share, to AHI Advanstar LLC for a total consideration
of $70,000,000.
On March 15, 1999, the Company issued 163,334 shares of its common stock,
par value $.01 per share, to AHI Advanstar LLC for a total consideration of
$980,000.
In addition, the Company has issued options to purchase an aggregate of
2,191,124 shares of the Company's common stock under the 1996 Stock Option Plan
at a weighted average exercise price of $6.59 (calculated as of April 21,
1999). No shares have been issued by the Company pursuant to the exercise of
previously granted stock options.
No underwriters were involved in the foregoing sales of securities. Such
sales were made in reliance upon an exemption from the registration provisions
of the Act set forth in Section 4(2) thereof relative to sales by an issuer not
involving any public offering or the rules and regulations thereunder, or, in
the case of options to purchase common stock, Rule 701 of the Act. All of the
foregoing securities are deemed restricted securities for the purposes of the
Act.
Item 16. Exhibits and Financial Statements
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1+ Form of U.S. Purchase Agreement
1.2+ Form of International Purchase Agreement
3.1+ Certificate of Incorporation, as amended, of Registrant
3.2* By-Laws of Registrant
3.3+ Form of Amended and Restated Certificate of Incorporation of the
Registrant to become effective upon the closing of the offerings under
this Registration Statement
3.4+ Form of Amended and Restated By-Laws of the Registrant to become
effective upon the closing of the offerings under this Registration
Statement
4.1** Specimen certificate representing the Registrant's Common Stock
4.2* Indenture, dated as of April 30, 1998, among the Company, the
Guarantors (as defined therein) and The Bank of New York
4.3* Supplemental Indenture, dated as of May 19, 1998, among the Company,
Applied Business teleCommunications and The Bank of New York
4.4* Form of Exchange Note
5.1+ Opinion of Testa, Hurwitz & Thibeault, LLP regarding the legality of
the common stock being issued
10.1* 1996 Stock Option Plan
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.2+ Amended and Restated 1996 Stock Option Plan
10.3+ 1999 Stock Option and Incentive Plan
10.4* Amended Credit Agreement (the "Credit Agreement"), dated as of May 31,
1996, as amended and restated as of August 26, 1998, among the
Company, the Guarantors (as defined in the Credit Agreement), the
Lenders (as defined in the Credit Agreement) and the Chase Manhattan
Bank
10.5* Employment Agreement, dated July 1, 1996, by and between Advanstar,
Inc. and Robert Krakoff
10.6* Employment Agreement, dated July 1, 1996, by and between Advanstar,
Inc. and James M. Alic
10.7+ Employment Agreement, dated April 19, 1999, by and between Advanstar,
Inc. and Martin C. ("Skip") Farber
10.8* Employees' 401(k) Plan and Trust, as amended
10.9* Agreement, dated July 31, 1997, between the Company and Banta
Publications
10.10* Lease Agreement, dated February 2, 1996, between the Las Vegas
Convention and Visitors Authority and Men's Apparel Guild in
California, Inc.
10.11* Lease Agreement dated December 24, 1996, between the Las Vegas
Convention and Visitor's Authority and Men's Apparel Guild in
California, Inc.
10.12* Lease Agreement, dated September 25, 1996, between the Interface
Group--Nevada, Inc. and Men's Apparel Guild in California, Inc.
10.13* Lease Agreement, dated September 5, 1997, between the Interface
Group--Nevada, Inc. and Men's Apparel Guild in California, Inc.
10.14* Lease Agreement, dated September 5, 1997, between the Interface
Group--Nevada, Inc. and Men's Apparel Guild in California, Inc.
10.15* Lease Agreement, dated September 5, 1997, between the Interface
Group--Nevada, Inc. and Men's Apparel Guild in California, Inc.
10.16* Lease Agreement, dated September 5, 1997, between the Interface
Group--Nevada, Inc. and Men's Apparel Guild in California, Inc.
10.17* Convention Agreement, dated March 19, 1998, between Las Vegas Hilton
Corporation and Men's Apparel Guild in California, Inc.
10.18+ Employment Agreement, dated April 20, 1999, by and between Advanstar,
Inc. and Robert L. Krakoff
10.19+ Employment Agreement, dated April 20, 1999, by and between Advanstar,
Inc. and James M. Alic
10.20+ Section 5 (setting forth the registration rights provisions) to the
Amended and Restated Stockholders Agreement, dated April 20, 1999, by
and among Advanstar, Inc., AHI Advanstar, LLC, Robert L. Krakoff,
James Alic, Peter J. Solomon, Co., Ltd., Hellman & Friedman Capital
Partners III, L.P., H&F Orchard Partners III, L.P. and H&F
International Partners III, L.P.
21.1* Subsidiaries of the Registrant
23.1+ Consent of Arthur Andersen LLP
23.2+ Consent of PricewaterhouseCoopers LLP
23.3+ Consent of Mahoney Cohen & Company, CPA, P.C.
23.4+ Consent of Testa, Hurwitz & Thibeault, LLP (included in Exhibit 5.1)
24.1* Power of Attorney
27.1* Financial Data Schedule (EDGAR version only)
</TABLE>
- --------
* Previously filed.
** To be filed by amendment.
+ Filed herewith.
II-3
<PAGE>
(b) Financial Statements Schedules:
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore have
been omitted.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to provisions described in Item 14 above, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Boston, Massachusetts,
on the 22nd day of April, 1999.
ADVANSTAR, INC.
/s/ Robert L. Krakoff
By: _________________________________
Robert L. Krakoff
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons on behalf of
the registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Titles Date
--------- ------ ----
<S> <C> <C>
/s/ Robert L. Krakoff Chairman of the Board and April 22, 1999
______________________________________ Chief Executive Officer
Robert L. Krakoff (Principal Executive
Officer)
* Vice President--Finance, April 22, 1999
______________________________________ Chief Financial Officer
David W. Montgomery and Secretary (Principal
Financial and Accounting
Officer)
* Director April 22, 1999
______________________________________
James M. Alic
* Director April 22, 1999
______________________________________
Kenneth T. Berliner
* Director April 22, 1999
______________________________________
Mitchell R. Cohen
* Director April 22, 1999
______________________________________
John M. Pasquesi
/s/ Robert L. Krakoff
*By: _________________________________
Robert L. Krakoff, attorney-in-fact
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Page
------- ----------- ----
<C> <S> <C>
1.1 Form of U.S. Purchase Agreement
1.2 Form of International Purchase Agreement
3.1 Certificate of Incorporation, as amended, of Registrant
3.3 Form of Amended and Restated Certificate of Incorporation of
the Registrant to
become effective upon the closing of the offerings under this
Registration Statement
3.4 Form of Amended and Restated By-Laws of the Registrant to
become effective
upon the closing of the offerings under this Registration
Statement
5.1 Opinion of Testa, Hurwitz & Thibeault, LLP
10.2 Form of Amended and Restated 1996 Stock Option Plan
10.3 Form of 1999 Stock Option and Incentive Plan
10.7 Employment Agreement, dated April 19, 1999, by and between
Advanstar, Inc. and Martin C. ("Skip") Farber
10.18 Employment Agreement, dated April 20, 1999, by and between
Advanstar, Inc. and Robert L. Krakoff
10.19 Employment Agreement, dated April 20, 1999, by and between
Advanstar, Inc. and James M. Alic
10.20 Section 5 (setting forth the registration rights provisions) to
the Amended and Restated Stockholders Agreement dated April 20,
1999 by and among Advanstar, Inc., AHI Advanstar, LLC, Robert
L. Krakoff, James Alic, Peter J. Solomon, Co., Ltd., Hellman &
Friedman Capital Partners III, L.P., H&F Orchard Partners III,
L.P. and H&F International Partners III, L.P.
23.1 Consent of Arthur Andersen LLP
23.2 Consent of PricewaterhouseCoopers LLP
23.3 Consent of Mahoney Cohen & Company, CPA, P.C.
</TABLE>
<PAGE>
===============================================================================
ADVANSTAR, INC.
(a Delaware corporation)
[ ] Shares of Common Stock
U.S. PURCHASE AGREEMENT
-----------------------
Dated: [ ] [ ], 1999
===============================================================================
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. Representations and Warranties...........................................................4
(a) Representations and Warranties by the Company.......................................................4
(i) Compliance with Registration Requirements...............................................4
(ii) Independent Accountants.................................................................6
(iii) Financial Statements....................................................................6
(iv) No Material Adverse Change in Business..................................................7
(v) Good Standing of the Company............................................................7
(vi) Good Standing of Subsidiaries...........................................................7
(vii) Capitalization..........................................................................8
(viii) Authorization of Agreement..............................................................8
(ix) Authorization and Description of Securities.............................................8
(x) Absence of Defaults and Conflicts.......................................................9
(xi) Absence of Labor Dispute...............................................................10
(xii) Absence of Proceedings.................................................................10
(xiii) Accuracy of Exhibits...................................................................10
(xiv) Possession of Intellectual Property....................................................10
(xv) A bsence of Further Requirements......................................................11
(xvi) Possession of Licenses and Permits.....................................................11
(xvii) Title to Property......................................................................12
(xviii) Compliance with Cuba Act...............................................................12
(xix) Investment Company Act.................................................................12
(xx) Environmental Laws.....................................................................12
(xxi) Registration Rights....................................................................13
(xxii) Internal Accounting Controls...........................................................13
(xxiii) Insurance..............................................................................13
(xxiv) ERISA..................................................................................14
(b) Representations and Warranties by the Selling Stockholders.........................................14
(i) Authorization of Agreements............................................................14
(ii) Good and Marketable Title..............................................................15
(iii) Due Execution of Power of Attorney and Custody Agreement...............................16
(iv) Absence of Manipulation................................................................16
(v) Absence of Further Requirements........................................................16
(vi) Restriction on Sale of Securities......................................................17
(vii) Certificates Suitable for Transfer.....................................................17
(viii) Information Relating to the Selling Stockholders.......................................17
(c) Officer's Certificates.............................................................................17
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 2. Sale and Delivery to U.S. Underwriters; Closing.........................................18
(a) Initial Securities.................................................................................18
(b) Option Securities..................................................................................18
(c) Payment............................................................................................19
(d) Denominations; Registration........................................................................20
SECTION 3. Covenants of the Company................................................................20
(a) Compliance with Securities Regulations and Commission Requests.....................................20
(b) Filing of Amendments...............................................................................20
(c) Delivery of Registration Statements................................................................21
(d) Delivery of Prospectuses...........................................................................21
(e) Continued Compliance with Securities Laws..........................................................21
(f) Blue Sky Qualifications............................................................................22
(g) Rule 158...........................................................................................22
(h) Use of Proceeds....................................................................................23
(i) Listing............................................................................................23
(j) Restriction on Sale of Securities..................................................................23
(k) Reporting Requirements.............................................................................23
(l) Compliance with NASD Rules.........................................................................23
(m) Compliance with Rule 463...........................................................................24
SECTION 4. Payment of Expenses.....................................................................24
(a) Expenses of the Company............................................................................24
(b) Termination of Agreement...........................................................................25
(c) Expenses of the Selling Stockholders...............................................................25
(d) Allocation of Expenses.............................................................................25
SECTION 5. Conditions of U.S. Underwriters' Obligations............................................25
(a) Effectiveness of Registration Statement............................................................25
(b) Opinion of Counsel for Company.....................................................................26
(c) Opinion of Counsel for U.S. Underwriters...........................................................26
(d) Officers' Certificate..............................................................................26
(e) Certificate of Selling Stockholders................................................................27
(f) Accountant's Comfort Letter........................................................................27
(g) Bring-down Comfort Letter..........................................................................27
(h) Approval of Listing................................................................................27
(i) No Objection.......................................................................................27
(j) Lock-up Agreements.................................................................................28
(k) Purchase of Initial International Securities.......................................................28
(l) Conditions to Purchase of U.S. Option Securities...................................................28
(i) Officers' Certificate..................................................................28
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
(ii) Opinion of Counsel for Company.........................................................28
(iii) Certificate of Selling Stockholders....................................................28
(iv) Opinion of Counsel for U.S. Underwriters...............................................29
(v) Bring-down Comfort Letter..............................................................29
(vi) Opinion of Counsel for the Selling Stockholders........................................29
(m) Amendment of Certain Documents.....................................................................29
(n) Dissolution of AHI Advanstar LLC...................................................................29
(o) Additional Documents...............................................................................29
(p) Termination of Agreement...........................................................................30
SECTION 6. Indemnification.........................................................................30
(a) Indemnification of U.S. Underwriters by Company....................................................30
(b) Indemnification of U.S. Underwriters by Selling Stockholders.......................................32
(c) Indemnification of Company, Directors and Officers and Selling Stockholders by U.S. Underwriters...32
(d) Actions Against Parties; Notification..............................................................33
(e) Settlement Without Consent if Failure to Reimburse.................................................33
(f) Indemnification for Reserved Securities............................................................34
SECTION 7. Contribution............................................................................34
SECTION 8. Representations, Warranties and Agreements to Survive Delivery..........................36
SECTION 9. Termination of Agreement................................................................36
(a) Termination; General...............................................................................36
(b) Liabilities........................................................................................37
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Page
----
SECTION 10. Default by One or More of the U.S. Underwriters.........................................37
SECTION 11. Default by One or More of the Selling Stockholders......................................38
SECTION 12. Notices.................................................................................39
SECTION 13. Parties.................................................................................39
SECTION 14. GOVERNING LAW AND TIME..................................................................39
SECTION 15. Effect of Headings......................................................................40
SCHEDULES
Schedule A - List of Selling Stockholders......................................................Sch A-1
Schedule B - List of Underwriters..............................................................Sch B-1
Schedule C - Pricing Information...............................................................Sch C-1
Schedule D - List of Persons subject to Lock-up................................................Sch D-1
EXHIBITS
Exhibit A - Form of Opinion of Company counsel.....................................................A-1
Exhibit B - Form of Lock-up Letter.................................................................B-1
Exhibit C - Form of Opinion of Counsel for the Selling Stockholders................................C-1
</TABLE>
iv
<PAGE>
ADVANSTAR, INC.
(a Delaware corporation)
[ ] Shares of Common Stock
(Par Value $[ ] Per Share)
U.S. PURCHASE AGREEMENT
-----------------------
[ ] [ ], 1999
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
BEAR, STEARNS & CO. INC.
as U.S. Representatives of the several U.S. Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Advanstar, Inc., a Delaware corporation (the "Company"), and the
-------
persons listed on Schedule A hereto (the "Selling Stockholders") confirm their
--------------------
agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") and each of the other U.S. Underwriters named in
-------------
Schedule B hereto (collectively, the "U.S. Underwriters", which term shall also
-----------------
include any underwriter substituted as hereinafter provided in Section 10
hereof), for whom Merrill Lynch and Bear, Stearns & Co. Inc. are acting as
representatives (in such capacity, the "U.S. Representatives"), with respect to
--------------------
(i) the issue and sale by the Company and the sale by the Selling Stockholders,
of an aggregate of [ ] to shares of Common Stock, par value $[ ] per share,
of the Company ("Common Stock") in the respective amounts set forth in Schedule
------------
A to the U.S. Underwriters, acting severally and not jointly, as set forth in
Schedule B hereto and (ii) the grant by the Selling Stockholders to the U.S.
Underwriters, acting severally and not jointly, of the option described in
Section 2(b) hereof to purchase all or any part of [ ] additional shares of
Common Stock to cover over-allotments, if any. The aforesaid [ ] shares of
Common Stock (the "Initial U.S. Securities") to be purchased by the U.S.
-----------------------
Underwriters and all or any part of the shares of Common Stock subject to the
option described in Section 2(b) hereof (the "U.S. Option Securities") are
----------------------
hereinafter called, collectively, the "U.S. Securities."
---------------
<PAGE>
-2-
It is understood that the Company is concurrently entering into an
agreement dated the date hereof (the "International Purchase Agreement")
--------------------------------
providing for the offering by the Company and the Selling Stockholders of an
aggregate of [ ] shares of Common Stock (the "Initial International
---------------------
Securities") through arrangements with certain underwriters outside the United
States and Canada (the "International Managers") for which Merrill Lynch
----------------------
International and Bear, Stearns International Limited are acting as lead manager
(the "Lead Managers") and the grant by the Selling Stockholders to the
-------------
International Managers, acting severally and not jointly, of an option to
purchase all or any part of the International Managers' pro rata portion of up
to [ ] additional shares of Common Stock solely to cover over-allotments, if
any (the "International Option Securities" and, together with the U.S. Option
-------------------------------
Securities, the "Option Securities"). The Initial International Securities and
-----------------
the International Option Securities are hereinafter called the "International
Securities". It is understood that the Company and the Selling Stockholders are
not obligated to sell and the U.S. Underwriters are not obligated to purchase,
any Initial U.S. Securities unless all of the Initial International Securities
are contemporaneously purchased by the International Managers.
The U.S. Underwriters and the International Managers are hereinafter
collectively called the "Underwriters", the Initial U.S. Securities and the
------------
Initial International Securities are hereinafter collectively called the
"Initial Securities", and the U.S. Securities, and the International Securities
- -------------------
are hereinafter collectively called the "Securities".
----------
The Underwriters will concurrently enter into an Intersyndicate
Agreement of even date herewith (the "Intersyndicate Agreement") providing for
------------------------
the coordination of certain transactions among the Underwriters under the
direction of Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated (in such capacity, the "Global Coordinator").
------------------
The Company understands that the U.S. Underwriters propose to make a
public offering of the U.S. Securities as soon as the U.S. Representatives deem
advisable after this Agreement has been executed and delivered.
The Company and the U.S. Underwriters agree that up to [ ] shares of
the Initial U.S. Securities to be purchased by the U.S. Underwriters and that up
to [ ] shares of the Initial International Securities to be purchased by the
International Managers (collectively, the "Reserved Securities")
-------------------
<PAGE>
-3-
shall be reserved for sale by the Underwriters to certain eligible employees and
persons having business relationships with the Company, as part of the
distribution of the Securities by the Underwriters, subject to the terms of this
Agreement, the applicable rules, regulations and interpretations of the National
Association of Securities Dealers, Inc. and all other applicable laws, rules and
regulations. To the extent that such Reserved Securities are not orally
confirmed for purchase by such eligible employees and persons having business
relationships with the Company by the end of the first business day after the
date of this Agreement, such Reserved Securities may be offered to the public as
part of the public offering contemplated hereby.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-____) covering the
----------
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
--------
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
---------
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
-------------------- -----------
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
--------
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b).
- -----------
Two forms of prospectus are to be used in connection with the offering and sale
of the Securities: one relating to the U.S. Securities (the "Form of U.S.
------------
Prospectus") and one relating to the International Securities (the "Form of
- ---------- -------
International Prospectus"). The Form of International Prospectus is identical
- ------------------------
to the Form of U.S. Prospectus, except for the front cover and back cover pages
and the information under the caption "Underwriting." The information included
in any such prospectus or in any such Term Sheet, as the case may be, that was
omitted from such registration statement at the time it became effective but
that is deemed to be part of such registration statement at the time it became
effective (a) pursuant to paragraph (b) of Rule 430A is referred to as "Rule
----
430A Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as
- ---------------- --
"Rule 434 Information". Each Form of U.S. Prospectus and Form of International
- ---------------------
Prospectus used before such registration statement became effective, and any
prospectus that omitted, as applicable, the Rule 430A Information or the Rule
434 Information, that was used after such effectiveness and prior to the
execution and delivery of this Agreement, is herein called a
<PAGE>
-4-
"preliminary prospectus". Such registration statement, including the
----------- ----------
exhibits thereto and schedules thereto, at the time it became effective and
including the Rule 430A Information and the Rule 434 Information, as applicable,
is herein called the "Registration Statement." Any registration statement
-----------------------
filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein referred
to as the "Rule 462(b) Registration Statement", and after such filing the term
----------------------------------
"Registration Statement" shall include the Rule 462(b) Registration Statement.
The final Form of U.S. Prospectus and the final Form of International Prospectus
in the forms first furnished to the Underwriters for use in connection with the
offering of the Securities are herein called the "U.S. Prospectus" and the
-------------
"International Prospectus", respectively, and collectively, the "Prospectuses".
------------------------ ------------
If Rule 434 is relied on, the terms "U.S. Prospectus" and "International
--------------- -------------
Prospectus" shall refer to the preliminary U.S. Prospectus dated May [ ], 1999,
- ---------
and preliminary International Prospectus dated May [ ], 1999, respectively, each
together with the applicable Term Sheet and all references in this Agreement to
the date of such Prospectuses shall mean the date of the applicable Term Sheet.
For purposes of this Agreement, all references to the Registration Statement,
any preliminary prospectus, the U.S. Prospectus, the International Prospectus or
any Term Sheet or any amendment or supplement to any of the foregoing shall be
deemed to include the copy filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval system ("EDGAR").
-----
SECTION 1. Representations and Warranties .
------------------------------
(a) Representations and Warranties by the Company. The Company
---------------------------------------------
represents and warrants to each U.S. Underwriter as of the date hereof, as of
the Closing Time referred to in Section 2(c) hereof, and as of each Date of
Delivery (if any) referred to in Section 2(b), hereof and agrees with each U.S.
Underwriter, as follows:
(i) Compliance with Registration Requirements . Each of the
-----------------------------------------
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act and no proceedings for that
purpose have been instituted or are pending or, to the knowledge of the
Company, are contemplated by the Commission, and any request on the part of
the Commission for additional information has been complied with.
<PAGE>
-5-
At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments thereto
became effective and at the Closing Time (and, if any U.S. Option
Securities are purchased, at the Date of Delivery), the Registration
Statement, the Rule 462(b) Registration Statement and any amendments and
supplements thereto complied and will comply in all material respects with
the requirements of the 1933 Act and the 1933 Act Regulations and did not
and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Prospectuses, any
preliminary prospectuses and any supplement thereto or prospectus wrapper
prepared in connection therewith, at their respective times of issuance and
at the Closing Time, complied and will comply in all material respects with
any applicable laws or regulations of foreign jurisdictions in which the
Prospectuses and such preliminary prospectuses, as amended or supplemented,
if applicable, are distributed in connection with the offer and sale of
Reserved Securities. Neither of the Prospectuses nor any amendments or
supplements thereto (including any prospectus wrapper), at the time the
Prospectuses or any amendments or supplements thereto were issued and at
the Closing Time (and, if any U.S. Option Securities are purchased, at the
Date of Delivery), included or will include an untrue statement of a
material fact or omitted or will omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. If Rule 434 is used, the
Company will comply with the requirements of Rule 434 and the Prospectuses
shall not be "materially different", as such term is used in Rule 434, from
the prospectuses included in the Registration Statement at the time it
became effective. The representations and warranties in this subsection
shall not apply to statements in or omissions from the Registration
Statement or the U.S. Prospectus made in reliance upon and in conformity
with information furnished to the Company in writing by any U.S.
Underwriter through the U.S. Representatives expressly for use in the
Registration Statement or the U.S. Prospectus.
Each preliminary prospectus and the prospectuses filed as part of
the Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so
filed in all material respects with the 1933 Act Regulations and
<PAGE>
-6-
each preliminary prospectus and the Prospectuses delivered to the
Underwriters for use in connection with this offering was identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(ii) Independent Accountants. The accountants who certified
-----------------------
the financial statements and supporting schedules of Advanstar, Inc.
included in the Registration Statement, the accountants who certified the
financial statements of Universal Media, Inc. ("Media") included in the
-----
Registration Statement and the accountants who certified the financial
statements of Men's Apparel Guild in California, Inc. ("Magic") included in
-----
the Registration Statement are each independent public accountants as
required by the 1933 Act and the 1933 Act Regulations.
(iii) Financial Statements. The financial statements included
--------------------
in the Registration Statement and the Prospectuses, together with the
related schedules and notes, present fairly the financial position of the
Company and its consolidated subsidiaries, MAGIC and its subsidiary and
Media at the dates indicated and the statement of operations, stockholders'
equity and cash flows of the Company and its consolidated subsidiaries,
Magic and its subsidiary and Media for the periods specified; said
financial statements have been prepared in conformity with generally
accepted accounting principles ("GAAP") applied on a consistent basis
----
throughout the periods involved. The supporting schedules included in the
Registration Statement present fairly in accordance with GAAP the
information required to be stated therein. The selected financial data and
the summary financial information included in the Prospectuses present
fairly the information shown therein and have been compiled on a basis
consistent with that of the audited financial statements included in the
Registration Statement. The pro forma financial statements and the related
notes thereto included in the Registration Statement and the Prospectuses
present fairly the information shown therein, have been prepared in
accordance with the Commission's rules and guidelines with respect to pro
forma financial statements and have been properly compiled on the bases
described therein, and the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate to give effect
to the transactions and circumstances referred to therein.
<PAGE>
-7-
(iv) No Material Adverse Change in Business. Since the
--------------------------------------
respective dates as of which information is given in the Registration
Statement and the Prospectuses, except as otherwise stated therein, (A)
there has been no material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of
the Company and its subsidiaries considered as one enterprise, whether or
not arising in the ordinary course of business (a "Material Adverse
----------------
Effect"), (B) there have been no transactions entered into by the Company
-----
or any of its subsidiaries, other than those in the ordinary course of
business, which are material with respect to the Company and its
subsidiaries considered as one enterprise, and (C) there has been no
dividend or distribution of any kind declared, paid or made by the Company
on any class of its capital stock.
(v) Good Standing of the Company. The Company has been duly
----------------------------
organized and is validly existing as a corporation in good standing under
the laws of the State of Delaware and has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectuses and to enter into and perform its obligations
under this Agreement; and the Company is duly qualified as a foreign
corporation to transact business and is in good standing in each other
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not result
in a Material Adverse Effect.
(vi) Good Standing of Subsidiaries. Each "significant
-----------------------------
subsidiary" of the Company (as such term is defined in Rule 1-02 of
Regulation S-X) (each a "Subsidiary" and, collectively, the "Subsidiaries")
---------- ------------
has been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, has
corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Prospectuses and is duly
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good standing
would not result in a Material Adverse Effect; all of the issued and
outstanding capital stock of each such Subsidiary has been
<PAGE>
-8-
duly authorized and validly issued, is fully paid and non-assessable and is
owned by the Company, directly or through subsidiaries, free and clear of
any security interest, mortgage, pledge, lien, encumbrance, claim or
equity; none of the outstanding shares of capital stock of any Subsidiary
was issued in violation of the preemptive or similar rights of any
securityholder of such Subsidiary. The only subsidiaries of the Company are
the subsidiaries listed on Exhibit 21.1 to the Registration Statement.
(vii) Capitalization. The authorized, issued and outstanding
--------------
capital stock of the Company is as reflected in the Prospectuses in the
column entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, [pursuant to the stock split referred to in
the Prospectus], pursuant to this Agreement, pursuant to reservations,
agreements or employee benefit plans referred to in the Prospectuses or
pursuant to options referred to in the Prospectuses). The shares of issued
and outstanding capital stock of the Company have been duly authorized and
validly issued and are fully paid and non-assessable; none of the
outstanding shares of capital stock of the Company was issued in violation
of the preemptive or other similar rights of any securityholder of the
Company.
(viii) Authorization of Agreement. This Agreement and the
--------------------------
International Purchase Agreement have been duly authorized, executed and
delivered by the Company.
(ix) Authorization and Description of Securities. The
-------------------------------------------
Securities to be purchased by the U.S. Underwriters and the International
Managers from the Company have been duly authorized for issuance and sale
to the U.S. Underwriters pursuant to this Agreement and the International
Managers pursuant to the International Purchase Agreement, respectively,
and, when issued and delivered by the Company pursuant to this Agreement
and the International Purchase Agreement, respectively, against payment of
the consideration set forth herein and the International Purchase
Agreement, respectively, will be validly issued, fully paid and non-
assessable; the Common Stock conforms to all statements relating thereto
contained in the Prospectuses and such description conforms to the rights
set forth in the instruments defining the same; no holder of the Securities
will be subject to personal liability by reason of being such a holder; and
the issuance of the Securities is
<PAGE>
-9-
not subject to the preemptive or other similar rights of any securityholder
of the Company.
(x) Absence of Defaults and Conflicts. Neither the Company
---------------------------------
nor any of its subsidiaries is in violation of its charter or by-laws (as
now in effect or as in effect at each Date of Delivery and on the Closing
Date) or in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or other
agreement or instrument to which the Company or any of its subsidiaries is
a party or by which it or any of them may be bound, or to which any of the
property or assets of the Company or any subsidiary is subject
(collectively, "Agreements and Instruments") except for such defaults that
--------------------------
would not result in a Material Adverse Effect; and the execution, delivery
and performance of this Agreement and the International Purchase Agreement
and the consummation of the transactions contemplated in this Agreement,
the International Purchase Agreement and in the Registration Statement and
compliance by the Company with its obligations under this Agreement and the
International Purchase Agreement have been duly authorized by all necessary
corporate action and do not and will not, whether with or without the
giving of notice or passage of time or both, conflict with or constitute a
breach of, or default or Repayment Event (as defined below) under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any subsidiary pursuant to,
the Agreements and Instruments (except for such conflicts, breaches or
defaults or liens, charges or encumbrances that would not result in a
Material Adverse Effect), nor will such action result in any violation of
the provisions of the charter or by-laws of the Company or any subsidiary
or any applicable law, statute, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any subsidiary or any of
their assets, properties or operations. As used herein, a "Repayment
---------
Event" means any event or condition which gives the holder of any note,
debenture or other evidence of indebtedness (or any person acting on such
holder's behalf) the right to require the repurchase, redemption or
repayment of all or a portion of such indebtedness by the Company or any
subsidiary.
<PAGE>
-10-
(xi) Absence of Labor Dispute. No labor dispute with the
------------------------
employees of the Company or any subsidiary exists or, to the knowledge of
the Company, is imminent, and the Company is not aware of any existing or
imminent labor disturbance by the employees of any of its or any
subsidiary's principal suppliers, manufacturers, customers or contractors,
which, in either case, may reasonably be expected to result in a Material
Adverse Effect.
(xii) Absence of Proceedings. There is no action, suit,
----------------------
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to the
knowledge of the Company, threatened, against or affecting the Company or
any subsidiary, which is required to be disclosed in the Registration
Statement (other than as disclosed therein), or which might reasonably be
expected to result in a Material Adverse Effect, or which might reasonably
be expected to materially and adversely affect the properties or assets
thereof or the consummation of the transactions contemplated in this
Agreement and the International Purchase Agreement or the performance by
the Company of its obligations hereunder or thereunder; the aggregate of
all pending legal or governmental proceedings to which the Company or any
subsidiary is a party or of which any of their respective property or
assets is the subject which are not described in the Registration
Statement, including ordinary routine litigation incidental to the
business, could not reasonably be expected to result in a Material Adverse
Effect.
(xiii) Accuracy of Exhibits. There are no contracts or
--------------------
documents which are required to be described in the Registration Statement
or the Prospectuses or to be filed as exhibits thereto which have not been
so described and filed as required.
(xiv) Possession of Intellectual Property. The Company and
-----------------------------------
its subsidiaries own or possess, or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the business
---------------------
now operated by them, and neither the Company nor any of its subsidiaries
has received any notice or is otherwise aware of any infringement of or
conflict with asserted rights of others with respect to any Intellectual
Property or of any facts or circumstances which would render any
Intellectual Property invalid or inadequate to protect the interest of the
Company or any of its subsidiaries therein, and which infringement
<PAGE>
-11-
or conflict (if the subject of any unfavorable decision, ruling or finding)
or invalidity or inadequacy, singly or in the aggregate, would result in a
Material Adverse Effect.
(xv) Absence of Further Requirements. No filing with, or
-------------------------------
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Company of its
obligations hereunder, in connection with the offering, issuance or sale of
the Securities under this Agreement and the International Purchase
Agreement or the consummation of the transactions contemplated by this
Agreement and the International Purchase Agreement, except (i) such as have
been already obtained or as may be required under the 1933 Act or the 1933
Act Regulations and foreign or state securities or blue sky laws and (ii)
such as have been obtained under the laws and regulations of jurisdictions
outside the United States in which the Reserved Securities are offered.
(xvi) Possession of Licenses and Permits. The Company and its
----------------------------------
subsidiaries possess such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the
---------------------
appropriate federal, state, local or foreign regulatory agencies or bodies
necessary to conduct the business now operated by them; the Company and its
subsidiaries are in compliance with the terms and conditions of all such
Governmental Licenses, except where the failure so to comply would not,
singly or in the aggregate, have a Material Adverse Effect; all of the
Governmental Licenses are valid and in full force and effect, except when
the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect.
<PAGE>
-12-
(xvii) Title to Property. The Company and its subsidiaries
-----------------
have good and marketable title to all real property owned by the Company
and its subsidiaries and good title to all other properties owned by them,
in each case, free and clear of all mortgages, pledges, liens, security
interests, claims, restrictions or encumbrances of any kind except such as
(a) are described in the Prospectuses or (b) do not, singly or in the
aggregate, materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company or any of its subsidiaries; and all of the leases and subleases
material to the business of the Company and its subsidiaries, considered as
one enterprise, and under which the Company or any of its subsidiaries
holds properties described in the Prospectuses, are in full force and
effect, and neither the Company nor any subsidiary has any notice of any
material claim of any sort that has been asserted by anyone adverse to the
rights of the Company or any subsidiary under any of the leases or
subleases mentioned above, or affecting or questioning the rights of the
Company or such subsidiary to the continued possession of the leased or
subleased premises under any such lease or sublease.
(xviii) Compliance with Cuba Act. The Company has complied
------------------------
with, and is and will be in compliance with, the provisions of that certain
Florida act relating to disclosure of doing business with Cuba, codified as
Section 517.075 of the Florida statutes, and the rules and regulations
thereunder (collectively, the "Cuba Act") or is exempt therefrom.
--------
(xix) Investment Company Act. The Company is not, and upon
----------------------
the issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectuses
will not be, an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment Company
Act of 1940, as amended (the "1940 Act").
--------
(xx) Environmental Laws. Except as would not, singly or in
------------------
the aggregate, result in a Material Adverse Effect, (A) neither the Company
nor any of its subsidiaries is in violation of any federal, state, local or
foreign statute, law, rule, regulation, ordinance, code, policy or rule of
common law or any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent, decree or
judgment, relating to pollution or
<PAGE>
-13-
protection of human health, the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata)
or wildlife, including, without limitation, laws and regulations relating
to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum or
petroleum products (collectively, "Hazardous Materials") or to the
-------------------
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials (collectively, "Environmental
-------------
Laws"), (B) the Company and its subsidiaries have all permits,
----
authorizations and approvals required under any applicable Environmental
Laws and are each in compliance with their requirements, (C) there are no
pending or threatened administrative, regulatory or judicial actions,
suits, demands, demand letters, claims, liens, notices of noncompliance or
violation, investigation or proceedings relating to any Environmental Law
against the Company or any of its subsidiaries and (D) there are no events
or circumstances that might reasonably be expected to form the basis of an
order for clean-up or remediation, or an action, suit or proceeding by any
private party or governmental body or agency, against or affecting the
Company or any of its subsidiaries relating to Hazardous Materials or any
Environmental Laws.
(xxi) Registration Rights. There are no persons with
-------------------
registration rights or other similar rights to have any securities
registered pursuant to the Registration Statement or otherwise registered
by the Company under the 1933 Act.
(xxii) Internal Accounting Controls. The Company and each of
----------------------------
its subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(xxiii) Insurance. The Company and each of its subsidiaries
---------
have insurance covering their respective properties, operations, personnel
and businesses, which insurance is
<PAGE>
-14-
in amounts and insures against such losses and risks as are believed by the
Company and its subsidiaries to be adequate to protect the Company and its
subsidiaries and their respective businesses. None of the Company nor any
of its subsidiaries has received notice from any insurer or agent of such
insurer that capital improvements or other expenditures are required or
necessary to be make in order to continue such insurance.
(xxiv) ERISA. No "prohibited transaction" (as defined in
-----
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended, including the Regulations and published interpretations thereunder
("ERISA"), as Section 4975 of the Internal Revenue Code of 1986, as amended
-----
from time to time (the "Code")) or "accumulated finding deficiency" (as
----
defined in Section 302 of ERISA) or any of the events set forth in Section
4043(b) (other than events with respect to which the 30-day notice
requirement under Section 4043 of ERISA has been waived) has occurred with
respect to any employee benefit plan (other than a multiemployer plan) of
the Company or any of its subsidiaries which could reasonably be expected
to have a Material Adverse Effect; each such employee benefit plan (other
than a multiemployer plan) is in compliance in all material respects with
applicable law, including ERISA and the Code; the Company and each of its
subsidiaries have not incurred and do not expect to incur liability under
Title IV of ERISA with respect to the termination of, or withdrawal from,
any pension plan for which the Company or any of its subsidiaries would
have any liability; and each such pension plan that is intended to be
qualified under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or failure to act,
which could reasonably be expected to cause the loss of such qualification.
(b) Representations and Warranties by the Selling Stockholders. Each
----------------------------------------------------------
Selling Stockholder severally represents and warrants to each U.S. Underwriter
as of the date hereof, as of the Closing Time, and, if the Selling Stockholder
is selling Option Securities on a Date of Delivery, as of each such Date of
Delivery, and agrees with each U.S. Underwriter, as follows:
(i) Authorization of Agreements. Each Selling Stockholder has
---------------------------
the full right, power and authority to enter into this Agreement and a
Power of Attorney and Custody Agreement (the "Power of Attorney and Custody
-----------------------------
Agreement") and to sell, transfer and deliver the U.S. Securities
---------
<PAGE>
-15-
to be sold by such Selling Stockholder hereunder. The execution and
delivery of this Agreement and the Power of Attorney and Custody Agreement
and the sale and delivery of the US. Securities to be sold by such Selling
Stockholder and the consummation of the transactions contemplated herein
and compliance by such Selling Stockholder with its obligations hereunder
have been duly authorized by such Selling Stockholder and do not and will
not, whether with or without the giving of notice or passage of time or
both, conflict with or constitute a breach of, or default under, or result
in the creation or imposition of any tax, lien, charge or encumbrance upon
the U.S. Securities to be sold by such Selling Stockholder or any property
or assets of such Selling Stockholder pursuant to, any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, license, lease or
other agreement or instrument to which such Selling Stockholder is a party
or by which such Selling Stockholder may be bound, or to which any of the
property or assets of such Selling Stockholder is subject, nor will such
action result in any violation of the provisions of the charter or by-laws
or other organizational instrument of such Selling Stockholder, if
applicable, or any applicable treaty, law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over
such Selling Stockholder or any of its properties.
(ii) Good and Marketable Title. Such Selling Stockholder has
-------------------------
and will at the Closing Time and, if any U.S. Option Securities are
purchased, on the Date of Delivery have good and marketable title to the
U.S. Securities to be sold by such Selling Stockholder hereunder, free and
clear of any security interest, mortgage, pledge, lien, charge, claim,
equity or encumbrance of any kind, other than pursuant to this Agreement;
and upon delivery of such U.S. Securities and payment of the purchase price
therefor as herein contemplated, assuming each such U.S. Underwriter has no
notice of any adverse claim, each of the U.S. Underwriters will receive
good and marketable title to the U.S. Securities purchased by it from such
Selling Stockholder, free and clear of any security interest, mortgage,
pledge, lien, charge, claim, equity or encumbrance of any kind.
<PAGE>
-16-
(iii) Due Execution of Power of Attorney and Custody Agreement
--------------------------------------------------------
/a/. Such Selling Stockholder has duly executed and delivered, in the form
heretofore furnished to the Representatives, the Power of Attorney and
Custody Agreement with [ ] as attorney-in-fact (the "Attorney-in-
-----------
Fact") and [ ], as custodian (the "Custodian"); the Custodian is
---- ---------
authorized to deliver the U.S. Securities to be sold by such Selling
Stockholder hereunder and to accept payment therefor; and the Attorney-in-
Fact is authorized to execute and deliver this Agreement and the
certificate referred to in Section 5(e) or that may be required pursuant to
Sections 5(l)(iii) on behalf of such Selling Stockholder, to sell, assign
and transfer to the U.S. Underwriters the U.S. Securities to be sold by
such Selling Stockholder hereunder, to determine the purchase price to be
paid by the U.S. Underwriters to such Selling Stockholder, as provided in
Section 2(a) hereof, to authorize the delivery of the U.S. Securities to be
sold by such Selling Stockholder hereunder, to accept payment therefor, and
otherwise to act on behalf of such Selling Stockholder in connection with
this Agreement.
(iv) Absence of Manipulation. Such Selling Stockholder has
-----------------------
not taken, and will not take, directly or indirectly, any action which is
designed to or which has constituted or which might reasonably be expected
to cause or result in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the U.S.
Securities.
(v) Absence of Further Requirements. No filing with, or
-------------------------------
consent, approval, authorization, order, registration, qualification or
decree of, any court or governmental authority or agency, domestic or
foreign, is necessary or required for the performance by each Selling
Stockholder of its obligations hereunder or in the Power of Attorney and
Custody Agreement, or in connection with the sale and delivery of the U.S.
Securities hereunder or the consummation of the transactions contemplated
by this Agreement, except (i) such as may have previously been made or
obtained or as may be required under the 1933 Act or the 1933 Act
Regulations or state securities laws and
- ---------------------------------
/a/ Discuss necessity of P/A and Custody Agreement.
<PAGE>
-17-
(ii) such as have been obtained under the laws and regulations of
jurisdictions outside the United States in which the Reserved Securities
are offered.
(vi) Restriction on Sale of Securities. During a period of
---------------------------------
180 days from the date of the Prospectus, such Selling Stockholder will
not, without the prior written consent of Merrill Lynch, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase
any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly, any
share of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly
or indirectly, the economic consequence of ownership of the Common Stock,
whether any such swap or transaction described in clause (i) or (ii) above
is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to the U.S.
Securities to be sold hereunder.
(vii) Certificates Suitable for Transfer. Certificates for
----------------------------------
all of the U.S. Securities to be sold by such Selling Stockholder pursuant
to this Agreement, in suitable form for transfer by delivery or accompanied
by duly executed instruments of transfer or assignment in blank with
signatures guaranteed, have been placed in custody with the Custodian with
irrevocable conditional instructions to deliver such U.S. Securities to the
U.S. Underwriters pursuant to this Agreement.
(viii) Information Relating to the Selling Stockholders. The
------------------------------------------------
information in the Prospectus is under the caption "Principal and Selling
Stockholders" which specifically relates to such Selling Stockholders does
not and will not on the Closing Date, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statement. therein, in the light of the
circumstances in which they were made, not misleading
(c) Officer's Certificates. Any certificate signed by any officer of
----------------------
the Company or any of its subsidiaries delivered to the Global Coordinator, the
U.S. Representatives or to counsel for the U.S. Underwriters shall be deemed a
representation and warranty by the Company to each U.S. Underwriter as to
<PAGE>
-18-
the matters covered thereby; and any certificate signed by or on behalf of the
Selling Stockholders as such and delivered to the Global Coordinator, U.S.
Representatives or to counsel for the U.S. Underwriters pursuant to the terms of
this Agreement shall be deemed a representation and warranty by such Selling
Stockholder to the U.S. Underwriters as to the matters covered thereby.
SECTION 2. Sale and Delivery to U.S. Underwriters; Closing.
-----------------------------------------------
(a) Initial Securities. On the basis of the representations and
------------------
warranties herein contained and subject to the terms and conditions herein set
forth, the Company and each Selling Stockholder, severally and not jointly,
agree to sell to each U.S. Underwriter, severally and not jointly, and each U.S.
Underwriter, severally and not jointly, agrees to purchase from the Company and
each Selling Stockholder, at the price per share set forth in Schedule C, the
number of Initial U.S. Securities set forth in Schedule B from the Company and
the Selling Stockholders, as set forth in Schedule A, plus any additional number
of Initial U.S. Securities which such Underwriter may become obligated to
purchase pursuant to the provisions of Section 10 hereof.
(b) Option Securities. In addition, on the basis of the
-----------------
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Selling Stockholders hereby grant an option to
the U.S. Underwriters, severally and not jointly, to purchase up to an
additional [ ] shares of Common Stock at the price per share set forth in
Schedule C, less an amount per share equal to any dividends or distributions
declared by the Company and payable on the Initial U.S. Securities but not
payable on the U.S. Option Securities. The option hereby granted will expire 30
days after the date hereof and may be exercised in whole or in part from time to
time only for the purpose of covering over-allotments which may be made in
connection with the offering and distribution of the Initial U.S. Securities
upon notice by the Global Coordinator to the Selling Stockholders setting forth
the number of U.S. Option Securities as to which the several U.S. Underwriters
are then exercising the option and the time and date of payment and delivery for
such U.S. Option Securities. Any such time and date of delivery for the U.S.
Option Securities (a "Date of Delivery") shall be determined by the Global
----------------
Coordinator, but shall not be later than seven full business days after the
exercise of said option, nor in any event prior to the Closing Time, as
hereinafter defined. If the option is exercised
<PAGE>
-19-
as to all or any portion of the U.S. Option Securities, each of the U.S.
Underwriters, acting severally and not jointly, will purchase that proportion of
the total number of U.S. Option Securities then being purchased which the number
of Initial U.S. Securities set forth in Schedule B opposite the name of such
U.S. Underwriter bears to the total number of Initial U.S. Securities, subject
in each case to such adjustments as the Global Coordinator in its discretion
shall make to eliminate any sales or purchases of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of
-------
certificates for, the Initial Securities shall be made at the offices of Cahill
Gordon & Reindel, 80 Pine Street, New York, New York 10005, or at such other
place as shall be agreed upon by the Global Coordinator and the Company, at 9:00
A.M. (Eastern time) on the third business day after the date hereof (unless
postponed in accordance with the provisions of Section 10), or such other time
not later than ten business days after such date as shall be agreed upon by the
Global Coordinator and the Company, (such time and date of payment and delivery
being herein called "Closing Time").
------------
In addition, in the event that any or all of the U.S. Option
Securities are purchased by the U.S. Underwriters, payment of the purchase price
for, and delivery of certificates for, such U.S. Option Securities shall be made
at the above-mentioned offices, or at such other place as shall be agreed upon
by the Global Coordinator, the Company and the Selling Stockholders, on each
Date of Delivery as specified in the notice from the Global Coordinator to the
Company and the Selling Stockholders.
Payment shall be made to the Company and the Selling Stockholders by
wire transfer of immediately available funds to a bank account designated by the
Company and the Selling Stockholders, against delivery to the U.S.
Representatives for the respective accounts of the U.S. Underwriters of
certificates for the U.S. Securities to be purchased by them. It is understood
that each U.S. Underwriter has authorized the U.S. Representatives, for its
account, to accept delivery of, receipt for, and make payment of the purchase
price for, the Initial U.S. Securities and the U.S. Option Securities, if any,
which it has agreed to purchase. Merrill Lynch, individually and not as
representative of the U.S. Underwriters, may (but shall not be obligated to)
make payment of the purchase price for the Initial U.S. Securities or the U.S.
Option Securities, if any, to be purchased by any U.S. Underwriter whose funds
have not been received by the Closing Time or the relevant Date of Delivery,
<PAGE>
-20-
as the case may be, but such payment shall not relieve such U.S. Underwriter
from its obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial U.S.
---------------------------
Securities and the U.S. Option Securities, if any, shall be in such
denominations and registered in such names as the U.S. Representatives may
request in writing at least one full business day before the Closing Time or the
relevant Date of Delivery, as the case may be. The certificates for the Initial
U.S. Securities and the U.S. Option Securities, if any, will be made available
for examination and packaging by the U.S. Representatives in The City of New
York not later than 10:00 A.M. (Eastern time) on the business day prior to the
Closing Time or the relevant Date of Delivery, as the case may be.
SECTION 3. Covenants of the Company . The Company covenants with
------------------------
each U.S. Underwriter as follows:
(a) Compliance with Securities Regulations and Commission Requests.
--------------------------------------------------------------
The Company, subject to Section 3(b), will comply with the requirements of Rule
430A or Rule 434, as applicable, and will notify the Global Coordinator
immediately, and confirm the notice in writing, (i) when any post-effective
amendment to the Registration Statement shall become effective, or any
supplement to the Prospectuses or any amended Prospectuses shall have been
filed, (ii) of the receipt of any comments from the Commission, (iii) of any
request by the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectuses or for additional information, and
(iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus, or of the suspension of the
qualification of the Securities for offering or sale in any jurisdiction, or of
the initiation or threatening of any proceedings for any of such purposes. The
Company will promptly effect the filings necessary pursuant to Rule 424(b) and
will take such steps as it deems necessary to ascertain promptly whether the
form of prospectus transmitted for filing under Rule 424(b) was received for
filing by the Commission and, in the event that it was not, it will promptly
file such prospectus. The Company will make every reasonable effort to prevent
the issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the Global
--------------------
Coordinator notice of its intention to file or prepare
<PAGE>
-21-
any amendment to the Registration Statement (including any filing under Rule
462(b)), any Term Sheet or any amendment, supplement or revision to either the
prospectus included in the Registration Statement at the time it became
effective or to the Prospectuses, will furnish the Global Coordinator with
copies of any such documents a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file or use any such document to
which the Global Coordinator or counsel for the U.S. Underwriters shall object.
(c) Delivery of Registration Statements. The Company has furnished
-----------------------------------
or will deliver to the U.S. Underwriters and counsel for the U.S. Underwriters,
without charge, signed copies of the Registration Statement as originally filed
and of each amendment thereto (including exhibits filed therewith or
incorporated by reference therein) and signed copies of all consents and
certificates of experts, and will also deliver to the U.S. Representatives,
without charge, a conformed copy of the Registration Statement as originally
filed and of each amendment thereto (without exhibits) for each of the U.S.
Underwriters. The copies of the Registration Statement and each amendment
thereto furnished to the U.S. Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
EDGAR, except to the extent permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to each U.S.
------------------------
Underwriter, without charge, as many copies of each preliminary prospectus as
such U.S. Underwriter reasonably requested, and the Company hereby consents to
the use of such copies for purposes permitted by the 1933 Act. The Company will
furnish to each U.S. Underwriter, without charge, during the period when the
U.S. Prospectus is required to be delivered under the 1933 Act or the Securities
Exchange of 1934 (the "1934 Act"), such number of copies of the U.S. Prospectus
--------
(as amended or supplemented) as such U.S. Underwriter may reasonably request.
The U.S. Prospectus and any amendments or supplements thereto furnished to the
U.S. Underwriters will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will
-----------------------------------------
comply with the 1933 Act and the 1933 Act Regulations so as to permit the
completion of the distribution of the Securities as contemplated in this
Agreement, the International Purchase Agreement and in the Prospectuses. If at
any time when a prospectus is required by the 1933 Act to be delivered
<PAGE>
-22-
in connection with sales of the Securities, any event shall occur or condition
shall exist as a result of which it is necessary, in the opinion of counsel for
the U.S. Underwriters or for the Company, to amend the Registration Statement or
amend or supplement any Prospectus in order that the Prospectuses will not
include any untrue statements of a material fact or omit to state a material
fact necessary in order to make the statements therein not misleading in the
light of the circumstances existing at the time it is delivered to a purchaser,
or if it shall be necessary, in the opinion of such counsel, at any such time to
amend the Registration Statement or amend or supplement any Prospectus in order
to comply with the requirements of the 1933 Act or the 1933 Act Regulations, the
Company will promptly prepare and file with the Commission, subject to Section
3(b), such amendment or supplement as may be necessary to correct such statement
or omission or to make the Registration Statement or the Prospectuses comply
with such requirements, and the Company will furnish to the U.S. Underwriters
such number of copies of such amendment or supplement as the U.S. Underwriters
may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best efforts,
-----------------------
in cooperation with the U.S. Underwriters, to qualify the Securities for
offering and sale under the applicable securities laws of such states and other
jurisdictions as the Global Coordinator may designate and to maintain such
qualifications in effect for a period of not less than one year from the later
of the effective date of the Registration Statement and any Rule 462(b)
Registration Statement; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which it
is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject. In each
jurisdiction in which the Securities have been so qualified, the Company will
file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect for a period of not less
than one year from the effective date of the Registration Statement and any Rule
462(b) Registration Statement.
(g) Rule 158. The Company will timely file such reports pursuant to
--------
the 1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.
<PAGE>
-23-
(h) Use of Proceeds. The Company will use the net proceeds received
---------------
by it from the sale of the Securities in the manner specified in the
Prospectuses under "Use of Proceeds".
(i) Listing. The Company will use its best efforts to effect the
-------
listing of the Common Stock on The New York Stock Exchange.
(j) Restriction on Sale of Securities. During a period of 180 days
---------------------------------
from the date of the Prospectuses, the Company will not, without the prior
written consent of the Global Coordinator, (i) directly or indirectly, offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of any share of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock or
file any registration statement under the 1933 Act with respect to any of the
foregoing or (ii) enter into any swap or any other agreement or any transaction
that transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of the Common Stock, whether any such swap or
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to the Securities to be sold hereunder or under the
International Purchase Agreement.
(k) Reporting Requirements. The Company, during the period when the
----------------------
Prospectuses are required to be delivered under the 1933 Act or the 1934 Act,
will file all documents required to be filed with the Commission pursuant to the
1934 Act within the time periods and rules and regulations of the Commission
thereunder.
(l) Compliance with NASD Rules. The Company hereby agrees that it
--------------------------
will ensure that the Reserved Securities will be restricted as required by the
National Association of Securities Dealers, Inc. (the "NASD") or the NASD rules
----
from sale, transfer, assignment, pledge or hypothecation for a period of three
months following the date of this Agreement. The Underwriters will notify the
Company as to which persons will need to be so restricted. At the request of
the Underwriters, the Company will direct the transfer agent to place a stop
transfer restriction upon such securities for such period of time. Should the
Company release, or seek to release, from such restrictions any of the Reserved
Securities, the Company agrees to reimburse the Underwriters for any reasonable
expenses (including,
<PAGE>
-24-
without limitation, legal expenses) they incur in connection with such release.
(m) Compliance with Rule 463. The Company will file with the
------------------------
Commission such reports on Form SR as may be required pursuant to Rule 463 of
the 1933 Act Regulations.
SECTION 4. Payment of Expenses .
-------------------
(a) Expenses of the Company. The Company will pay all expenses
-----------------------
incident to the performance of its obligations under this Agreement, including
(i) the preparation, printing and filing of the Registration Statement
(including financial statements and exhibits) as originally filed and of each
amendment thereto, (ii) the preparation, printing and delivery to the
Underwriters of this Agreement, any Agreement among Underwriters and such other
documents as may be required in connection with the offering, purchase, sale,
issuance or delivery of the Securities, (iii) the preparation, issuance and
delivery of the certificates for the Securities to the Underwriters, including
any stock or other transfer taxes and any stamp or other duties payable upon
the sale, issuance or delivery of the Securities to the Underwriters and the
transfer of the Securities between the U.S. Underwriters and the International
Managers, (iv) the fees and disbursements of counsel for the Company and the
Selling Stockholders and the Company's accountants and other advisors, (v) the
qualification of the Securities under securities laws in accordance with the
provisions of Section 3(f) hereof, including filing fees and the reasonable fees
and disbursements of counsel for the Underwriters in connection therewith and in
connection with the preparation of the Blue Sky Survey and any supplement
thereto, (vi) the printing and delivery to the Underwriters of copies of each
preliminary prospectus, any Term Sheets and of the Prospectuses and any
amendments or supplements thereto, (vii) the preparation, printing and delivery
to the Underwriters of copies of the Blue Sky Survey and any supplement thereto,
(viii) the fees and expenses of any transfer agent or registrar for the
Securities, (ix) the filing fees incident to, and the reasonable fees and
disbursements of counsel to the Underwriters in connection with, the review by
the NASD of the terms of the sale of the Securities and (x) the fees and
expenses incurred in connection with the listing of the Securities on The New
York Stock Exchange and (xi) all costs and expenses of the Underwriters,
including the fees and disbursements of counsel for the Underwriters, in
connection with matters related to the Reserved Securities which are designated
by the Company for sale to employees and others having a business relationship
with the Company.
<PAGE>
-25-
(b) Termination of Agreement. If this Agreement is terminated by the
------------------------
U.S. Representatives in accordance with the provisions of Section 5 or Section
9(a)(i) hereof, the Company shall reimburse the U.S. Underwriters for all of
their out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the U.S. Underwriters.
(c) Expenses of the Selling Stockholders. The Selling Stockholders,
------------------------------------
jointly and severally, will pay all expenses incident to the performance of
their respective obligations under, and the consummation of the transactions
contemplated by, this Agreement, including (i) any stamp duties, capital duties
and stock transfer taxes, if any, payable upon the sale of the U.S. Securities
to the U.S. Underwriters, and their transfer between the U.S. Underwriters
pursuant to an agreement between such U.S. Underwriters, and (ii) the fees and
disbursements of their counsel and accountants.
(d) Allocation of Expenses. The provisions of this Section shall not
----------------------
affect any agreement that the Company and the Selling Stockholders may make for
the sharing of such costs and expenses.
SECTION 5. Conditions of U.S. Underwriters' Obligations . The
--------------------------------------------
obligations of the several U.S. Underwriters hereunder are subject to the
accuracy of the representations and warranties of the Company and the Selling
Stockholders contained in Section 1 hereof or in certificates of any officer of
the Company or any subsidiary of the Company delivered pursuant to the
provisions hereof, to the performance by the Company of its covenants and other
obligations hereunder, and to the following further conditions:
(a) Effectiveness of Registration Statement. The Registration
---------------------------------------
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of
the Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission, and any
request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of counsel to the U.S.
Underwriters. A prospectus containing the Rule 430A Information shall have
been filed with the Commission in accordance with Rule 424(b) (or a post-
effective amendment providing such information shall have been filed and
declared effective in accordance with the requirements of Rule 430A) or, if
the Company has elected to rely upon
<PAGE>
-26-
Rule 434, a Term Sheet shall have been filed with the Commission in
accordance with Rule 424(b).
(b) Opinion of Counsel for Company. At Closing Time, the U.S.
------------------------------
Representatives shall have received the favorable opinion, dated as of
Closing Time, of Testa, Hurwitz & Thibeault, LLP, counsel for the Company,
and Eric Lisman, General Counsel of the Company, in form and substance
satisfactory to counsel for the U.S. Underwriters, together with signed or
reproduced copies of such letters for each of the other U.S. Underwriters
covering the matters set forth in Exhibit A hereto and to such effect as
counsel to the U.S. Underwriters may reasonably request.
(c) Opinion of Counsel for U.S. Underwriters. At Closing Time, the
----------------------------------------
U.S. Representatives shall have received the favorable opinion, dated as of
Closing Time, of Cahill Gordon & Reindel, counsel for the U.S.
Underwriters, together with signed or reproduced copies of such letter for
each of the other U.S. Underwriters, in form and substance satisfactory to
the U.S. Representatives. In giving such opinion such counsel may rely, as
to all matters governed by the laws of jurisdictions other than the law of
the State of New York and the federal law of the United States and the
General Corporation Law of the State of Delaware, upon the opinions of
counsel satisfactory to the U.S. Representatives. Such counsel may also
state that, insofar as such opinion involves factual matters, they have
relied, to the extent they deem proper, upon certificates of officers of
the Company and its subsidiaries and certificates of public officials.
(d) Officers' Certificate. At Closing Time, there shall not have
---------------------
been, since the date hereof or since the respective dates as of which
information is given in the Prospectuses, any material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs
or business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and
the U.S. Representatives shall have received a certificate of the President
or a Vice President of the Company and of the chief financial or chief
accounting officer of the Company, dated as of Closing Time, to the effect
that (i) there has been no such material adverse change, (ii) the
representations and warranties in Section 1(a) hereof are true and correct
with the same force and effect as though expressly made at and as of
Closing Time,
<PAGE>
-27-
(iii) the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to Closing
Time, and (iv) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose
have been instituted or are pending or are contemplated by the Commission.
(e) Certificate of Selling Stockholders. At Closing Time, the
-----------------------------------
Representatives shall have received a certificate of an Attorney-in-Fact on
behalf of each Selling Stockholder, dated as of Closing Time, to the
effect that the representations and warranties of each Selling Stockholder
contained in Section 1(b) hereof are true and correct in all respects with
the same force and effect as though expressly made at and as of Closing
Time and (ii) each Selling Stockholder has complied in all material
respects with all agreements and all conditions on its part to be performed
under this Agreement at or prior to Closing Time.
(f) Accountant's Comfort Letter. At the time of the execution of
---------------------------
this Agreement, the U.S. Representatives shall have received from a letter
dated such date, in form and substance satisfactory to the U.S.
Representatives, together with signed or reproduced copies of such letter
for each of the other U.S. Underwriters containing statements and
information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained in the Registration Statement and
the Prospectuses.
(g) Bring-down Comfort Letter-. At Closing Time, the Representatives
--------------------------
shall have received from Arthur Andersen a letter, dated as of Closing
Time, to the effect that they reaffirm the statements made in the letter
furnished pursuant to subsection (f) of this Section, except that the
specified date referred to shall be a date not more than three business
days prior to Closing Time.
(h) Approval of Listing. At Closing Time, the Securities shall have
-------------------
been approved for listing on The New York Stock Exchange, subject only to
official notice of issuance.
(i) No Objection. The NASD has confirmed that it has not raised any
------------
objection with respect to the fairness
<PAGE>
-28-
and reasonableness of the underwriting terms and arrangements.
(j) Lock-up Agreements-. At the date of this Agreement, the U.S.
-------------------
Representatives shall have received an agreement substantially in the form
of Exhibit B hereto signed by the persons listed on Schedule D hereto.
(k) Purchase of Initial International Securities. Contemporaneously
--------------------------------------------
with the purchase by the U.S. Underwriters of the Initial U.S. Securities
under this Agreement, the International Managers shall have purchased the
Initial International Securities under the International Purchase
Agreement.
(l) Conditions to Purchase of U.S. Option Securities. In the event
------------------------------------------------
that the U.S. Underwriters exercise their option provided in Section 2(b)
hereof to purchase all or any portion of the U.S. Option Securities, the
representations and warranties of the Company contained herein and the
statements in any certificates furnished by the Company or any subsidiary
of the Company hereunder shall be true and correct as of each Date of
Delivery and, at the relevant Date of Delivery, the U.S. Representatives
shall have received:
(i) Officers' Certificate. A certificate, dated such
---------------------
Date of Delivery, of the President or a Vice President of the Company
and of the chief financial or chief accounting officer of the Company
confirming that the certificate delivered at the Closing Time pursuant
to Section 5(d) hereof remains true and correct as of such Date of
Delivery.
(ii) Opinion of Counsel for Company. The favorable
------------------------------
opinion of Testa, Hurwitz & Thibeault, LLP, counsel for the Company
and Eric Lisman, General Counsel of the Company, in form and substance
satisfactory to counsel for the U.S. Underwriters, dated such Date of
Delivery, relating to the U.S. Option Securities to be purchased on
such Date of Delivery and otherwise to the same effect as the opinion
required by Section 5(b) hereof.
(iii) Certificate of Selling Stockholders. A
-----------------------------------
certificate, dated such Date of Delivery, of an Attorney-in-Fact on
behalf of the Selling Stockholders confirming that the certificate
delivered at Closing
<PAGE>
-29-
Time pursuant to Section 5(e) remains true and correct as of such Date
of Delivery.
(iv) Opinion of Counsel for U.S. Underwriters. The
----------------------------------------
favorable opinion of Cahill Gordon & Reindel, counsel for the U.S.
Underwriters, dated such Date of Delivery, relating to the U.S. Option
Securities to be purchased on such Date of Delivery and otherwise to
the same effect as the opinion required by Section 5(c) hereof.
(v) Bring-down Comfort Letter. A letter from Arthur
-------------------------
Andersen, in form and substance satisfactory to the U.S.
Representatives and dated such Date of Delivery, substantially in the
same form and substance as the letter furnished to the U.S.
Representatives pursuant to Section 5(g) hereof, except that the
"specified date" in the letter furnished pursuant to this paragraph
shall be a date not more than five days prior to such Date of
Delivery.
(vi) Opinion of Counsel for the Selling Stockholders.
-----------------------------------------------
The favorable opinion of Heller Ehrman White & McAuliffe, counsel for
the Selling Stockholders, dated such Date of Delivery, relating to the
U.S. Option Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the opinion required by Section 5(c)
hereof.
(m) Amendment of Certain Documents. The Company shall have amended
------------------------------
and restated its Certificate of Incorporation, its By-Laws and its 1996
Stock Option Plan and each of the Amended and Restated Certificate of
Incorporation, the Amended and Restated By-Laws and Amended and Restated
1996 Stock Option Plan shall be in effect and the Company shall have
provided such documents to the Underwriters.
(n) Dissolution of AHI Advanstar LLC. AHI Advanstar LLC, the
--------------------------------
Company's sole Stockholder prior to the Offering, shall be dissolved and
the [ ] shares of Common Stock will be distributed to the members of AHI
Advanstar LLC who owned such interests.
(o) Additional Documents. At Closing Time and at each Date of
--------------------
Delivery, counsel for the U.S. Underwriters shall have been furnished with
such documents and opinions as they may require for the purpose of enabling
them to
<PAGE>
-30-
pass upon the issuance and sale of the Securities as herein contemplated,
or in order to evidence the accuracy of any of the representations or
warranties, or the fulfillment of any of the conditions, herein contained;
and all proceedings taken by the Company in connection with the issuance
and sale of the Securities as herein contemplated shall be satisfactory in
form and substance to the U.S. Representatives and counsel for the U.S.
Underwriters.
(p) Termination of Agreement. If any condition specified in this
------------------------
Section shall not have been fulfilled when and as required to be fulfilled,
this Agreement, or, in the case of any condition to the purchase of U.S.
Option Securities on a Date of Delivery which is after the Closing Time,
the obligations of the several U.S. Underwriters to purchase the relevant
Option Securities, may be terminated by the U.S. Representatives by notice
to the Company at any time at or prior to Closing Time or such Date of
Delivery, as the case may be, and such termination shall be without
liability of any party to any other party except as provided in Section 4
and except that Sections 1, 6, 7 and 8 shall survive any such termination
and remain in full force and effect.
SECTION 6. Indemnification .
---------------
(a) Indemnification of U.S. Underwriters by Company. The Company
-----------------------------------------------
agrees to indemnify and hold harmless each U.S. Underwriter and each
person, if any, who controls any U.S. Underwriter within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(or any amendment thereto), including the Rule 430A Information and the
Rule 434 Information, if applicable, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact included in any
preliminary U.S. prospectus or the U.S. Prospectus (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements
<PAGE>
-31-
therein, in the light of the circumstances under which they were made, not
misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of (A) the violation of any applicable
laws or regulations of foreign jurisdictions where Reserved Securities have
been offered and (B) any untrue statement or alleged untrue statement of a
material fact included in the supplement or prospectus wrapper material
distributed in [ ] in connection with the reservation and sale of the
Reserved Securities to eligible employees and certain other persons of the
Company or the omission or alleged omission therefrom of a material fact
necessary to make the statements therein, when considered in conjunction
with the Prospectus or preliminary prospectus, not misleading;
(iii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount paid
in settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission or in connection with any violation of
the nature referred to in Section 6(a)(ii)(A) hereof; provided that
--------
(subject to Section 6(e) below) any such settlement is effected with the
written consent of the Company; and
(iv) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by Merrill Lynch), reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission or
in connection with any violation of the nature referred to in Section
6(a)(ii)(A) hereof, to the extent that any such expense is not paid under
clause (i), (ii) or (iii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
- -------- -------
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
U.S. Underwriter through the U.S. Representatives expressly for use in the
Registration Statement (or any amendment thereto),
<PAGE>
-32-
including the Rule 430A Information and the Rule 434 Information, if applicable,
or any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
(b) Indemnification of U.S. Underwriters by Selling Stockholders.
------------------------------------------------------------
Each of the Selling Stockholders agree, severally and not jointly, to indemnify
and hold harmless each U.S. Underwriter and each person, if any, who controls
any U.S. Underwriter within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act (a) against any and all loss, liability, claim, damage and
expense described in the indemnity contained in subsection (a) of this Section,
as incurred, but only with respect to such loss, liability, claim, damage and
expense caused by any untrue statements or omissions, or alleged untrue
statements or omissions, made in the Registration Statement (or any amendment
thereto), including the Rule 430A Information and the Rule 434 Information, if
applicable, or any preliminary U.S. Prospectus or the U.S. Prospectus (or any
amendment or supplement thereto) relating to any Selling Stockholder furnished
in writing by or on behalf of such Selling Stockholder expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary prospectus
or the Prospectus (or any amendment or supplement thereto) and (b) against any
and all loss, liability, claim, damage and expense arising from the breach of
any of the representations and warranties of such Selling Stockholder set forth
in Section 1(b)(ii).
(c) Indemnification of Company, Directors and Officers and Selling
--------------------------------------------------------------
Stockholders by U.S. Underwriters. Each U.S. Underwriter severally agrees to
- ---------------------------------
indemnify and hold harmless the Company, its directors, each of its officers who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act, and each Selling Stockholder and each person, if any, who controls any
Selling Stockholder within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act against any and all loss, liability, claim, damage and
expense described in the indemnity contained in subsection (a) of this Section,
as incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary U.S. prospectus or the U.S.
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such U.S.
Underwriter through the U.S. Representatives expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary
<PAGE>
-33-
prospectus or the Prospectus (or any amendment or supplement thereto).
(d) Actions Against Parties; Notification. Each indemnified party
-------------------------------------
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it is
not materially prejudiced as a result thereof and in any event shall not relieve
it from any liability which it may have otherwise than on account of this
indemnity agreement. In the case of parties indemnified pursuant to Sections
6(a) and 6(b) above, counsel to the indemnified parties shall be selected by
Merrill Lynch and in the case of parties indemnified pursuant to Sections 6(c)
above, counsel to the indemnified parties shall be selected by the Company. An
indemnifying party may participate at its own expense in the defense of any such
action; provided, however, that counsel to the indemnifying party shall not
-------- -------
(except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section 6 or Section 7 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(e) Settlement Without Consent if Failure to Reimburse. If at any
--------------------------------------------------
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 6(a)(iii) effected without its written
<PAGE>
-34-
consent if such settlement is entered into more than 45 days after receipt by
such indemnifying party of the aforesaid request, (ii) such indemnifying party
shall have received notice of the terms of such settlement at least 30 days
prior to such settlement being entered into and (iii) such indemnifying party
shall not have reimbursed such indemnified party in accordance with such request
prior to the date of such settlement.
(f) Indemnification for Reserved Securities. In connection with the
---------------------------------------
offer and sale of the Reserved Securities, the Company agrees, promptly upon a
request in writing, to indemnify and hold harmless the Underwriters from and
against any and all losses, liabilities, claims, damages and expenses incurred
by them as a result of the failure of eligible employees and certain other
persons of the Company to pay for and accept delivery of Reserved Securities
which, by the end of the first business day following the date of this
Agreement, were subject to a properly confirmed agreement to purchase.
SECTION 7. Contribution . If the indemnification provided for in
------------
Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Selling Stockholders on the one hand and the U.S. Underwriters
on the other hand from the offering of the Securities pursuant to this Agreement
or (ii) if the allocation provided by clause (i) is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company and the Selling Stockholders on the one hand and of the U.S.
Underwriters on the other hand in connection with the statements or omissions,
or in connection with any violation of the nature referred to in Section
6(a)(ii)(A) hereof, which resulted in such losses, liabilities, claims, damages
or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Selling
Stockholders on the one hand and the U.S. Underwriters on the other hand in
connection with the offering of the Securities pursuant to this Agreement shall
be deemed to be in the same respective proportions as the total net proceeds
from the offering of the Securities pursuant to this Agreement (before deducting
expenses) received by the Company and the Selling
<PAGE>
-35-
Stockholders and the total underwriting discount received by the U.S.
Underwriters, in each case as set forth on the cover of the Prospectus, or, if
Rule 434 is used, the corresponding location on the Term Sheet bear to the
aggregate initial public offering price of the Securities as set forth on such
cover.
The relative fault of the Company and the Selling Stockholders on the
one hand and the Underwriters on the other hand shall be determined by reference
to, among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or the Selling Stockholders or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission or any
violation of the nature referred to in Section 6(a)(ii)(A) hereof.
The Company, the Selling Stockholders and the U.S. Underwriters agree
that it would not be just and equitable if contribution pursuant to this Section
7 were determined by pro rata allocation (even if the Underwriters were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to above in this
Section 7. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
7 shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no U.S. Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the U.S. Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such U.S. Underwriter has otherwise been required to pay by reason of any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding anything in this Agreement to the contrary, the maximum
aggregate liability of any Selling Stockholder pursuant to this Section 7 shall
be limited to an amount equal to the gross proceeds (after deducting
underwriting discounts and commissions but before deducting expenses) received
by such Selling Stockholder from the U.S.
<PAGE>
-36-
Underwriters for the sale of the U.S. Securities sold by such Selling
Stockholder hereunder.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls a
U.S. Underwriter within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act shall have the same rights to contribution as such U.S.
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company or any Selling Stockholder within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act shall have the same rights to contribution as
the Company or such Selling Stockholder, as the case may be. The U.S.
Underwriters' respective obligations to contribute pursuant to this Section 7
are several in proportion to the number of Initial Securities set forth opposite
their respective names in Schedule A hereto and not joint. The respective
obligations of the Selling Stockholders to contribute pursuant to this Section 7
are several in proportion to the respective number of Initial Securities sold by
each Selling Stockholder hereunder and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive
-----------------------------------------------------
Delivery . All representations, warranties and agreements contained in this
- --------
Agreement or in certificates of officers of the Company or any of its
subsidiaries or the Selling Stockholders submitted pursuant hereto, shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of any U.S. Underwriter or controlling person, or by or on behalf
of the Company or the Selling Stockholders, and shall survive delivery of the
Securities to the U.S. Underwriters.
SECTION 9. Termination of Agreement.
------------------------
(a) Termination; General. The U.S. Representatives may terminate
--------------------
this Agreement, by notice to the Company and the Selling Stockholders, at any
time at or prior to Closing Time (i) if there has been, since the time of
execution of this Agreement or since the respective dates as of which
information is given in the U.S. Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its
<PAGE>
-37-
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has occurred any material adverse
change in the financial markets in the United States or the international
financial markets, any outbreak of hostilities or escalation thereof or other
calamity or crisis or any change or development involving a prospective change
in national or international political, financial or economic conditions, in
each case the effect of which is such as to make it, in the judgment of the U.S.
Representatives, impracticable to market the Securities or to enforce contracts
for the sale of the Securities, or (iii) if trading in any securities of the
Company has been suspended or materially limited by the Commission or the New
York Stock Exchange, or if trading generally on the American Stock Exchange or
the New York Stock Exchange or in the Nasdaq National Market has been suspended
or materially limited, or minimum or maximum prices for trading have been fixed,
or maximum ranges for prices have been required, by any of said exchanges or by
such system or by order of the Commission, the National Association of
Securities Dealers, Inc. or any other governmental authority, or (iv) if a
banking moratorium has been declared by either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
-----------
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7 and 8 shall survive such termination and remain in full force and
effect.
SECTION 10. Default by One or More of the U.S. Underwriters . If
-----------------------------------------------
one or more of the U.S. Underwriters shall fail at Closing Time or a Date of
Delivery to purchase the Securities which it or they are obligated to purchase
under this Agreement (the "Defaulted Securities"), the U.S. Representatives
shall have the right, within 24 hours thereafter, to make arrangements for one
or more of the non-defaulting U.S. Underwriters, or any other underwriters, to
purchase all, but not less than all, of the Defaulted Securities in such amounts
as may be agreed upon and upon the terms herein set forth; if, however, the U.S.
Representatives shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
number of U.S. Securities to be purchased on such date, each of the non-
defaulting U.S. Underwriters shall be obligated, severally and not jointly, to
purchase the full amount thereof in the proportions that their respective
underwriting
<PAGE>
-38-
obligations hereunder bear to the underwriting obligations of all non-defaulting
U.S. Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the number
of U.S. Securities to be purchased on such date, this Agreement or, with respect
to any Date of Delivery which occurs after the Closing Time, the obligation of
the U.S. Underwriters to purchase and of the Selling Stockholders to sell the
Option Securities to be purchased and sold on such Date of Delivery shall
terminate without liability on the part of any non-defaulting U.S. Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
U.S. Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement or, in the case of a Date of Delivery which is
after the Closing Time, which does not result in a termination of the obligation
of the Underwriters to purchase and the Company to sell the relevant Option
Securities, as the case may be, either (i) the U.S. Representatives or (ii) the
Company and any Selling Stockholder shall have the right to postpone Closing
Time or the relevant Date of Delivery, as the case may be, for a period not
exceeding seven days in order to effect any required changes in the Registration
Statement or Prospectus or in any other documents or arrangements. As used
herein, the term "U.S. Underwriter" includes any person substituted for an U.S.
Underwriter under this Section 10.
SECTION 11. Default by One or More of the Selling Stockholders . If
--------------------------------------------------
a Selling Stockholder shall fail at Closing Time or at a Date of Delivery to
sell and deliver the number of Securities which such Selling Stockholder or
Selling Stockholders are obligated to sell hereunder, and the remaining Selling
Stockholders do not exercise the right hereby granted to increase, pro rata or
otherwise, the number of Securities to be sold by them hereunder to the total
number to be sold by all Selling Stockholders as set forth in Schedule B hereto,
then the U.S. Underwriters may, at option of the Representatives, by notice from
the Representatives to the Company and the non-defaulting Selling Stockholders,
either (a) terminate this Agreement without any liability on the fault of any
non-defaulting party except that the provisions of Sections 1, 4, 6, 7 and 8
shall remain in full force and effect or (b) elect to purchase the Securities
which the non-defaulting Selling Stockholders have agreed to sell hereunder. No
action taken
<PAGE>
-39-
pursuant to this Section 11 shall relieve any Selling Stockholder so defaulting
from liability, if any, in respect of such default.
In the event of a default by any Selling Stockholder as referred to in
this Section 11, each of the U.S. Representatives, the Company and the non-
defaulting Selling Stockholders shall have the right to postpone Closing Time or
Date of Delivery for a period not exceeding seven days in order to effect any
required change in the Registration Statement or Prospectus or in any other
documents or arrangements.
SECTION 12. Notices. All notices and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication. Notices to the
U.S. Underwriters shall be directed to the U.S. Representatives at North Tower,
World Financial Center, New York, New York 10281-1201, attention of [bullet];
notices to the Company shall be directed to it at Advanstar, Inc., 575 Boylston
St., Boston, MA 02116, attention of Robert L. Krakoff; and notices to the
Selling Stockholder(s) shall be directed to [bullet], attention of [bullet].
SECTION 13. Parties. This Agreement shall each inure to the
-------
benefit of and be binding upon the U.S. Underwriters, the Company and the
Selling Stockholders and their respective successors. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any
person, firm or corporation, other than the U.S. Underwriters, the Company and
the Selling Stockholders and their respective successors and the controlling
persons and officers and directors referred to in Sections 6 and 7 and their
heirs and legal representatives, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the U.S. Underwriters, the Company and the Selling
Stockholders and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities
from any U.S. Underwriter shall be deemed to be a successor by reason merely of
such purchase.
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE
----------------------
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
<PAGE>
-40-
SECTION 15. Effect of Headings. The Article and Section headings
------------------
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.
<PAGE>
-41-
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company and the Attorney-in-Fact for
the Selling Stockholders a counterpart hereof, whereupon this instrument, along
with all counterparts, will become a binding agreement between the U.S.
Underwriters, the Company and the Selling Stockholders in accordance with its
terms.
Very truly yours,
ADVANSTAR, INC.
By ______________________________
Title:
ATTORNEY-IN-FACT
By ______________________________
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
BEAR, STEARNS & CO. INC.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By_________________________________________
Authorized Signatory
For themselves and as U.S. Representatives of the other U.S. Underwriters named
in Schedule B hereto.
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of Initial Maximum Number of Option
Securities to Be Sold Securities to Be Sold
---------------------------- ---------------------------------
<S> <C> <C>
[LIST SELLING STOCKHOLDERS]
Total.........................
</TABLE>
Schedule A-1
<PAGE>
SCHEDULE B
<TABLE>
<CAPTION>
Number of
- --------------------------------------------------------------------- Initial U.S.
Securities
Name of U.S. Underwriter ----------------------
- ---------------------------------------------------------------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.............................................
Bear, Stearns & Co. Inc..............................................
Lehman Brothers Inc..................................................
Morgan Stanley & Co. Incorporated....................................
Salomon Smith Barney Inc.............................................
Total................................................................
</TABLE>
Schedule B-1
<PAGE>
SCHEDULE C
ADVANSTAR, INC.
[ ] Shares of Common Stock
(Par Value $[ ] Per Share)
1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $__.
2. The purchase price per share for the U.S. Securities to be paid by
the several U.S. Underwriters shall be $__, being an amount equal to the
initial public offering price set forth above less $__ per share; provided
that the purchase price per share for any U.S. Option Securities purchased
upon the exercise of the over-allotment option described in Section 2(b)
shall be reduced by an amount per share equal to any dividends or
distributions declared by the Company and payable on the Initial U.S.
Securities but not payable on the U.S. Option Securities.
Schedule C-1
<PAGE>
[SCHEDULE D]
[List of persons and entities
subject to lock-up]
Schedule D-1
<PAGE>
Exhibit A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectuses and to enter into and perform its obligations under the U.S.
Purchase Agreement and the International Purchase Agreement.
(iii) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(iv) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectuses in the column entitled "Actual"
under the caption "Capitalization" (except for subsequent issuances, if any,
pursuant to the U.S. Purchase Agreement and the International Purchase Agreement
or pursuant to reservations, agreements or employee benefit plans referred to in
the Prospectuses or pursuant to the exercise of convertible securities or
options referred to in the Prospectuses); the shares of issued and outstanding
capital stock have been duly authorized and validly issued and are fully paid
and non-assessable; and none of the outstanding shares of capital stock of the
Company was issued in violation of the preemptive or other similar rights of any
securityholder of the Company.
(v) The Securities to be purchased by the U.S. Underwriters and the
International Managers from the Company have been duly authorized for issuance
and sale to the Underwriters pursuant to the U.S. Purchase Agreement and the
International Purchase Agreement, respectively, and, when issued and delivered
by the Company pursuant to the U.S. Purchase Agreement and the International
Purchase Agreement, respectively, against payment of the consideration set forth
in the U.S. Purchase
EXHIBIT A-1
<PAGE>
Agreement and the International Purchase Agreement, will be validly issued and
fully paid and non-assessable and no holder of the Securities is or will be
subject to personal liability by reason of being such a holder.
(vi) The issuance of the Securities is not subject to the preemptive
or other similar rights of any securityholder of the Company.
(vii) Each Subsidiary has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation, has corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Prospectuses and
is duly qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required, whether
by reason of the ownership or leasing of property or the conduct of business,
except where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect; except as otherwise disclosed in the
Registration Statement, all of the issued and outstanding capital stock of each
Subsidiary has been duly authorized and validly issued, is fully paid and non-
assessable and, to the best of our knowledge, is owned by the Company, directly
or through subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity; none of the outstanding shares of
capital stock of any Subsidiary was issued in violation of the preemptive or
similar rights of any securityholder of such Subsidiary. To the best of our
knowledge, the Company does not have any subsidiaries.
(viii) The U.S. Purchase Agreement and the International Purchase
Agreement have been duly authorized, executed and delivered by the Company.
(ix) The Registration Statement, including any Rule 462(b)
Registration Statement, has been declared effective under the 1933 Act; any
required filing of the Prospectuses pursuant to Rule 424(b) has been made in the
manner and within the time period required by Rule 424(b); and, to the best of
[our] [my] knowledge, no stop order suspending the effectiveness of the
Registration Statement or any Rule 462(b) Registration Statement has been issued
under the 1933 Act and no proceedings for that purpose have been instituted or
are pending or threatened by the Commission.
(x) The Registration Statement, including any Rule 462(b) Registration
Statement, the Rule 430A Information and
EXHIBIT A-2
<PAGE>
the Rule 434 Information, as applicable, the Prospectuses and each amendment or
supplement to the Registration Statement and the Prospectuses as of their
respective effective or issue dates (other than the financial statements and
supporting schedules included therein or omitted therefrom, as to which we need
express no opinion) complied as to form in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations.
(xi) If Rule 434 has been relied upon, the Prospectuses were not
"materially different," as such term is used in Rule 434, from the prospectuses
included in the Registration Statement at the time it became effective.
(xii) The form of certificate used to evidence the Common Stock
complies in all material respects with all applicable statutory requirements,
with any applicable requirements of the charter and by-laws of the Company and
the requirements of the New York Stock Exchange.
(xiii) To the best of our knowledge, there is not pending or
threatened any action, suit, proceeding, inquiry or investigation, to which the
Company or any subsidiary is a party, or to which the property of the Company or
any subsidiary is subject, before or brought by any court or governmental agency
or body, domestic or foreign, which might reasonably be expected to result in a
Material Adverse Effect, or which might reasonably be expected to materially and
adversely affect the properties or assets thereof or the consummation of the
transactions contemplated in the U.S. Purchase Agreement and International
Purchase Agreement or the performance by the Company of its obligations
thereunder.
(xiv) The information in the Prospectuses under "Description of
Capital Stock", "Business--Facilities", "Business--Litigation", "Certain Federal
Income Tax Considerations for Non-U.S. Holders" and in the Registration
Statement under Item 14, to the extent that it constitutes matters of law,
summaries of legal matters, the Company's charter and bylaws or legal
proceedings, or legal conclusions, has been reviewed by us and is correct in all
material respects.
(xv) To the best of our knowledge, there are no statutes or
regulations that are required to be described in the Prospectuses that are not
described as required.
(xvi) All descriptions in the Prospectuses of contracts and other
documents to which the Company or its subsidiaries
EXHIBIT A-3
<PAGE>
are a party are accurate in all material respects; to the best of our knowledge,
there are no franchises, contracts, indentures, mortgages, loan agreements,
notes, leases or other instruments required to be described or referred to in
the Registration Statement or to be filed as exhibits thereto other than those
described or referred to therein or filed or incorporated by reference as
exhibits thereto, and the descriptions thereof or references thereto are correct
in all material respects.
(xvii) To the best of our knowledge, neither the Company nor any
subsidiary is in violation of its charter or by-laws and no default by the
Company or any subsidiary exists in the due performance or observance of any
material obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument that is described or referred to in the Registration Statement or the
Prospectuses or filed or incorporated by reference as an exhibit to the
Registration Statement.
(xviii) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign (other than under the 1933 Act and the
1933 Act Regulations, which have been obtained, or as may be required under the
securities or blue sky laws of the various states, as to which we need express
no opinion) is necessary or required in connection with the due authorization,
execution and delivery of the U.S. Purchase Agreement and the International
Purchase Agreement or for the offering, issuance, sale or delivery of the
Securities.
(xix) The execution, delivery and performance of the U.S. Purchase
Agreement and the International Purchase Agreement and the consummation of the
transactions contemplated in the U.S. Purchase Agreement, the International
Purchase Agreement and in the Registration Statement (including the issuance and
sale of the Securities, and the use of the proceeds from the sale of the
Securities as described in the Prospectuses under the caption "Use Of Proceeds")
and compliance by the Company with its obligations under the U.S. Purchase
Agreement and the International Purchase Agreement do not and will not, whether
with or without the giving of notice or lapse of time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined in Section
1(a)(x) of the Purchase Agreements) under or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of
EXHIBIT A-4
<PAGE>
the Company or any subsidiary pursuant to any contract, indenture, mortgage,
deed of trust, loan or credit agreement, note, lease or any other agreement or
instrument, known to us, to which the Company or any subsidiary is a party or by
which it or any of them may be bound, or to which any of the property or assets
of the Company or any subsidiary is subject (except for such conflicts, breaches
or defaults or liens, charges or encumbrances that would not have a Material
Adverse Effect), nor will such action result in any violation of the provisions
of the charter or by-laws of the Company or any subsidiary, or any applicable
law, statute, rule, regulation, judgment, order, writ or decree, known to us, of
any government, government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any subsidiary or any of their respective
properties, assets or operations.
(xx) To the best of our knowledge, there are no persons with
registration rights or other similar rights to have any securities registered
pursuant to the Registration Statement or otherwise registered by the Company
under the 1933 Act.
(xxi) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the 1940
Act.
(xxii) The form of certificate used to evidence the Common Stock
complies in all material respects with the Delaware General Corporation Law,
with any applicable requirements of the charter and by-laws of the Company and
the requirements of the New York Stock Exchange.
Nothing has come to our attention that would lead us to believe that
the Registration Statement or any amendment thereto, including the Rule 430A
Information and Rule 434 Information (if applicable), (except for financial
statements and schedules and other financial data included therein or omitted
therefrom, as to which we need make no statement), at the time such Registration
Statement or any such amendment became effective, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Prospectuses or any amendment or supplement thereto (except for financial
statements and schedules and other financial data included therein or omitted
therefrom, as to which we need make no statement), at the time the Prospectuses
were issued, at the time any such amended or supplemented prospectus was issued
or at the Closing Time, included or includes an untrue statement of a material
fact or omitted or
EXHIBIT A-5
<PAGE>
omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
EXHIBIT A-6
<PAGE>
[Form of lock-up pursuant to Section 5(j)]
------------------------------------------
Exhibit B
LOCK-UP LETTER AGREEMENT
[ ], 1999
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
Bear, Stearns & Co. Inc.
as representative of the several
U.S. underwriters to be named in the
within mentioned U.S. Purchase Agreement
Merrill Lynch International
Bear, Stearns International Limited
as lead managers of the several
international managers to be named in the
within mentioned International Purchase Agreement
c/o Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Re: Proposed Public Offering
by Advanstar, Inc.
------------------
Dear Sirs:
The undersigned, a securityholder, officer, director or any
combination of the foregoing of Advanstar, Inc., a Delaware corporation (the
"Company"), understands that Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") and Bear, Stearns & Co. propose to enter into a U.S. Purchase
Agreement (the "U.S. Purchase Agreement") with the Company and certain
securityholders of the Company and Merrill Lynch International and Bear, Stearns
International Limited propose to enter into an International Purchase Agreement
(the "International Purchase Agreement") and together with the U.S. Purchase
Agreement, the "Purchase Agreements") with the Company and certain
Exhibit B-1
<PAGE>
securityholders of the Company, providing for the underwritten public offerings
(the "Offerings") of shares of the Company's common stock, par value $.01 per
share (the "Common Stock"). In recognition of the benefit that such Offerings
will confer upon the undersigned as a securityholder, officer, director or any
combination of the foregoing of the Company, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
undersigned agrees with each underwriter to be named in the Purchase Agreements
that, during a period commencing from the date of the execution of this
agreement and ending 180 days after the date of signing of the U.S. Purchase
Agreement, the undersigned will not, without the prior written consent of
Merrill Lynch, directly or indirectly, (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant for the sale of, or otherwise
dispose of or transfer any shares of the Common Stock or any securities
convertible into or exchangeable or exercisable for the Common Stock, whether
now owned or hereafter acquired by the undersigned or with respect to which the
undersigned has or hereafter acquires the power of disposition or (ii) enter
into any swap or any other agreement or any transaction that transfers, in whole
or in part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction is to be settled by delivery
of Common Stock or other securities, in cash or otherwise, except in either case
for shares of Common Stock to be sold in the Offerings or shares of Common Stock
purchased in the Offerings or in the public market pursuant to brokers'
transactions.
This agreement shall cease to be effective if the closing of the
Offerings has not occurred by July 31, 1999.
Very truly yours,
_______________________________
Signature:
_______________________________
Print Name:
Exhibit B-2
<PAGE>
Exhibit C
FORM OF OPINION OF COUNSEL FOR THE SELLING STOCKHOLDERS
-------------------------------------------------------
TO BE DELIVERED PURSUANT TO SECTION 5(f)
(i) No filing with, or consent, approval, authorization, license,
order registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign, (other than the issuance of the
order of the Commission declaring the Registration Statement effective and
such authorizations, approvals or consents as may be necessary under state
securities laws, as to which we need express no opinion) is necessary or
required to be obtained by the Selling Stockholders for the performance by
each Selling Stockholder of its obligations under the Purchase Agreement or
in the Power of Attorney and Custody Agreement, or in connection with the
offer, sale or delivery of the Securities.
(ii) The Power of Attorney and Custody Agreement has been duly
executed and delivered by the Selling Stockholders named therein and
constitutes the legal, valid and binding agreement of such Selling
Stockholder.
(iii) The Purchase Agreement has been duly authorized, executed and
delivered by or on behalf of each Selling Stockholder.
(iv) The Attorney-in-Fact has been duly authorized by the Selling
Stockholders to deliver the Securities on behalf of the Selling
Stockholders in accordance with the terms of the Purchase Agreement.
(v) The execution, delivery and performance of the Purchase
Agreement and the Power of Attorney and Custody Agreement and the sale and
delivery of the Securities and the consummation of the transactions
contemplated in the Purchase Agreement and in the Registration and
compliance by the Selling Stockholders with its obligations under the
Purchase Agreement have been duly authorized by all necessary action on the
part of the Selling Stockholders and do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with or
constitute a breach of, or default under or result in the creation or
imposition of any tax, lien, charge or encumbrance upon the Securities or
any property or assets of
Exhibit C-1
<PAGE>
the Selling Stockholders pursuant to, any contract, indenture, mortgage,
deed of trust, loan or credit agreement, note, license, lease or other
instrument or agreement to which any Selling Stockholder is a party or by
which he may be bound, or to which any of the property or assets of the
Selling Stockholders may be subject nor will such action result in any
violation of the provisions of the charter or by-laws of the Selling
Stockholders, if applicable, or any law, administrative regulation,
judgment or order of any governmental agency or body or any administrative
or court decree having jurisdiction over such Selling Stockholder or any of
its properties.
(vi) To the best of our knowledge, each Selling Stockholder has
valid and marketable title to the Securities to be sold by such Selling
Stockholder pursuant to the Purchase Agreement, free and clear of any
pledge, lien, security interest, charge, claim, equity or encumbrance of
any kind, and has full right, power and authority to sell, transfer and
deliver such Securities pursuant to the Purchase Agreement. By delivery of
a certificate or certificates therefor such Selling Stockholder will
transfer to the Underwriters who have purchased such Securities pursuant to
the Purchase Agreement (without notice of any defect in the title of such
Selling Stockholder and who are otherwise bona fide purchasers for purposes
of the Uniform Commercial Code) valid and marketable title to such
Securities, free and clear of any pledge, lien, security interest, charge,
claim, equity or encumbrance of any kind.
Nothing has come to our attention that would lead us to believe that
the Registration Statement or any amendment thereto, including the Rule
430A Information and Rule 434 Information (if applicable), (except for
financial statements and schedules and other financial data included
therein or omitted therefrom, as to which we need make no statement), at
the time such Registration Statement or any such amendment became
effective, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading or that the Prospectuses or any
amendment or supplement thereto (except for financial statements and
schedules and other financial data included therein or omitted therefrom,
as to which we need make no statement), at the time the Prospectuses were
issued, at the time any such amended or supplemented prospectus was issued
or at the Closing Time,
Exhibit C-2
<PAGE>
included or includes an untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
Exhibit C-3
<PAGE>
=============================================================================
ADVANSTAR, INC.
(a Delaware corporation)
[ ] Shares of Common Stock
INTERNATIONAL PURCHASE AGREEMENT
--------------------------------
Dated: [ ] [ ], 1999
=============================================================================
<PAGE>
Table of Contents
<TABLE>
Page
----
<S> <C> <C>
SECTION 1. Representations and Warranties...........................................................4
(a) Representations and Warranties by the Company.......................................................4
(i) Compliance with Registration Requirements...............................................4
(ii) Independent Accountants.................................................................6
(iii) Financial Statements....................................................................6
(iv) No Material Adverse Change in Business..................................................7
(v) Good Standing of the Company............................................................7
(vi) Good Standing of Subsidiaries...........................................................7
(vii) Capitalization..........................................................................8
(viii) Authorization of Agreement..............................................................8
(ix) Authorization and Description of Securities.............................................8
(x) Absence of Defaults and Conflicts.......................................................9
(xi) Absence of Labor Dispute................................................................9
(xii) Absence of Proceedings.................................................................10
(xiii) Accuracy of Exhibits...................................................................10
(xiv) Possession of Intellectual Property....................................................10
(xv) Absence of Further Requirements........................................................11
(xvi) Possession of Licenses and Permits.....................................................11
(xvii) Title to Property......................................................................11
(xviii) Compliance with Cuba Act...............................................................12
(xix) Investment Company Act.................................................................12
(xx) Environmental Laws.....................................................................12
(xxi) Registration Rights....................................................................13
(xxii) Internal Accounting Controls...........................................................13
(xxiii) Insurance..............................................................................13
(xxiv) ERISA..................................................................................14
(b) Representations and Warranties by the Selling Stockholders.........................................14
(i) Authorization of Agreements............................................................14
(ii) Good and Marketable Title..............................................................15
(iii) Due Execution of Power of Attorney and Custody Agreement...............................16
(iv) Absence of Manipulation................................................................16
(v) Absence of Further Requirements........................................................16
(vi) Restriction on Sale of Securities......................................................17
(vii) Certificates Suitable for Transfer.....................................................17
(viii) Information Relating to the Selling Stockholders.......................................17
(c) Officer's Certificates.............................................................................17
</TABLE>
-i-
<PAGE>
<TABLE>
Page
----
<S> <C> <C>
SECTION 2. Sale and Delivery to U.S. Underwriters; Closing.........................................18
(a) Initial Securities.................................................................................18
(b) Option Securities..................................................................................18
(c) Payment............................................................................................19
(d) Denominations; Registration........................................................................20
SECTION 3. Covenants of the Company................................................................20
(a) Compliance with Securities Regulations and Commission Requests.....................................20
(b) Filing of Amendments...............................................................................21
(c) Delivery of Registration Statements................................................................21
(d) Delivery of Prospectuses...........................................................................21
(e) Continued Compliance with Securities Laws..........................................................21
(f) Blue Sky Qualifications............................................................................22
(g) Rule 158...........................................................................................22
(h) Use of Proceeds....................................................................................23
(i) Listing............................................................................................23
(j) Restriction on Sale of Securities..................................................................23
(k) Reporting Requirements.............................................................................23
(l) Compliance with NASD Rules.........................................................................23
(m) Compliance with Rule 463...........................................................................24
SECTION 4. Payment of Expenses.....................................................................24
(a) Expenses of the Company............................................................................24
(b) Termination of Agreement...........................................................................25
(c) Expenses of the Selling Stockholders...............................................................25
(d) Allocation of Expenses.............................................................................25
SECTION 5. Conditions of International Managers' Obligations.......................................25
(a) Effectiveness of Registration Statement............................................................25
(b) Opinion of Counsel for Company.....................................................................26
(c) Opinion of Counsel for U.S. Underwriters...........................................................26
(d) Officers' Certificate..............................................................................26
(e) Certificate of Selling Stockholders................................................................27
(f) Accountant's Comfort Letter........................................................................27
(g) Bring-down Comfort Letter..........................................................................27
(h) Approval of Listing................................................................................27
(i) No Objection.......................................................................................28
(j) Lock-up Agreements.................................................................................28
(k) Purchase of Initial U.S. Securities................................................................28
(l) Conditions to Purchase of International Option Securities..........................................28
(m) Amendment of Certain Documents.....................................................................29
(n) Dissolution of AHI Advanstar LLC...................................................................29
</TABLE>
-ii-
<PAGE>
<TABLE>
Page
----
<S> <C> <C>
(o) Additional Documents...............................................................................30
(p) Termination of Agreement...........................................................................30
SECTION 6. Indemnification.........................................................................30
(a) Indemnification of International Managers..........................................................30
(b) Indemnification of International Managers by Selling Stockholders..................................32
(c) Indemnification of Company, Directors and Officers and Selling
Stockholders by International Managers.............................................................32
(d) Actions Against Parties; Notification..............................................................33
(e) Settlement Without Consent if Failure to Reimburse.................................................34
(f) Indemnification for Reserved Securities............................................................34
SECTION 7. Contribution............................................................................34
SECTION 8. Representations, Warranties and Agreements to Survive Delivery..........................36
SECTION 9. Termination of Agreement................................................................36
(a) Termination; General...............................................................................36
(b) Liabilities........................................................................................37
SECTION 10. Default by One or More of the International Managers....................................37
SECTION 11. Default by One or More of the Selling Stockholders......................................38
SECTION 12. Notices.................................................................................39
SECTION 13. Parties.................................................................................39
SECTION 14. GOVERNING LAW AND TIME..................................................................40
SECTION 15. Effect of Headings......................................................................40
SCHEDULES
Schedule A - List of Selling Stockholders......................................................Sch A-1
</TABLE>
-iii-
<PAGE>
<TABLE>
Page
----
<S> <C> <C>
Schedule B - List of Underwriters..............................................................Sch B-1
Schedule C - Pricing Information...............................................................Sch C-1
Schedule D - List of Persons subject to Lock-up................................................Sch D-1
EXHIBITS
Exhibit A - Form of Opinion of Company counsel.....................................................A-1
Exhibit B - Form of Lock-up Letter.................................................................B-1
Exhibit C - Form of Opinion of Counsel for the Selling Stockholders................................C-2
</TABLE>
-iv-
<PAGE>
ADVANSTAR, INC.
---------------
(a Delaware corporation)
[ ] Shares of Common Stock
(Par Value $[ ] Per Share)
INTERNATIONAL PURCHASE AGREEMENT
[ ] [ ], 1999
MERRILL LYNCH INTERNATIONAL
BEAR, STEARNS INTERNATIONAL LIMITED
as Lead Managers of the several International Managers
c/o Merrill Lynch International
Ropemaker Place
25 Ropemaker Place
London EC2Y 9LY
England
Ladies and Gentlemen:
Advanstar, Inc., a Delaware corporation (the "Company"), and the
-------
persons listed on Schedule A hereto (the "Selling Stockholders") confirm their
--------------------
agreement with Merrill Lynch International ("Merrill Lynch") and each of the
-------------
other international underwriters named in Schedule B hereto (collectively, the
"International Managers," which term shall also include any underwriter
----------------------
substituted as hereinafter provided in Section 10 hereof), for whom Merrill
Lynch and Bear, Stearns International Limited are acting as representatives (in
such capacity, the "Lead Managers"), with respect to (i) the issue and sale by
-------------
the Company and the sale by the Selling Stockholders, of an aggregate of [ ]
to shares of Common Stock, par value $[ ] per share, of the Company ("Common
------
Stock") in the respective amounts set forth in Schedule A to the International
- -----
Managers, acting severally and not jointly, as set forth in Schedule B hereto
and (ii) the grant by the Selling Stockholders to the International Managers,
acting severally and not jointly, of the option described in Section 2(b) hereof
to purchase all or any part of [ ] additional shares of Common Stock to cover
over-allotments, if any. The aforesaid [ ] shares of Common Stock (the
"Initial International Securities") to be purchased by the International
- ---------------------------------
Underwriters and all or any part of the shares of Common Stock subject to the
option described in Section 2(b) hereof (the "International Option Securities")
-------------------------------
are hereinafter called, collectively, the "International Securities."
------------------------
<PAGE>
-2-
It is understood that the Company is concurrently entering into an
agreement dated the date hereof (the "U.S. Purchase Agreement") providing for
-----------------------
the offering by the Company and the Selling Stockholders of an aggregate of [ ]
shares of Common Stock (the "Initial U.S. Securities") through arrangements with
-----------------------
certain underwriters in the United States and Canada (the "U.S. Underwriters")
-----------------
for which Merrill Lynch, Pierce, Fenner & Smith Incorporated and Bear, Stearns &
Co. Inc. are acting as representatives (the "Representatives") and the grant by
---------------
the Selling Stockholders to the U.S. Underwriters, acting severally and not
jointly, of an option to purchase all or any part of the U.S. Underwriters' pro
rata portion of up to [ ] additional shares of Common Stock solely to cover
over-allotments, if any (the "U.S. Option Securities" and, together with the
----------------------
International Option Securities, the "Option Securities"). The Initial U.S.
-----------------
Securities and the U.S. Option Securities are hereinafter called the "U.S.
Securities." It is understood that the Company and the Selling Stockholders are
not obligated to sell and the International Managers are not obligated to
purchase, any Initial International Securities unless all of the Initial U.S.
Securities are contemporaneously purchased by the U.S. Underwriters.
The International Managers and the U.S. Underwriters are hereinafter
collectively called the "U.S. Underwriters", the Initial International
-----------------
Securities and the Initial U.S. Securities are hereinafter collectively called
the "Initial Securities," and the International Securities and the U.S.
------------------
Securities are hereinafter collectively called the "Securities."
----------
The Underwriters will concurrently enter into an Intersyndicate
Agreement of even date herewith (the "Intersyndicate Agreement") providing for
------------------------
the coordination of certain transactions among the Underwriters under the
direction of Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated (in such capacity, the "Global Coordinator").
------------------
The Company understands that the International Managers propose to
make a public offering of the International Securities as soon as the Lead
Managers deem advisable after this Agreement has been executed and delivered.
The Company and the International Managers agree that up to [ ]
shares of the Initial U.S. Securities to be purchased by the U.S. Underwriters
and that up to [ ] shares of the Initial International Securities to be
purchased by the International Managers (collectively, the "Reserved
--------
Securities") shall be reserved for sale by the Underwriters to certain eligible
<PAGE>
-3-
employees and persons having business relationships with the Company, as part of
the distribution of the Securities by the Underwriters, subject to the terms of
this Agreement, the applicable rules, regulations and interpretations of the
National Association of Securities Dealers, Inc. and all other applicable laws,
rules and regulations. To the extent that such Reserved Securities are not
orally confirmed for purchase by such eligible employees and persons having
business relationships with the Company by the end of the first business day
after the date of this Agreement, such Reserved Securities may be offered to the
public as part of the public offering contemplated hereby.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333- ) covering the
----------
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
--------
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
---------
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
-------------------- -----------
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
--------
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b).
- -----------
Two forms of prospectus are to be used in connection with the offering and sale
of the Securities: one relating to the U.S. Securities (the "Form of U.S.
------------
Prospectus") and one relating to the International Securities (the "Form of
- ---------- -------
International Prospectus"). The Form of International Prospectus is identical
- ------------------------
to the Form of U.S. Prospectus, except for the front cover and back cover pages
and the information under the caption "Underwriting." The information included
in any such prospectus or in any such Term Sheet, as the case may be, that was
omitted from such registration statement at the time it became effective but
that is deemed to be part of such registration statement at the time it became
effective (a) pursuant to paragraph (b) of Rule 430A is referred to as "Rule
----
430A Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as
- ----------------
"Rule 434 Information." Each Form of U.S. Prospectus and Form of International
--------------------
Prospectus used before such registration statement became effective, and any
prospectus that omitted, as applicable, the Rule 430A Information or the Rule
434 Information, that was used after such effectiveness and prior to the
execution and delivery of this Agreement, is herein called a "preliminary
-----------
prospectus." Such registration statement, including
- ----------
<PAGE>
-4-
the exhibits thereto and schedules thereto, at the time it became effective and
including the Rule 430A Information and the Rule 434 Information, as applicable,
is herein called the "Registration Statement." Any registration statement filed
-----------------------
pursuant to Rule 462(b) of the 1933 Act Regulations is herein referred to as the
"Rule 462(b) Registration Statement," and after such filing the term
----------------------------------
"Registration Statement" shall include the Rule 462(b) Registration Statement.
----------------------
The final Form of U.S. Prospectus and the final Form of International Prospectus
in the forms first furnished to the Underwriters for use in connection with the
offering of the Securities are herein called the "U.S. Prospectus" and the
---------------
"International Prospectus," respectively, and collectively, the "Prospectuses."
------------------------ ------------
If Rule 434 is relied on, the terms "U.S. Prospectus" and "International
--------------- -------------
Prospectus" shall refer to the preliminary U.S. Prospectus dated May [ ], 1999,
- ----------
and preliminary International Prospectus dated May [ ], 1999, respectively, each
together with the applicable Term Sheet and all references in this Agreement to
the date of such Prospectuses shall mean the date of the applicable Term Sheet.
For purposes of this Agreement, all references to the Registration Statement,
any preliminary prospectus, the U.S. Prospectus, the International Prospectus or
any Term Sheet or any amendment or supplement to any of the foregoing shall be
deemed to include the copy filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval system ("EDGAR").
-----
SECTION 1. Representations and Warranties.
------------------------------
(a) Representations and Warranties by the Company. The Company
---------------------------------------------
represents and warrants to each International Manager as of the date hereof, as
of the Closing Time referred to in Section 2(c) hereof, and as of each Date of
Delivery (if any) referred to in Section 2(b), hereof and agrees with each
International Manager, as follows:
(i) Compliance with Registration Requirements. Each of the
-----------------------------------------
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act and no proceedings for that
purpose have been instituted or are pending or, to the knowledge of the
Company, are contemplated by the Commission, and any request on the part of
the Commission for additional information has been complied with.
<PAGE>
-5-
At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments thereto
became effective and at the Closing Time (and, if any International Option
Securities are purchased, at the Date of Delivery), the Registration
Statement, the Rule 462(b) Registration Statement and any amendments and
supplements thereto complied and will comply in all material respects with
the requirements of the 1933 Act and the 1933 Act Regulations and did not
and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Prospectuses, any
preliminary prospectuses and any supplement thereto or prospectus wrapper
prepared in connection therewith, at their respective times of issuance and
at the Closing Time, complied and will comply in all material respects with
any applicable laws or regulations of foreign jurisdictions in which the
Prospectuses and such preliminary prospectuses, as amended or supplemented,
if applicable, are distributed in connection with the offer and sale of
Reserved Securities. Neither of the Prospectuses nor any amendments or
supplements thereto (including any prospectus wrapper), at the time the
Prospectuses or any amendments or supplements thereto were issued and at
the Closing Time (and, if any International Option Securities are
purchased, at the Date of Delivery), included or will include an untrue
statement of a material fact or omitted or will omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If Rule 434 is
used, the Company will comply with the requirements of Rule 434 and the
Prospectuses shall not be "materially different," as such term is used in
Rule 434, from the prospectuses included in the Registration Statement at
the time it became effective. The representations and warranties in this
subsection shall not apply to statements in or omissions from the
Registration Statement or the International Prospectus made in reliance
upon and in conformity with information furnished to the Company in writing
by any International Manager through the Lead Managers expressly for use in
the Registration Statement or the International Prospectus.
Each preliminary prospectus and the prospectuses filed as part of
the Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so
filed in all material respects with the 1933 Act Regulations and
<PAGE>
-6-
each preliminary prospectus and the Prospectuses delivered to the
Underwriters for use in connection with this offering was identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(ii) Independent Accountants. The accountants who certified the
-----------------------
financial statements and supporting schedules of Advanstar, Inc. included
in the Registration Statement, the accountants who certified the financial
statements of Universal Media, Inc. ("Media") included in the Registration
-----
Statement and the accountants who certified the financial statements of
Men's Apparel Guild in California, Inc. ("Magic") included in the
-----
Registration Statement are each independent public accountants as required
by the 1933 Act and the 1933 Act Regulations.
(iii) Financial Statements. The financial statements included
--------------------
in the Registration Statement and the Prospectuses, together with the
related schedules and notes, present fairly the financial position of the
Company and its consolidated subsidiaries, MAGIC and its subsidiary and
Media at the dates indicated and the statement of operations, stockholders'
equity and cash flows of the Company and its consolidated subsidiaries,
Magic and its subsidiary and Media for the periods specified; said
financial statements have been prepared in conformity with generally
accepted accounting principles ("GAAP") applied on a consistent basis
----
throughout the periods involved. The supporting schedules included in the
Registration Statement present fairly in accordance with GAAP the
information required to be stated therein. The selected financial data and
the summary financial information included in the Prospectuses present
fairly the information shown therein and have been compiled on a basis
consistent with that of the audited financial statements included in the
Registration Statement. The pro forma financial statements and the related
notes thereto included in the Registration Statement and the Prospectuses
present fairly the information shown therein, have been prepared in
accordance with the Commission's rules and guidelines with respect to pro
forma financial statements and have been properly compiled on the bases
described therein, and the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate to give effect
to the transactions and circumstances referred to therein.
<PAGE>
-7-
(iv) No Material Adverse Change in Business. Since the
--------------------------------------
respective dates as of which information is given in the Registration
Statement and the Prospectuses, except as otherwise stated therein, (A)
there has been no material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of
the Company and its subsidiaries considered as one enterprise, whether or
not arising in the ordinary course of business (a "Material Adverse
----------------
Effect"), (B) there have been no transactions entered into by the Company
-------
or any of its subsidiaries, other than those in the ordinary course of
business, which are material with respect to the Company and its
subsidiaries considered as one enterprise, and (C) there has been no
dividend or distribution of any kind declared, paid or made by the Company
on any class of its capital stock.
(v) Good Standing of the Company. The Company has been duly
----------------------------
organized and is validly existing as a corporation in good standing under
the laws of the State of Delaware and has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectuses and to enter into and perform its obligations
under this Agreement; and the Company is duly qualified as a foreign
corporation to transact business and is in good standing in each other
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not result
in a Material Adverse Effect.
(vi) Good Standing of Subsidiaries. Each "significant
-----------------------------
subsidiary" of the Company (as such term is defined in Rule 1-02 of
Regulation S-X) (each a "Subsidiary" and, collectively, the "Subsidiaries")
---------- ------------
has been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, has
corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Prospectuses and is duly
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good standing
would not result in a Material Adverse Effect; all of the issued and
outstanding capital stock of each such Subsidiary has been
<PAGE>
-8-
duly authorized and validly issued, is fully paid and non-assessable and is
owned by the Company, directly or through subsidiaries, free and clear of
any security interest, mortgage, pledge, lien, encumbrance, claim or
equity; none of the outstanding shares of capital stock of any Subsidiary
was issued in violation of the preemptive or similar rights of any
securityholder of such Subsidiary. The only subsidiaries of the Company are
the subsidiaries listed on Exhibit 21.1 to the Registration Statement.
(vii) Capitalization. The authorized, issued and outstanding
--------------
capital stock of the Company is as reflected in the Prospectuses in the
column entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, [pursuant to the stock split referred to in
the Prospectus], pursuant to this Agreement, pursuant to reservations,
agreements or employee benefit plans referred to in the Prospectuses or
pursuant to options referred to in the Prospectuses). The shares of issued
and outstanding capital stock of the Company have been duly authorized and
validly issued and are fully paid and non-assessable; none of the
outstanding shares of capital stock of the Company was issued in violation
of the preemptive or other similar rights of any securityholder of the
Company.
(viii) Authorization of Agreement. This Agreement and the U.S.
--------------------------
Purchase Agreement have been duly authorized, executed and delivered by the
Company.
(ix) Authorization and Description of Securities. The
-------------------------------------------
Securities to be purchased by the U.S. Underwriters and the International
Managers from the Company have been duly authorized for issuance and sale
to the International Managers pursuant to this Agreement and the U.S.
Underwriters pursuant to the U.S. Purchase Agreement, respectively, and,
when issued and delivered by the Company pursuant to this Agreement and the
U.S. Purchase Agreement, respectively, against payment of the consideration
set forth herein and the U.S. Purchase Agreement, respectively, will be
validly issued, fully paid and non-assessable; the Common Stock conforms to
all statements relating thereto contained in the Prospectuses and such
description conforms to the rights set forth in the instruments defining
the same; no holder of the Securities will be subject to personal liability
by reason of being such a holder; and the issuance of the Securities is not
<PAGE>
-9-
subject to the preemptive or other similar rights of any securityholder of
the Company.
(x) Absence of Defaults and Conflicts. Neither the Company nor
---------------------------------
any of its subsidiaries is in violation of its charter or by-laws (as now
in effect or as in effect at each Date of Delivery and on the Closing Date)
or in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or other
agreement or instrument to which the Company or any of its subsidiaries is
a party or by which it or any of them may be bound, or to which any of the
property or assets of the Company or any subsidiary is subject
(collectively, "Agreements and Instruments") except for such defaults that
--------------------------
would not result in a Material Adverse Effect; and the execution, delivery
and performance of this Agreement and the U.S. Purchase Agreement and the
consummation of the transactions contemplated in this Agreement, the U.S.
Purchase Agreement and in the Registration Statement and compliance by the
Company with its obligations under this Agreement and the U.S. Purchase
Agreement have been duly authorized by all necessary corporate action and
do not and will not, whether with or without the giving of notice or
passage of time or both, conflict with or constitute a breach of, or
default or Repayment Event (as defined below) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any subsidiary pursuant to, the Agreements and
Instruments (except for such conflicts, breaches or defaults or liens,
charges or encumbrances that would not result in a Material Adverse
Effect), nor will such action result in any violation of the provisions of
the charter or by-laws of the Company or any subsidiary or any applicable
law, statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Company or any subsidiary or any of their
assets, properties or operations. As used herein, a "Repayment Event"
---------------
means any event or condition which gives the holder of any note, debenture
or other evidence of indebtedness (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment of all
or a portion of such indebtedness by the Company or any subsidiary.
(xi) Absence of Labor Dispute. No labor dispute with the
------------------------
employees of the Company or any subsidiary exists or,
<PAGE>
-10-
to the knowledge of the Company, is imminent, and the Company is not aware
of any existing or imminent labor disturbance by the employees of any of
its or any subsidiary's principal suppliers, manufacturers, customers or
contractors, which, in either case, may reasonably be expected to result in
a Material Adverse Effect.
(xii) Absence of Proceedings. There is no action, suit,
----------------------
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to the
knowledge of the Company, threatened, against or affecting the Company or
any subsidiary, which is required to be disclosed in the Registration
Statement (other than as disclosed therein), or which might reasonably be
expected to result in a Material Adverse Effect, or which might reasonably
be expected to materially and adversely affect the properties or assets
thereof or the consummation of the transactions contemplated in this
Agreement and the U.S. Purchase Agreement or the performance by the Company
of its obligations hereunder or thereunder; the aggregate of all pending
legal or governmental proceedings to which the Company or any subsidiary is
a party or of which any of their respective property or assets is the
subject which are not described in the Registration Statement, including
ordinary routine litigation incidental to the business, could not
reasonably be expected to result in a Material Adverse Effect.
(xiii) Accuracy of Exhibits. There are no contracts or
--------------------
documents which are required to be described in the Registration Statement
or the Prospectuses or to be filed as exhibits thereto which have not been
so described and filed as required.
(xiv) Possession of Intellectual Property. The Company and its
-----------------------------------
subsidiaries own or possess, or can acquire on reasonable terms, adequate
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the business
---------------------
now operated by them, and neither the Company nor any of its subsidiaries
has received any notice or is otherwise aware of any infringement of or
conflict with asserted rights of others with respect to any Intellectual
Property or of any facts or
<PAGE>
-11-
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any of its
subsidiaries therein, and which infringement or conflict (if the subject of
any unfavorable decision, ruling or finding) or invalidity or inadequacy,
singly or in the aggregate, would result in a Material Adverse Effect.
(xv) Absence of Further Requirements. No filing with, or
-------------------------------
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Company of its
obligations hereunder, in connection with the offering, issuance or sale of
the Securities under this Agreement and the U.S. Purchase Agreement or the
consummation of the transactions contemplated by this Agreement and the
U.S. Purchase Agreement, except (i) such as have been already obtained or
as may be required under the 1933 Act or the 1933 Act Regulations and
foreign or state securities or blue sky laws and (ii) such as have been
obtained under the laws and regulations of jurisdictions outside the United
States in which the Reserved Securities are offered.
(xvi) Possession of Licenses and Permits. The Company and its
----------------------------------
subsidiaries possess such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the
---------------------
appropriate federal, state, local or foreign regulatory agencies or bodies
necessary to conduct the business now operated by them; the Company and its
subsidiaries are in compliance with the terms and conditions of all such
Governmental Licenses, except where the failure so to comply would not,
singly or in the aggregate, have a Material Adverse Effect; all of the
Governmental Licenses are valid and in full force and effect, except when
the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect.
(xvii) Title to Property. The Company and its subsidiaries have
-----------------
good and marketable title to all real property owned by the Company and its
subsidiaries and good title
<PAGE>
-12-
to all other properties owned by them, in each case, free and clear of all
mortgages, pledges, liens, security interests, claims, restrictions or
encumbrances of any kind except such as (a) are described in the
Prospectuses or (b) do not, singly or in the aggregate, materially affect
the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company or any of its
subsidiaries; and all of the leases and subleases material to the business
of the Company and its subsidiaries, considered as one enterprise, and
under which the Company or any of its subsidiaries holds properties
described in the Prospectuses, are in full force and effect, and neither
the Company nor any subsidiary has any notice of any material claim of any
sort that has been asserted by anyone adverse to the rights of the Company
or any subsidiary under any of the leases or subleases mentioned above, or
affecting or questioning the rights of the Company or such subsidiary to
the continued possession of the leased or subleased premises under any such
lease or sublease.
(xviii) Compliance with Cuba Act. The Company has complied
------------------------
with, and is and will be in compliance with, the provisions of that certain
Florida act relating to disclosure of doing business with Cuba, codified as
Section 517.075 of the Florida statutes, and the rules and regulations
thereunder (collectively, the "Cuba Act") or is exempt therefrom.
--------
(xix) Investment Company Act. The Company is not, and upon the
----------------------
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectuses
will not be, an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment Company
Act of 1940, as amended (the "1940 Act").
--------
(xx) Environmental Laws. Except as would not, singly or in the
------------------
aggregate, result in a Material Adverse Effect, (A) neither the Company nor
any of its subsidiaries is in violation of any federal, state, local or
foreign statute, law, rule, regulation, ordinance, code, policy or rule of
common law or any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent, decree or
judgment, relating to pollution or protection of human health, the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including,
<PAGE>
-13-
without limitation, laws and regulations relating to the release or
threatened release of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture, processing,
-------------------
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials (collectively, "Environmental Laws"), (B) the Company
------------------
and its subsidiaries have all permits, authorizations and approvals
required under any applicable Environmental Laws and are each in compliance
with their requirements, (C) there are no pending or threatened
administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Law against the
Company or any of its subsidiaries and (D) there are no events or
circumstances that might reasonably be expected to form the basis of an
order for clean-up or remediation, or an action, suit or proceeding by any
private party or governmental body or agency, against or affecting the
Company or any of its subsidiaries relating to Hazardous Materials or any
Environmental Laws.
(xxi) Registration Rights. There are no persons with
-------------------
registration rights or other similar rights to have any securities
registered pursuant to the Registration Statement or otherwise registered
by the Company under the 1933 Act.
(xxii) Internal Accounting Controls. The Company and each of
----------------------------
its subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(xxiii) Insurance. The Company and each of its subsidiaries
---------
have insurance covering their respective properties, operations, personnel
and businesses, which insurance is in amounts and insures against such
losses and risks as are believed by the Company and its subsidiaries to be
adequate to protect the Company and its subsidiaries and
<PAGE>
-14-
their respective businesses. None of the Company nor any of its
subsidiaries has received notice from any insurer or agent of such insurer
that capital improvements or other expenditures are required or necessary
to be make in order to continue such insurance.
(xxiv) ERISA. No "prohibited transaction" (as defined in
-----
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended, including the Regulations and published interpretations thereunder
("ERISA"), as Section 4975 of the Internal Revenue Code of 1986, as amended
-----
from time to time (the "Code")) or "accumulated finding deficiency" (as
----
defined in Section 302 of ERISA) or any of the events set forth in Section
4043(b) (other than events with respect to which the 30-day notice
requirement under Section 4043 of ERISA has been waived) has occurred with
respect to any employee benefit plan (other than a multiemployer plan) of
the Company or any of its subsidiaries which could reasonably be expected
to have a Material Adverse Effect; each such employee benefit plan (other
than a multiemployer plan) is in compliance in all material respects with
applicable law, including ERISA and the Code; the Company and each of its
subsidiaries have not incurred and do not expect to incur liability under
Title IV of ERISA with respect to the termination of, or withdrawal from,
any pension plan for which the Company or any of its subsidiaries would
have any liability; and each such pension plan that is intended to be
qualified under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or failure to act,
which could reasonably be expected to cause the loss of such qualification.
(b) Representations and Warranties by the Selling Stockholders. Each
----------------------------------------------------------
Selling Stockholder severally represents and warrants to each International
Manager as of the date hereof, as of the Closing Time, and, if the Selling
Stockholder is selling Option Securities on a Date of Delivery, as of each such
Date of Delivery, and agrees with each International Manager, as follows:
(i) Authorization of Agreements. Each Selling Stockholder has
---------------------------
the full right, power and authority to enter into this Agreement and a
Power of Attorney and Custody Agreement (the "Power of Attorney and Custody
-----------------------------
Agreement") and to sell, transfer and deliver the International Securities
---------
to be sold by such Selling Stockholder hereunder. The execution and
delivery of this Agreement
<PAGE>
-15-
and the Power of Attorney and Custody Agreement and the sale and delivery
of the International Securities to be sold by such Selling Stockholder and
the consummation of the transactions contemplated herein and compliance by
such Selling Stockholder with its obligations hereunder have been duly
authorized by such Selling Stockholder and do not and will not, whether
with or without the giving of notice or passage of time or both, conflict
with or constitute a breach of, or default under, or result in the creation
or imposition of any tax, lien, charge or encumbrance upon the
International Securities to be sold by such Selling Stockholder or any
property or assets of such Selling Stockholder pursuant to, any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note,
license, lease or other agreement or instrument to which such Selling
Stockholder is a party or by which such Selling Stockholder may be bound,
or to which any of the property or assets of such Selling Stockholder is
subject, nor will such action result in any violation of the provisions of
the charter or by-laws or other organizational instrument of such Selling
Stockholder, if applicable, or any applicable treaty, law, statute, rule,
regulation, judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over
such Selling Stockholder or any of its properties.
(ii) Good and Marketable Title. Such Selling Stockholder has
-------------------------
and will at the Closing Time and, if any International Option Securities
are purchased, on the Date of Delivery have good and marketable title to
the International Securities to be sold by such Selling Stockholder
hereunder, free and clear of any security interest, mortgage, pledge, lien,
charge, claim, equity or encumbrance of any kind, other than pursuant to
this Agreement; and upon delivery of such International Securities and
payment of the purchase price therefor as herein contemplated, assuming
each such U.S. Underwriter has no notice of any adverse claim, each of the
U.S. Underwriters will receive good and marketable title to the
International Securities purchased by it from such Selling Stockholder,
free and clear of any security interest, mortgage, pledge, lien, charge,
claim, equity or encumbrance of any kind.
<PAGE>
-16-
(iii) Due Execution of Power of Attorney and Custody Agreement
--------------------------------------------------------
/a/. Such Selling Stockholder has duly executed and delivered, in the form
heretofore furnished to the Representatives, the Power of Attorney and
Custody Agreement with [ ] as attorney-in-fact (the "Attorney-in-
-----------
Fact") and [ ], as custodian (the "Custodian"); the Custodian is
---- ---------
authorized to deliver the Securities to be sold by such Selling
Stockholder hereunder and to accept payment therefor; and the Attorney-in-
Fact is authorized to execute and deliver this Agreement and the
certificate referred to in Section 5(e) or that may be required pursuant to
Sections 5(l)(iii) on behalf of such Selling Stockholder, to sell, assign
and transfer to the International Managers the International Securities to
be sold by such Selling Stockholder hereunder, to determine the purchase
price to be paid by the International Managers to such Selling Stockholder,
as provided in Section 2(a) hereof, to authorize the delivery of the
International Securities to be sold by such Selling Stockholder hereunder,
to accept payment therefor, and otherwise to act on behalf of such Selling
Stockholder in connection with this Agreement.
(iv) Absence of Manipulation. Such Selling Stockholder has not
-----------------------
taken, and will not take, directly or indirectly, any action which is
designed to or which has constituted or which might reasonably be expected
to cause or result in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
International Securities.
(v) Absence of Further Requirements. No filing with, or
-------------------------------
consent, approval, authorization, order, registration, qualification or
decree of, any court or governmental authority or agency, domestic or
foreign, is necessary or required for the performance by each Selling
Stockholder of its obligations hereunder or in the Power of Attorney and
Custody Agreement, or in connection with the sale and delivery of the
International Securities hereunder or the consummation of the transactions
contemplated by this Agreement, except (i) such as may have previously been
made or obtained or as may be required under the 1933 Act or the 1933 Act
Regulations or state securities
___________
/a/ Discuss necessity of P/A and Custody Agreement.
<PAGE>
-17-
laws and (ii) such as have been obtained under the laws and regulations of
jurisdictions outside the United States in which the Reserved Securities
are offered.
(vi) Restriction on Sale of Securities. During a period of 180
---------------------------------
days from the date of the Prospectus, such Selling Stockholder will not,
without the prior written consent of Merrill Lynch, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase
any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly, any
share of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly
or indirectly, the economic consequence of ownership of the Common Stock,
whether any such swap or transaction described in clause (i) or (ii) above
is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to the
International Securities to be sold hereunder.
(vii) Certificates Suitable for Transfer. Certificates for all
----------------------------------
of the International Securities to be sold by such Selling Stockholder
pursuant to this Agreement, in suitable form for transfer by delivery or
accompanied by duly executed instruments of transfer or assignment in blank
with signatures guaranteed, have been placed in custody with the Custodian
with irrevocable conditional instructions to deliver such International
Securities to the Underwriters pursuant to this Agreement.
(viii) Information Relating to the Selling Stockholders The
------------------------------------------------
information in the Prospectus is under the caption "Principal and Selling
Stockholders" which specifically relates to such Selling Stockholders does
not and will not on the Closing Date, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statement. therein, in the light of the
circumstances in which they were made, not misleading
(c) Officer's Certificates. Any certificate signed by any officer of
----------------------
the Company or any of its subsidiaries delivered to the Global Coordinator, the
Lead Managers or to counsel for the International Managers shall be deemed a
representation and warranty by the Company to each International Manager as to
<PAGE>
-18-
the matters covered thereby; and any certificate signed by or on behalf of the
Selling Stockholders as such and delivered to the Global Coordinator, the U.S.
Representatives or to counsel for the U.S. Underwriters pursuant to the terms of
this Agreement shall be deemed a representation and warranty by such Selling
Stockholder to the U.S. Underwriters as to the matters covered thereby.
SECTION 2. Sale and Delivery to U.S. Underwriters;
Closing.
---------------------------------------
(a) Initial Securities. On the basis of the representations and
------------------
warranties herein contained and subject to the terms and conditions herein set
forth, the Company and each Selling Stockholder, severally and not jointly,
agree to sell to each International Manager, severally and not jointly, and each
International Manager, severally and not jointly, agrees to purchase from the
Company and each Selling Stockholder, at the price per share set forth in
Schedule C, the number of Initial International Securities set forth in Schedule
B from the Company and the Selling Stockholders, as set forth in Schedule A,
plus any additional number of Initial International Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof.
(b) Option Securities. In addition, on the basis of the
-----------------
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Selling Stockholders hereby grant an option to
the International Managers, severally and not jointly, to purchase up to an
additional [ ] shares of Common Stock at the price per share set forth in
Schedule C, less an amount per share equal to any dividends or distributions
declared by the Company and payable on the Initial International Securities but
not payable on the International Option Securities. The option hereby granted
will expire 30 days after the date hereof and may be exercised in whole or in
part from time to time only for the purpose of covering over-allotments which
may be made in connection with the offering and distribution of the Initial
International Securities upon notice by the Global Coordinator to the Selling
Stockholders setting forth the number of International Option Securities as to
which the several International Managers are then exercising the option and the
time and date of payment and delivery for such International Option Securities.
Any such time and date of delivery for the International Option Securities (a
"Date of Delivery") shall be determined by the Global Coordinator, but shall not
- -----------------
be later than seven full business days after the exercise of said option, nor in
any event prior
<PAGE>
-19-
to the Closing Time, as hereinafter defined. If the option is exercised as to
all or any portion of the International Option Securities, each of the
International Managers, acting severally and not jointly, will purchase that
proportion of the total number of International Option Securities then being
purchased which the number of Initial International Securities set forth in
Schedule B opposite the name of such International Manager bears to the total
number of Initial International Securities, subject in each case to such
adjustments as the Global Coordinator in its discretion shall make to eliminate
any sales or purchases of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of
-------
certificates for, the Initial Securities shall be made at the offices of Cahill
Gordon & Reindel, 80 Pine Street, New York, New York 10005, or at such other
place as shall be agreed upon by the Global Coordinator and the Company, at 9:00
A.M. (Eastern time) on the third business day after the date hereof (unless
postponed in accordance with the provisions of Section 10), or such other time
not later than ten business days after such date as shall be agreed upon by the
Global Coordinator and the Company, (such time and date of payment and delivery
being herein called "Closing Time").
------------
In addition, in the event that any or all of the International Option
Securities are purchased by the International Managers, payment of the purchase
price for, and delivery of certificates for, such International Option
Securities shall be made at the above-mentioned offices, or at such other place
as shall be agreed upon by the Global Coordinator, the Company and the Selling
Stockholders, on each Date of Delivery as specified in the notice from the
Global Coordinator to the Company and the Selling Stockholders.
Payment shall be made to the Company and the Selling Stockholders by
wire transfer of immediately available funds to a bank account designated by the
Company and the Selling Stockholders, against delivery to the Lead Managers for
the respective accounts of the International Managers of certificates for the
International Securities to be purchased by them. It is understood that each
International Underwriter has authorized the Lead Managers, for its account, to
accept delivery of, receipt for, and make payment of the purchase price for, the
Initial International Securities and the International Option Securities, if
any, which it has agreed to purchase. Merrill Lynch, individually and not as
representative of the International Managers, may (but shall not be obligated
to) make payment of the purchase price for the Initial International Securities
<PAGE>
-20-
or the International Option Securities, if any, to be purchased by any
International Manager whose funds have not been received by the Closing Time or
the relevant Date of Delivery, as the case may be, but such payment shall not
relieve such International Manager from its obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial
---------------------------
International Securities and the International Option Securities, if any, shall
be in such denominations and registered in such names as the Lead Managers may
request in writing at least one full business day before the Closing Time or the
relevant Date of Delivery, as the case may be. The certificates for the Initial
International Securities and the U.S. Option Securities, if any, will be made
available for examination and packaging by the Lead Managers in The City of New
York not later than 10:00 A.M. (Eastern time) on the business day prior to the
Closing Time or the relevant Date of Delivery, as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with
------------------------
each International Manager as follows:
(a) Compliance with Securities Regulations and Commission Requests.
--------------------------------------------------------------
The Company, subject to Section 3(b), will comply with the requirements of Rule
430A or Rule 434, as applicable, and will notify the Global Coordinator
immediately, and confirm the notice in writing, (i) when any post-effective
amendment to the Registration Statement shall become effective, or any
supplement to the Prospectuses or any amended Prospectuses shall have been
filed, (ii) of the receipt of any comments from the Commission, (iii) of any
request by the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectuses or for additional information, and
(iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus, or of the suspension of the
qualification of the Securities for offering or sale in any jurisdiction, or of
the initiation or threatening of any proceedings for any of such purposes. The
Company will promptly effect the filings necessary pursuant to Rule 424(b) and
will take such steps as it deems necessary to ascertain promptly whether the
form of prospectus transmitted for filing under Rule 424(b) was received for
filing by the Commission and, in the event that it was not, it will promptly
file such prospectus. The Company will make every reasonable effort to prevent
the issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.
<PAGE>
-21-
(b) Filing of Amendments. The Company will give the Global
--------------------
Coordinator notice of its intention to file or prepare any amendment to the
Registration Statement (including any filing under Rule 462(b)), any Term Sheet
or any amendment, supplement or revision to either the prospectus included in
the Registration Statement at the time it became effective or to the
Prospectuses, will furnish the Global Coordinator with copies of any such
documents a reasonable amount of time prior to such proposed filing or use, as
the case may be, and will not file or use any such document to which the Global
Coordinator or counsel for the International Managers shall object.
(c) Delivery of Registration Statements. The Company has furnished
-----------------------------------
or will deliver to the Lead Managers and counsel for the International Managers,
without charge, signed copies of the Registration Statement as originally filed
and of each amendment thereto (including exhibits filed therewith or
incorporated by reference therein) and signed copies of all consents and
certificates of experts, and will also deliver to the Lead Managers, without
charge, a conformed copy of the Registration Statement as originally filed and
of each amendment thereto (without exhibits) for each of the International
Managers. The copies of the Registration Statement and each amendment thereto
furnished to the International Managers will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR, except
to the extent permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to each
------------------------
International Manager, without charge, as many copies of each preliminary
prospectus as such International Manager reasonably requested, and the Company
hereby consents to the use of such copies for purposes permitted by the 1933
Act. The Company will furnish to each International Manager, without charge,
during the period when the International Prospectus is required to be delivered
under the 1933 Act or the Securities Exchange of 1934 (the "1934 Act"), such
--------
number of copies of the International Prospectus (as amended or supplemented) as
such International Manager may reasonably request. The International Prospectus
and any amendments or supplements thereto furnished to the International
Managers will be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will
-----------------------------------------
comply with the 1933 Act and the 1933 Act Regulations so as to permit the
completion of the distribution of the
<PAGE>
-22-
Securities as contemplated in this Agreement, the U.S. Purchase Agreement and in
the Prospectuses. If at any time when a prospectus is required by the 1933 Act
to be delivered in connection with sales of the Securities, any event shall
occur or condition shall exist as a result of which it is necessary, in the
opinion of counsel for the International Managers or for the Company, to amend
the Registration Statement or amend or supplement any Prospectus in order that
the Prospectuses will not include any untrue statements of a material fact or
omit to state a material fact necessary in order to make the statements therein
not misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary, in the opinion of such
counsel, at any such time to amend the Registration Statement or amend or
supplement any Prospectus in order to comply with the requirements of the 1933
Act or the 1933 Act Regulations, the Company will promptly prepare and file with
the Commission, subject to Section 3(b), such amendment or supplement as may be
necessary to correct such statement or omission or to make the Registration
Statement or the Prospectuses comply with such requirements, and the Company
will furnish to the International Managers such number of copies of such
amendment or supplement as the International Managers may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best efforts,
-----------------------
in cooperation with the International Managers, to qualify the Securities for
offering and sale under the applicable securities laws of such states and other
jurisdictions as the Global Coordinator may designate and to maintain such
qualifications in effect for a period of not less than one year from the later
of the effective date of the Registration Statement and any Rule 462(b)
Registration Statement; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which it
is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject. In each
jurisdiction in which the Securities have been so qualified, the Company will
file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect for a period of not less
than one year from the effective date of the Registration Statement and any Rule
462(b) Registration Statement.
(g) Rule 158. The Company will timely file such reports pursuant to
--------
the 1934 Act as are necessary in order to make generally available to its
securityholders as soon as
<PAGE>
-23-
practicable an earnings statement for the purposes of, and to provide the
benefits contemplated by, the last paragraph of Section 11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds received
---------------
by it from the sale of the Securities in the manner specified in the
Prospectuses under "Use of Proceeds".
(i) Listing. The Company will use its best efforts to effect the
-------
listing of the Common Stock on The New York Stock Exchange.
(j) Restriction on Sale of Securities. During a period of 180 days
---------------------------------
from the date of the Prospectuses, the Company will not, without the prior
written consent of the Global Coordinator, (i) directly or indirectly, offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of any share of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock or
file any registration statement under the 1933 Act with respect to any of the
foregoing or (ii) enter into any swap or any other agreement or any transaction
that transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of the Common Stock, whether any such swap or
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to the Securities to be sold hereunder or under the
International Purchase Agreement.
(k) Reporting Requirements. The Company, during the period when the
----------------------
Prospectuses are required to be delivered under the 1933 Act or the 1934 Act,
will file all documents required to be filed with the Commission pursuant to the
1934 Act within the time periods and rules and regulations of the Commission
thereunder.
(l) Compliance with NASD Rules. The Company hereby agrees that it
--------------------------
will ensure that the Reserved Securities will be restricted as required by the
National Association of Securities Dealers, Inc. (the "NASD") or the NASD rules
----
from sale, transfer, assignment, pledge or hypothecation for a period of three
months following the date of this Agreement. The Underwriters will notify the
Company as to which persons will need to be so restricted. At the request of
the Underwriters, the Company will direct the transfer agent to place a stop
transfer restriction upon such securities for such period of time.
<PAGE>
-24-
Should the Company release, or seek to release, from such restrictions any of
the Reserved Securities, the Company agrees to reimburse the Underwriters for
any reasonable expenses (including, without limitation, legal expenses) they
incur in connection with such release.
(m) Compliance with Rule 463. The Company will file with the
------------------------
Commission such reports on Form SR as may be required pursuant to Rule 463 of
the 1933 Act Regulations.
SECTION 4. Payment of Expenses.
-------------------
(a) Expenses of the Company. The Company will pay all expenses
-----------------------
incident to the performance of its obligations under this Agreement, including
(i) the preparation, printing and filing of the Registration Statement
(including financial statements and exhibits) as originally filed and of each
amendment thereto, (ii) the preparation, printing and delivery to the
Underwriters of this Agreement, any Agreement among Underwriters and such other
documents as may be required in connection with the offering, purchase, sale,
issuance or delivery of the Securities, (iii) the preparation, issuance and
delivery of the certificates for the Securities to the Underwriters, including
any stock or other transfer taxes and any stamp or other duties payable upon
the sale, issuance or delivery of the Securities to the Underwriters and the
transfer of the Securities between the U.S. Underwriters and the International
Managers, (iv) the fees and disbursements of counsel for the Company and the
Selling Stockholders and the Company's accountants and other advisors, (v) the
qualification of the Securities under securities laws in accordance with the
provisions of Section 3(f) hereof, including filing fees and the reasonable fees
and disbursements of counsel for the Underwriters in connection therewith and in
connection with the preparation of the Blue Sky Survey and any supplement
thereto, (vi) the printing and delivery to the Underwriters of copies of each
preliminary prospectus, any Term Sheets and of the Prospectuses and any
amendments or supplements thereto, (vii) the preparation, printing and delivery
to the Underwriters of copies of the Blue Sky Survey and any supplement thereto,
(viii) the fees and expenses of any transfer agent or registrar for the
Securities, (ix) the filing fees incident to, and the reasonable fees and
disbursements of counsel to the Underwriters in connection with, the review by
the NASD of the terms of the sale of the Securities and (x) the fees and
expenses incurred in connection with the listing of the Securities on The New
York Stock Exchange and (xi) all costs and expenses of the Underwriters,
including the fees and disbursements of counsel for the Underwriters, in
connection
<PAGE>
-25-
with matters related to the Reserved Securities which are designated by the
Company for sale to employees and others having a business relationship with the
Company.
(b) Termination of Agreement. If this Agreement is terminated by the
------------------------
Lead Managers in accordance with the provisions of Section 5 or Section 9(a)(i)
hereof, the Company shall reimburse the International Managers for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the International Managers.
(c) Expenses of the Selling Stockholders. The Selling Stockholders,
------------------------------------
jointly and severally, will pay all expenses incident to the performance of
their respective obligations under, and the consummation of the transactions
contemplated by, this Agreement, including (i) any stamp duties, capital duties
and stock transfer taxes, if any, payable upon the sale of the Securities to the
International Managers, and their transfer between the International Managers
pursuant to an agreement between such International Managers, and (ii) the fees
and disbursements of their counsel and accountants.
(d) Allocation of Expenses. The provisions of this Section shall not
----------------------
affect any agreement that the Company and the Selling Stockholders may make for
the sharing of such costs and expenses.
SECTION 5. Conditions of International Managers' Obligations. The
-------------------------------------------------
obligations of the several International Managers hereunder are subject to the
accuracy of the representations and warranties of the Company and the Selling
Stockholders contained in Section 1 hereof or in certificates of any officer of
the Company or any subsidiary of the Company delivered pursuant to the
provisions hereof, to the performance by the Company of its covenants and other
obligations hereunder, and to the following further conditions:
(a) Effectiveness of Registration Statement. The Registration
---------------------------------------
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of
the Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission, and any
request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of counsel to the
International Managers. A prospectus containing the Rule 430A Information
shall have been filed with the Commission
<PAGE>
-26-
in accordance with Rule 424(b) (or a post-effective amendment providing
such information shall have been filed and declared effective in accordance
with the requirements of Rule 430A) or, if the Company has elected to rely
upon Rule 434, a Term Sheet shall have been filed with the Commission in
accordance with Rule 424(b).
(b) Opinion of Counsel for Company. At Closing Time, the Lead
------------------------------
Managers shall have received the favorable opinion, dated as of Closing
Time, of Testa, Hurwitz & Thibeault, LLP, counsel for the Company, and Eric
Lisman, General Counsel of the Company, in form and substance satisfactory
to counsel for the International Managers, together with signed or
reproduced copies of such letters for each of the other International
Managers covering the matters set forth in Exhibit A hereto and to such
effect as counsel to the International Managers may reasonably request.
(c) Opinion of Counsel for U.S. Underwriters. At Closing Time, the
----------------------------------------
Lead Managers shall have received the favorable opinion, dated as of
Closing Time, of Cahill Gordon & Reindel, counsel for the International
Managers, together with signed or reproduced copies of such letter for each
of the other International Managers, in form and substance satisfactory to
the Lead Managers. In giving such opinion such counsel may rely, as to all
matters governed by the laws of jurisdictions other than the law of the
State of New York and the federal law of the United States and the General
Corporation Law of the State of Delaware, upon the opinions of counsel
satisfactory to the Lead Managers. Such counsel may also state that,
insofar as such opinion involves factual matters, they have relied, to the
extent they deem proper, upon certificates of officers of the Company and
its subsidiaries and certificates of public officials.
(d) Officers' Certificate. At Closing Time, there shall not have
---------------------
been, since the date hereof or since the respective dates as of which
information is given in the Prospectuses, any material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs
or business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and
the Lead Managers shall have received a certificate of the President or a
Vice President of the Company and of the chief
<PAGE>
-27-
financial or chief accounting officer of the Company, dated as of Closing
Time, to the effect that (i) there has been no such material adverse
change, (ii) the representations and warranties in Section 1(a) hereof are
true and correct with the same force and effect as though expressly made at
and as of Closing Time, (iii) the Company has complied with all agreements
and satisfied all conditions on its part to be performed or satisfied at or
prior to Closing Time, and (iv) no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or are contemplated by the
Commission.
(e) Certificate of Selling Stockholders. At Closing Time, the
-----------------------------------
Representatives shall have received a certificate of an Attorney-in-Fact on
behalf of each Selling Stockholder, dated as of Closing Time, to the
effect that the representations and warranties of each Selling Stockholder
contained in Section 1(b) hereof are true and correct in all respects with
the same force and effect as though expressly made at and as of Closing
Time and (ii) each Selling Stockholder has complied in all material
respects with all agreements and all conditions on its part to be performed
under this Agreement at or prior to Closing Time.
(f) Accountant's Comfort Letter. At the time of the execution of
---------------------------
this Agreement, the Lead Managers shall have received from a letter dated
such date, in form and substance satisfactory to the Lead Managers,
together with signed or reproduced copies of such letter for each of the
other International Managers containing statements and information of the
type ordinarily included in accountants' "comfort letters" to underwriters
with respect to the financial statements and certain financial information
contained in the Registration Statement and the Prospectuses.
(g) Bring-down Comfort Letter. At Closing Time, the Lead Managers
-------------------------
shall have received from Arthur Andersen a letter, dated as of Closing
Time, to the effect that they reaffirm the statements made in the letter
furnished pursuant to subsection (f) of this Section, except that the
specified date referred to shall be a date not more than three business
days prior to Closing Time.
(h) Approval of Listing. At Closing Time, the Securities shall have
-------------------
been approved for listing on The New
<PAGE>
-28-
York Stock Exchange, subject only to official notice of issuance.
(i) No Objection. The NASD has confirmed that it has not raised any
------------
objection with respect to the fairness and reasonableness of the
underwriting terms and arrangements.
(j) Lock-up Agreements. At the date of this Agreement, the Lead
------------------
Managers shall have received an agreement substantially in the form of
Exhibit B hereto signed by the persons listed on Schedule D hereto.
(k) Purchase of Initial U.S. Securities. Contemporaneously with the
-----------------------------------
purchase by the International Managers of the Initial International
Securities under this Agreement, the U.S. Underwriters shall have purchased
the Initial U.S. Securities under the U.S. Purchase Agreement.
(l) Conditions to Purchase of International Option Securities. In
---------------------------------------------------------
the event that the International Managers exercise their option provided in
Section 2(b) hereof to purchase all or any portion of the International
Option Securities, the representations and warranties of the Company
contained herein and the statements in any certificates furnished by the
Company or any subsidiary of the Company hereunder shall be true and
correct as of each Date of Delivery and, at the relevant Date of Delivery,
the Lead Managers shall have received:
(i) Officers' Certificate. A certificate, dated such Date of
---------------------
Delivery, of the President or a Vice President of the Company and of
the chief financial or chief accounting officer of the Company
confirming that the certificate delivered at the Closing Time pursuant
to Section 5(d) hereof remains true and correct as of such Date of
Delivery.
(ii) Opinion of Counsel for Company. The favorable opinion of
------------------------------
Testa, Hurwitz & Thibeault, LLP, counsel for the Company and Eric
Lisman, General Counsel of the Company, in form and substance
satisfactory to counsel for the International Managers, dated such
Date of Delivery, relating to the International Option Securities to
be purchased on such Date of Delivery and otherwise to the same effect
as the opinion required by Section 5(b) hereof.
<PAGE>
-29-
(iii) Certificate of Selling Stockholders. A certificate,
-----------------------------------
dated such Date of Delivery, of an Attorney-in-Fact on behalf of the
Selling Stockholders confirming that the certificate delivered at
Closing Time pursuant to Section 5(e) remains true and correct as of
such Date of Delivery.
(iv) Opinion of Counsel for International Managers. The
---------------------------------------------
favorable opinion of Cahill Gordon & Reindel, counsel for the
International Managers, dated such Date of Delivery, relating to the
International Option Securities to be purchased on such Date of
Delivery and otherwise to the same effect as the opinion required by
Section 5(c) hereof.
(v) Bring-down Comfort Letter. A letter from Arthur Andersen,
-------------------------
in form and substance satisfactory to the Lead Managers and dated such
Date of Delivery, substantially in the same form and substance as the
letter furnished to the Lead Managers pursuant to Section 5(g) hereof,
except that the "specified date" in the letter furnished pursuant to
this paragraph shall be a date not more than five days prior to such
Date of Delivery.
(vi) Opinion of Counsel for the Selling Stockholders. The
-----------------------------------------------
favorable opinion of Heller Ehrman White & McAuliffe, counsel for the
Selling Stockholders, dated such Date of Delivery, relating to the
International Option Securities to be purchased on such Date of
Delivery and otherwise to the same effect as the opinion required by
Section 5(c) hereof.
(m) Amendment of Certain Documents. The Company shall have amended
------------------------------
and restated its Certificate of Incorporation, its By-Laws and its 1996
Stock Option Plan and each of the Amended and Restated Certificate of
Incorporation, the Amended and Restated By-Laws and Amended and Restated
1996 Stock Option Plan shall be in effect and the Company shall have
provided such documents to the International Managers.
(n) Dissolution of AHI Advanstar LLC. AHI Advanstar LLC, the
--------------------------------
Company's sole shareholder prior to the Offering, shall be dissolved and
the [ ] shares of Common Stock will be distributed to the members of AHI
Advanstar LLC who owned such interests.
<PAGE>
-30-
(o) Additional Documents. At Closing Time and at each Date of
--------------------
Delivery, counsel for the International Managers shall have been furnished
with such documents and opinions as they may require for the purpose of
enabling them to pass upon the issuance and sale of the Securities as
herein contemplated, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the conditions,
herein contained; and all proceedings taken by the Company in connection
with the issuance and sale of the Securities as herein contemplated shall
be satisfactory in form and substance to the Lead Managers and counsel for
the International Managers.
(p) Termination of Agreement. If any condition specified in this
------------------------
Section shall not have been fulfilled when and as required to be fulfilled,
this Agreement, or, in the case of any condition to the purchase of
International Option Securities on a Date of Delivery which is after the
Closing Time, the obligations of the several International Managers to
purchase the relevant Option Securities, may be terminated by the Lead
Managers by notice to the Company at any time at or prior to Closing Time
or such Date of Delivery, as the case may be, and such termination shall be
without liability of any party to any other party except as provided in
Section 4 and except that Sections 1, 6, 7 and 8 shall survive any such
termination and remain in full force and effect.
SECTION 6. Indemnification.
---------------
(a) Indemnification of International Managers the Company. The
-----------------------------------------------------
Company agrees to indemnify and hold harmless each International Manager and
each person, if any, who controls any International Manager within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(or any amendment thereto), including the Rule 430A Information and the
Rule 434 Information, if applicable, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material
<PAGE>
-31-
fact included in any preliminary international prospectus or the
International Prospectus (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of (A) the violation of any applicable
laws or regulations of foreign jurisdictions where Reserved Securities have
been offered and (B) any untrue statement or alleged untrue statement of a
material fact included in the supplement or prospectus wrapper material
distributed in [ ] in connection with the reservation and sale of the
Reserved Securities to eligible employees and certain other persons of the
Company or the omission or alleged omission therefrom of a material fact
necessary to make the statements therein, when considered in conjunction
with the Prospectus or preliminary prospectus, not misleading;
(iii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount paid
in settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission or in connection with any violation of
the nature referred to in Section 6(a)(ii)(A) hereof; provided that
--------
(subject to Section 6(d) below) any such settlement is effected with the
written consent of the Company; and
(iv) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by Merrill Lynch), reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission or
in connection with any violation of the nature referred to in Section
6(a)(ii)(A) hereof, to the extent that any such expense is not paid under
clause (i), (ii) or (iii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
- -------- -------
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged
<PAGE>
-32-
untrue statement or omission made in reliance upon and in conformity with
written information furnished to the Company by any International Manager
through the Lead Managers expressly for use in the Registration Statement (or
any amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto).
(b) Indemnification of International Managers by Selling
----------------------------------------------------
Stockholders. Each of the Selling Stockholders agree, severally and not
- ------------
jointly, to indemnify and hold harmless each International Manager and each
person, if any, who controls any International Manager within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act (a) against any and all
loss, liability, claim, damage and expense described in the indemnity contained
in subsection (a) of this Section, as incurred, but only with respect to such
loss, liability, claim, damage and expense caused by any untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary International
Prospectus or the International Prospectus (or any amendment or supplement
thereto) relating to any Selling Stockholder furnished in writing by or on
behalf of such Selling Stockholder expressly for use in the Registration
Statement (or any amendment thereto) or such preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) and (b) against any and all
loss, liability, claim, damage and expense arising from the breach of any of the
representations and warranties of such Selling Stockholder set forth in Section
1(b)(ii).
(c) Indemnification of Company, Directors and Officers and Selling
--------------------------------------------------------------
Stockholders by International Managers. Each International Manager severally
- --------------------------------------
agrees to indemnify and hold harmless the Company, its directors, each of its
officers who signed the Registration Statement, and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act, and each Selling Stockholder and each person, if any, who
controls any Selling Stockholder within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act against any and all loss, liability, claim,
damage and expense described in the indemnity contained in subsection (a) of
this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary International
<PAGE>
-33-
prospectus or the International Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information furnished
to the Company by such International Manager through the Lead Managers expressly
for use in the Registration Statement (or any amendment thereto) or such
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
(d) Actions Against Parties; Notification. Each indemnified party
-------------------------------------
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it is
not materially prejudiced as a result thereof and in any event shall not relieve
it from any liability which it may have otherwise than on account of this
indemnity agreement. In the case of parties indemnified pursuant to Section
6(a) and 6(b) above, counsel to the indemnified parties shall be selected by
Merrill Lynch, and, in the case of parties indemnified pursuant to Section 6(c)
above, counsel to the indemnified parties shall be selected by the Company. An
indemnifying party may participate at its own expense in the defense of any such
action; provided, however, that counsel to the indemnifying party shall not
-------- -------
(except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section 6 or Section 7 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
<PAGE>
-34-
(e) Settlement Without Consent if Failure to Reimburse. If at any
--------------------------------------------------
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 6(a)(iii) effected without its written consent if
such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.
(f) Indemnification for Reserved Securities. In connection with the
---------------------------------------
offer and sale of the Reserved Securities, the Company agrees, promptly upon a
request in writing, to indemnify and hold harmless the Underwriters from and
against any and all losses, liabilities, claims, damages and expenses incurred
by them as a result of the failure of eligible employees and certain other
persons of the Company to pay for and accept delivery of Reserved Securities
which, by the end of the first business day following the date of this
Agreement, were subject to a properly confirmed agreement to purchase.
SECTION 7. Contribution. If the indemnification provided for in
------------
Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Selling Stockholders on the one hand and the International
Managers on the other hand from the offering of the Securities pursuant to this
Agreement or (ii) if the allocation provided by clause (i) is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company and the Selling Stockholders on the one hand and of the
International Managers on the other hand in connection with the statements or
omissions, or in connection with any violation of the nature referred to in
Section 6(a)(ii)(A) hereof, which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations.
<PAGE>
-35-
The relative benefits received by the Company and the Selling
Stockholders on the one hand and the International Managers on the other hand in
connection with the offering of the Securities pursuant to this Agreement shall
be deemed to be in the same respective proportions as the total net proceeds
from the offering of the Securities pursuant to this Agreement (before deducting
expenses) received by the Company and the Selling Stockholders and the total
underwriting discount received by the International Managers, in each case as
set forth on the cover of the Prospectus, or, if Rule 434 is used, the
corresponding location on the Term Sheet bear to the aggregate initial public
offering price of the Securities as set forth on such cover.
The relative fault of the Company and the Selling Stockholders on the
one hand and the International Managers on the other hand shall be determined by
reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company or the Selling Stockholders
or by the International Managers and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission or any violation of the nature referred to in Section 6(a)(ii)(A)
hereof.
The Company, the Selling Stockholders and the International Managers
agree that it would not be just and equitable if contribution pursuant to this
Section 7 were determined by pro rata allocation (even if the International
Managers were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this Section 7. The aggregate amount of losses, liabilities,
claims, damages and expenses incurred by an indemnified party and referred to
above in this Section 7 shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in investigating, preparing or
defending against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever
based upon any such untrue or alleged untrue statement or omission or alleged
omission.
Notwithstanding the provisions of this Section 7, no International
Managers shall be required to contribute any amount in excess of the amount by
which the total price at which the International Securities underwritten by it
and distributed to the public were offered to the public exceeds the
<PAGE>
-36-
amount of any damages which such U.S. Underwriter has otherwise been required to
pay by reason of any such untrue or alleged untrue statement or omission or
alleged omission. Notwithstanding anything in this Agreement to the contrary,
the maximum aggregate liability of any Selling Stockholder pursuant to this
Section 7 shall be limited to an amount equal to the gross proceeds (after
deducting underwriting discount and commissions but before deducting expenses)
received by such Selling Stockholder from the International Managers for the
sale of the International Securities sold by such Selling Stockholder.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls a
U.S. Underwriter within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act shall have the same rights to contribution as such International
Manager, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company or any Selling Stockholder within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act shall have the same rights to contribution as
the Company or such Selling Stockholder, as the case may be. The International
Managers' respective obligations to contribute pursuant to this Section 7 are
several in proportion to the number of Initial International Securities set
forth opposite their respective names in Schedule A hereto and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive
-----------------------------------------------------
Delivery. All representations, warranties and agreements contained in this
- --------
Agreement or in certificates of officers of the Company or any of its
subsidiaries or the Selling Stockholders submitted pursuant hereto, shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of any International Manager or controlling person, or by or on
behalf of the Company or the Selling Stockholders, and shall survive delivery of
the Securities to the International Managers.
SECTION 9. Termination of Agreement.
------------------------
(a) Termination; General. The Lead Managers may terminate this
--------------------
Agreement, by notice to the Company and the Selling Stockholders, at any time at
or prior to Closing Time (i) if there has been, since the time of execution of
this
<PAGE>
-37-
Agreement or since the respective dates as of which information is given in
the International Prospectus, any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business, or (ii) if there has
occurred any material adverse change in the financial markets in the United
States or the international financial markets, any outbreak of hostilities or
escalation thereof or other calamity or crisis or any change or development
involving a prospective change in national or international political, financial
or economic conditions, in each case the effect of which is such as to make it,
in the judgment of the Lead Managers, impracticable to market the Securities or
to enforce contracts for the sale of the Securities, or (iii) if trading in any
securities of the Company has been suspended or materially limited by the
Commission or the New York Stock Exchange, or if trading generally on the
American Stock Exchange or the New York Stock Exchange or in the Nasdaq National
Market has been suspended or materially limited, or minimum or maximum prices
for trading have been fixed, or maximum ranges for prices have been required, by
any of said exchanges or by such system or by order of the Commission, the
National Association of Securities Dealers, Inc. or any other governmental
authority, or (iv) if a banking moratorium has been declared by either Federal
or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
-----------
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7 and 8 shall survive such termination and remain in full force and
effect.
SECTION 10. Default by One or More of the International Managers.
----------------------------------------------------
If one or more of the International Managers shall fail at Closing Time or a
Date of Delivery to purchase the Securities which it or they are obligated to
purchase under this Agreement (the "Defaulted Securities"), the Lead Managers
shall have the right, within 24 hours thereafter, to make arrangements for one
or more of the non-defaulting International Managers, or any other underwriters,
to purchase all, but not less than all, of the Defaulted Securities in such
amounts as may be agreed upon and upon the terms herein set forth; if, however,
the Lead Managers shall not have completed such arrangements within such 24-hour
period, then:
<PAGE>
-38-
(a) if the number of Defaulted Securities does not exceed 10% of the
number of International Securities to be purchased on such date, each of the
non-defaulting International Managers shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions that their
respective underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting International Managers, or
(b) if the number of Defaulted Securities exceeds 10% of the number
of U.S. Securities to be purchased on such date, this Agreement or, with respect
to any Date of Delivery which occurs after the Closing Time, the obligation of
the International Managers to purchase and of the Selling Stockholders to sell
the Option Securities to be purchased and sold on such Date of Delivery shall
terminate without liability on the part of any non-defaulting International
Manager.
No action taken pursuant to this Section shall relieve any defaulting
International Manager from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement or, in the case of a Date of Delivery which is
after the Closing Time, which does not result in a termination of the obligation
of the International Managers to purchase and the Company to sell the relevant
Option Securities, as the case may be, either (i) the Lead Managers or (ii) the
Company and any Selling Stockholder shall have the right to postpone Closing
Time or the relevant Date of Delivery, as the case may be, for a period not
exceeding seven days in order to effect any required changes in the Registration
Statement or Prospectus or in any other documents or arrangements. As used
herein, the term "International Manager" includes any person substituted for an
International Manager under this Section 10.
SECTION 11. Default by One or More of the Selling Stockholders. If
--------------------------------------------------
a Selling Stockholder shall fail at Closing Time or at a Date of Delivery to
sell and deliver the number of Securities which such Selling Stockholder or
Selling Stockholders are obligated to sell hereunder, and the remaining Selling
Stockholders do not exercise the right hereby granted to increase, pro rata or
otherwise, the number of Securities to be sold by them hereunder to the total
number to be sold by all Selling Stockholders as set forth in Schedule B hereto,
then the International Managers may, at option of the Representatives, by notice
from the Representatives to the Company and
<PAGE>
-39-
the non-defaulting Selling Stockholders, either (a) terminate this Agreement
without any liability on the fault of any non-defaulting party except that the
provisions of Sections 1, 4, 6, 7 and 8 shall remain in full force and effect or
(b) elect to purchase the Securities which the non-defaulting Selling
Stockholders have agreed to sell hereunder. No action taken pursuant to this
Section 11 shall relieve any Selling Stockholder so defaulting from liability,
if any, in respect of such default.
In the event of a default by any Selling Stockholder as referred to in
this Section 11, each of the Lead Managers, the Company and the non-defaulting
Selling Stockholders shall have the right to postpone Closing Time or Date of
Delivery for a period not exceeding seven days in order to effect any required
change in the Registration Statement or Prospectus or in any other documents or
arrangements.
SECTION 12. Notices. All notices and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication. Notices to the
International Managers shall be directed to the Lead Managers at North Tower,
World Financial Center, New York, New York 10281-1201, attention of .; notices
to the Company shall be directed to it at Advanstar, Inc., 575 Boylston St.,
Boston, MA 02116, attention of Robert L. Krakoff; and notices to the Selling
Stockholder(s) shall be directed to ., attention of ..
SECTION 13. Parties. This Agreement shall each inure to the
-------
benefit of and be binding upon the International Managers, the Company and the
Selling Stockholders and their respective successors. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any
person, firm or corporation, other than the International Managers, the Company
and the Selling Stockholders and their respective successors and the controlling
persons and officers and directors referred to in Sections 6 and 7 and their
heirs and legal representatives, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the International Managers, the Company and the
Selling Stockholders and their respective successors, and said controlling
persons and officers and directors and their heirs and legal representatives,
and for the benefit of no other person, firm or corporation. No purchaser of
Securities from any International
<PAGE>
-40-
Manager shall be deemed to be a successor by reason merely of such purchase.
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE
----------------------
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 15. Effect of Headings. The Article and Section headings
------------------
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.
<PAGE>
-41-
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company and the Attorney-in-Fact for
the Selling Stockholders a counterpart hereof, whereupon this instrument, along
with all counterparts, will become a binding agreement between the U.S.
Underwriters, the Company and the Selling Stockholders in accordance with its
terms.
Very truly yours,
ADVANSTAR, INC.
By ______________________________
Title:
ATTORNEY-IN-FACT
By ______________________________
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH INTERNATIONAL
BEAR, STEARNS INTERNATIONAL LIMITED
By: MERRILL LYNCH INTERNATIONAL
By_________________________________________
Authorized Signatory
For themselves and as Lead Managers of the other U.S. Underwriters named in
Schedule B hereto.
<PAGE>
SCHEDULE A
Number of Initial Maximum Number of Option
Securities to Be Sold Securities to Be Sold
---------------------------- ------------------------------
[LIST SELLING
STOCKHOLDERS]
Total.........................
Schedule A-1
<PAGE>
SCHEDULE B
Number of
Initial International
Securities
---------------------
Name of International Manager
- -----------------------------
Merrill Lynch International........................
Bear, Stearns International
Limited............................................
Lehman Brothers International......................
Morgan Stanley & Co. International
Limited............................................
Salomon Brothers International
Limited............................................
Total..............................................
Total.........................
Schedule B-1
<PAGE>
SCHEDULE C
ADVANSTAR, INC.
[ ] Shares of Common Stock
(Par Value $[ ] Per Share)
1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $/o/.
2. The purchase price per share for the International Securities to
be paid by the several International Managers shall be $ , being an
amount equal to the initial public offering price set forth above less $
per share; provided that the purchase price per share for any International
Option Securities purchased upon the exercise of the over-allotment option
described in Section 2(b) shall be reduced by an amount per share equal to
any dividends or distributions declared by the Company and payable on the
Initial International Securities but not payable on the International
Option Securities.
Schedule C-1
<PAGE>
[SCHEDULE D]
[List of persons and entities
subject to lock-up]
Schedule D-1
<PAGE>
Exhibit A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(i) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectuses and to enter into and perform its obligations under the U.S.
Purchase Agreement and the International Purchase Agreement.
(iii) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(iv) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectuses in the column entitled "Actual"
under the caption "Capitalization" (except for subsequent issuances, if any,
pursuant to the U.S. Purchase Agreement and the International Purchase Agreement
or pursuant to reservations, agreements or employee benefit plans referred to in
the Prospectuses or pursuant to the exercise of convertible securities or
options referred to in the Prospectuses); the shares of issued and outstanding
capital stock have been duly authorized and validly issued and are fully paid
and non-assessable; and none of the outstanding shares of capital stock of the
Company was issued in violation of the preemptive or other similar rights of any
securityholder of the Company.
(v) The Securities to be purchased by the U.S. Underwriters and the
International Managers from the Company have been duly authorized for issuance
and sale to the Underwriters pursuant to the U.S. Purchase Agreement and the
International Purchase Agreement, respectively, and, when issued and delivered
by the Company pursuant to the U.S. Purchase Agreement and the International
Purchase Agreement, respectively, against payment of the consideration set forth
in the U.S. Purchase
Exhibit A-1
<PAGE>
Agreement and the International Purchase Agreement, will be
validly issued and fully paid and non-assessable and no holder of the Securities
is or will be subject to personal liability by reason of being such a holder.
(vi) The issuance of the Securities is not subject to the preemptive
or other similar rights of any securityholder of the Company.
(vii) Each Subsidiary has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation, has corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Prospectuses and
is duly qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required, whether
by reason of the ownership or leasing of property or the conduct of business,
except where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect; except as otherwise disclosed in the
Registration Statement, all of the issued and outstanding capital stock of each
Subsidiary has been duly authorized and validly issued, is fully paid and non-
assessable and, to the best of our knowledge, is owned by the Company, directly
or through subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity; none of the outstanding shares of
capital stock of any Subsidiary was issued in violation of the preemptive or
similar rights of any securityholder of such Subsidiary. To the best of our
knowledge, the Company does not have any subsidiaries.
(viii) The U.S. Purchase Agreement and the International Purchase
Agreement have been duly authorized, executed and delivered by the Company.
(ix) The Registration Statement, including any Rule 462(b)
Registration Statement, has been declared effective under the 1933 Act; any
required filing of the Prospectuses pursuant to Rule 424(b) has been made in the
manner and within the time period required by Rule 424(b); and, to the best of
[our] [my] knowledge, no stop order suspending the effectiveness of the
Registration Statement or any Rule 462(b) Registration Statement has been issued
under the 1933 Act and no proceedings for that purpose have been instituted or
are pending or threatened by the Commission.
(x) The Registration Statement, including any Rule 462(b) Registration
Statement, the Rule 430A Information and
Exhibit A-2
<PAGE>
the Rule 434 Information, as applicable, the Prospectuses and each amendment or
supplement to the Registration Statement and the Prospectuses as of their
respective effective or issue dates (other than the financial statements and
supporting schedules included therein or omitted therefrom, as to which we need
express no opinion) complied as to form in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations.
(xi) If Rule 434 has been relied upon, the Prospectuses were not
"materially different," as such term is used in Rule 434, from the prospectuses
included in the Registration Statement at the time it became effective.
(xii) The form of certificate used to evidence the Common Stock
complies in all material respects with all applicable statutory requirements,
with any applicable requirements of the charter and by-laws of the Company and
the requirements of the New York Stock Exchange.
(xiii) To the best of our knowledge, there is not pending or
threatened any action, suit, proceeding, inquiry or investigation, to which the
Company or any subsidiary is a party, or to which the property of the Company or
any subsidiary is subject, before or brought by any court or governmental agency
or body, domestic or foreign, which might reasonably be expected to result in a
Material Adverse Effect, or which might reasonably be expected to materially and
adversely affect the properties or assets thereof or the consummation of the
transactions contemplated in the U.S. Purchase Agreement and International
Purchase Agreement or the performance by the Company of its obligations
thereunder.
(xiv) The information in the Prospectuses under "Description of
Capital Stock", "Business--Facilities", "Business--Litigation", "Certain Federal
Income Tax Considerations for Non-U.S. Holders" and in the Registration
Statement under Item 14, to the extent that it constitutes matters of law,
summaries of legal matters, the Company's charter and bylaws or legal
proceedings, or legal conclusions, has been reviewed by us and is correct in all
material respects.
(xv) To the best of our knowledge, there are no statutes or
regulations that are required to be described in the Prospectuses that are not
described as required.
(xvi) All descriptions in the Prospectuses of contracts and other
documents to which the Company or its subsidiaries
Exhibit A-3
<PAGE>
are a party are accurate in all material respects; to the best of our knowledge,
there are no franchises, contracts, indentures, mortgages, loan agreements,
notes, leases or other instruments required to be described or referred to in
the Registration Statement or to be filed as exhibits thereto other than those
described or referred to therein or filed or incorporated by reference as
exhibits thereto, and the descriptions thereof or references thereto are correct
in all material respects.
(xvii) To the best of our knowledge, neither the Company nor any
subsidiary is in violation of its charter or by-laws and no default by the
Company or any subsidiary exists in the due performance or observance of any
material obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument that is described or referred to in the Registration Statement or the
Prospectuses or filed or incorporated by reference as an exhibit to the
Registration Statement.
(xviii) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign (other than under the 1933 Act and the
1933 Act Regulations, which have been obtained, or as may be required under the
securities or blue sky laws of the various states, as to which we need express
no opinion) is necessary or required in connection with the due authorization,
execution and delivery of the U.S. Purchase Agreement and the International
Purchase Agreement or for the offering, issuance, sale or delivery of the
Securities.
(xix) The execution, delivery and performance of the U.S. Purchase
Agreement and the International Purchase Agreement and the consummation of the
transactions contemplated in the U.S. Purchase Agreement, the International
Purchase Agreement and in the Registration Statement (including the issuance and
sale of the Securities, and the use of the proceeds from the sale of the
Securities as described in the Prospectuses under the caption "Use Of Proceeds")
and compliance by the Company with its obligations under the U.S. Purchase
Agreement and the International Purchase Agreement do not and will not, whether
with or without the giving of notice or lapse of time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined in Section
1(a)(x) of the Purchase Agreements) under or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of
Exhibit A-4
<PAGE>
the Company or any subsidiary pursuant to any contract, indenture, mortgage,
deed of trust, loan or credit agreement, note, lease or any other agreement or
instrument, known to us, to which the Company or any subsidiary is a party or by
which it or any of them may be bound, or to which any of the property or assets
of the Company or any subsidiary is subject (except for such conflicts, breaches
or defaults or liens, charges or encumbrances that would not have a Material
Adverse Effect), nor will such action result in any violation of the provisions
of the charter or by-laws of the Company or any subsidiary, or any applicable
law, statute, rule, regulation, judgment, order, writ or decree, known to us, of
any government, government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any subsidiary or any of their respective
properties, assets or operations.
(xx) To the best of our knowledge, there are no persons with
registration rights or other similar rights to have any securities registered
pursuant to the Registration Statement or otherwise registered by the Company
under the 1933 Act.
(xxi) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the 1940
Act.
(xxii) The form of certificate used to evidence the Common Stock
complies in all material respects with the Delaware General Corporation Law,
with any applicable requirements of the charter and by-laws of the Company and
the requirements of the New York Stock Exchange.
Nothing has come to our attention that would lead us to believe that
the Registration Statement or any amendment thereto, including the Rule 430A
Information and Rule 434 Information (if applicable), (except for financial
statements and schedules and other financial data included therein or omitted
therefrom, as to which we need make no statement), at the time such Registration
Statement or any such amendment became effective, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Prospectuses or any amendment or supplement thereto (except for financial
statements and schedules and other financial data included therein or omitted
therefrom, as to which we need make no statement), at the time the Prospectuses
were issued, at the time any such amended or supplemented prospectus was issued
or at the Closing Time, included or includes an untrue statement of a material
fact or omitted or
Exhibit A-5
<PAGE>
omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
Exhibit A-6
<PAGE>
[Form of lock-up pursuant to Section 5(j)]
------------------------------------------
Exhibit B
LOCK-UP LETTER AGREEMENT
[ ], 1999
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
Bear, Stearns & Co. Inc.
as representative of the several
U.S. underwriters to be named in the
within mentioned U.S. Purchase Agreement
Merrill Lynch International
Bear, Stearns International Limited
as lead managers of the several
international managers to be named in the
within mentioned International Purchase Agreement
c/o Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Re: Proposed Public Offering
by Advanstar, Inc.
------------------
Dear Sirs:
The undersigned, a securityholder, officer, director or any
combination of the foregoing of Advanstar, Inc., a Delaware corporation (the
"Company"), understands that Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") and Bear, Stearns & Co. propose to enter into a U.S. Purchase
Agreement (the "U.S. Purchase Agreement") with the Company and certain
Exhibit B-1
<PAGE>
securityholders of the Company and Merrill Lynch International and Bear, Stearns
International Limited propose to enter into an International Purchase Agreement
(the "International Purchase Agreement") and together with the U.S. Purchase
Agreement, the "Purchase Agreements") with the Company and certain
securityholders of the Company, providing for the underwritten public offerings
(the "Offerings") of shares of the Company's common stock, par value $.01 per
share (the "Common Stock"). In recognition of the benefit that such Offerings
will confer upon the undersigned as a securityholder, officer, director or any
combination of the foregoing of the Company, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
undersigned agrees with each underwriter to be named in the Purchase Agreements
that, during a period commencing from the date of the execution of this
agreement and ending 180 days after the date of signing of the U.S. Purchase
Agreement, the undersigned will not, without the prior written consent of
Merrill Lynch, directly or indirectly, (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant for the sale of, or otherwise
dispose of or transfer any shares of the Common Stock or any securities
convertible into or exchangeable or exercisable for the Common Stock, whether
now owned or hereafter acquired by the undersigned or with respect to which the
undersigned has or hereafter acquires the power of disposition or (ii) enter
into any swap or any other agreement or any transaction that transfers, in whole
or in part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction is to be settled by delivery
of Common Stock or other securities, in cash or otherwise, except in either case
for shares of Common Stock to be sold in the Offerings or shares of Common Stock
purchased in the Offerings or in the public market pursuant to brokers'
transactions.
This agreement shall cease to be effective if the closing of the
Offerings has not occurred by July 31, 1999.
Very truly yours,
_______________________________
Signature:
_______________________________
Print Name:
Exhibit B-2
<PAGE>
Exhibit C
FORM OF OPINION OF COUNSEL FOR THE SELLING SHAREHOLDERS
TO BE DELIVERED PURSUANT TO SECTION 5(f)
(i) No filing with, or consent, approval, authorization, license,
order registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign, (other than the issuance of the
order of the Commission declaring the Registration Statement effective and
such authorizations, approvals or consents as may be necessary under state
securities laws, as to which we need express no opinion) is necessary or
required to be obtained by the Selling Stockholders for the performance by
each Selling Stockholder of its obligations under the Purchase Agreement or
in the Power of Attorney and Custody Agreement, or in connection with the
offer, sale or delivery of the Securities.
(ii) The Power of Attorney and Custody Agreement has been duly
executed and delivered by the Selling Stockholders named therein and
constitutes the legal, valid and binding agreement of such Selling
Stockholder.
(iii) The Purchase Agreement has been duly authorized, executed and
delivered by or on behalf of each Selling Stockholder.
(iv) The Attorney-in-Fact has been duly authorized by the Selling
Stockholders to deliver the Securities on behalf of the Selling
Stockholders in accordance with the terms of the Purchase Agreement.
(v) The execution, delivery and performance of the Purchase Agreement
and the Power of Attorney and Custody Agreement and the sale and delivery
of the Securities and the consummation of the transactions contemplated in
the Purchase Agreement and in the Registration and compliance by the
Selling Stockholders with its obligations under the Purchase Agreement have
been duly authorized by all necessary action on the part of the Selling
Stockholders and do not and will not, whether with or without the giving of
notice or passage of time or both, conflict with or constitute a breach of,
or default under or result in the creation or imposition of any tax, lien,
charge or encumbrance upon the Securities or any property or assets of the
Selling Stockholders pursuant to, any contract, indenture, mortgage, deed
of trust, loan or credit agreement, note, license, lease or other
instrument or agreement to which any Selling Stockholder is a party or by
which he may be bound, or to which any of the property or assets of
Exhibit C-1
<PAGE>
the Selling Stockholders may be subject nor will such action result in any
violation of the provisions of the charter or by-laws of the Selling
Stockholders, if applicable, or any law, administrative regulation,
judgment or order of any governmental agency or body or any administrative
or court decree having jurisdiction over such Selling Stockholder or any of
its properties.
(vi) To the best of our knowledge, each Selling Stockholder has valid
and marketable title to the Securities to be sold by such Selling
Stockholder pursuant to the Purchase Agreement, free and clear of any
pledge, lien, security interest, charge, claim, equity or encumbrance of
any kind, and has full right, power and authority to sell, transfer and
deliver such Securities pursuant to the Purchase Agreement. By delivery of
a certificate or certificates therefor such Selling Stockholder will
transfer to the Underwriters who have purchased such Securities pursuant to
the Purchase Agreement (without notice of any defect in the title of such
Selling Stockholder and who are otherwise bona fide purchasers for purposes
of the Uniform Commercial Code) valid and marketable title to such
Securities, free and clear of any pledge, lien, security interest, charge,
claim, equity or encumbrance of any kind.
Nothing has come to our attention that would lead us to believe that
the Registration Statement or any amendment thereto, including the Rule
430A Information and Rule 434 Information (if applicable), (except for
financial statements and schedules and other financial data included
therein or omitted therefrom, as to which we need make no statement), at
the time such Registration Statement or any such amendment became
effective, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading or that the Prospectuses or any
amendment or supplement thereto (except for financial statements and
schedules and other financial data included therein or omitted therefrom,
as to which we need make no statement), at the time the Prospectuses were
issued, at the time any such amended or supplemented prospectus was issued
or at the Closing Time, included
Exhibit C-2
<PAGE>
or includes an untrue statement of a material fact or omitted or omits to
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
Exhibit C-3
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Advanstar, Inc., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of Advanstar, Inc. (the
"Corporation"), by a unanimous written consent effective as of April 20, 1999,
duly and validly adopted the following resolutions:
RESOLVED: That, subject to stockholder approval, the Corporation amend its
Certificate of Incorporation, as amended, to increase the authorized
capital stock of the Corporation from 20,000,000 to 40,000,000 shares
of its common stock, par value $.01 per share (the "Common Stock").
RESOLVED: That, subject to stockholder approval, the Chief Executive Officer
and the Chief Financial Officer of the Corporation be, and each of
them acting singly hereby is, authorized in the name and on behalf of
the Corporation to prepare, execute and affix the Corporation's seal
to a certificate of amendment to the its Certificate of
Incorporation, as amended (the "Certificate of Amendment"), and to
file such instrument with the Secretary of State of the State of
Delaware, and to take all other actions which such officer shall deem
necessary, appropriate or desirable in order to effect the intent and
purposes of the foregoing resolutions.
RESOLVED: that the Board of Directors is hereby authorized to issue all or any
part of the authorized but unissued capital stock of the Corporation
at such times, to such persons, upon such terms, and for such
consideration as the Board of Directors may in its discretion
determine.
RESOLVED: That, subject to filing the Certificate of Amendment with the
Secretary of State of the State of Delaware, a two-for-one stock
split in the form of a stock dividend of 16,815,000 shares of Common
Stock for each outstanding share of Common Stock of the Corporation
outstanding as of the date hereof and payable on and as of such date,
is hereby approved and declared.
<PAGE>
- 2 -
RESOLVED: That the Corporation issue an aggregate of 16,815,000 shares of
Common Stock to the holders of the Corporation's outstanding Common
Stock pursuant to the preceding vote; and that the Chief Executive
Officer and the Chief Financial Officer of the Corporation be, and
each of them acting singly hereby is, authorized to transfer from the
surplus to the capital account in respect of the stock dividend
described above the total par value of the shares issued pursuant to
said stock dividend.
SECOND: That the sole stockholder of the corporation has duly adopted
such resolutions by a written consent effective as of April 20, 1999, in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
THIRD: Article Fourth of the Certificate of Incorporation of this
corporation be amended to read as follows:
FOURTH: This corporation is authorized to issue only one class of
shares of stock and the total number of shares which this
corporation is authorized to issue is 40,000,000 with a par
value of $0.01 per share.
FOURTH: That the aforesaid amendment was duly adopted in accordance
with the applicable provisions of Section 242 of the General Corporation Law of
the State of Delaware.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
- 3 -
IN WITNESS WHEREOF, said Advanstar, Inc. has caused this certificate to be
executed by David W. Montgomery, its Chief Financial Officer, on this April 21,
1999.
ADVANSTAR, INC.
By: /s/ David W. Montgomery
-----------------------
David W. Montgomery
Chief Financial Officer
<PAGE>
- 4 -
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Advanstar Holdings, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That the Board of Directors of Advanstar Holdings, Inc. (the
"Corporation"), by a unanimous written consent effective as of March 17, 1999,
duly and validly adopted the following resolutions:
RESOLVED: That, subject to stockholder approval, the Corporation amend its
Certificate of Incorporation as filed with the Secretary of State of
the State of Delaware (the "Certificate of Incorporation") so that,
as amended and restated, Article FIRST of the Certificate of
Incorporation shall be read in its entirety as set forth on Exhibit A
---------
attached hereto.
RESOLVED: That the foregoing amendment is hereby recommended to the
stockholders of the Corporation as being advisable and in the best
interests of the Corporation and its stockholders.
RESOLVED: That the proposal to amend the Certificate of Incorporation, as set
forth in the preceding resolution, be submitted to the stockholders
of the Corporation for their approval in compliance with Section 242
and 228 of the General Corporation Law of the State of Delaware.
RESOLVED: That, subject to approval by the stockholders of the proposal to
amend the Certificate of Incorporation as described in the foregoing
resolution, the Chief Executive Officer or Chief Financial Officer
be, and each of them acting singly hereby is, authorized and directed
to amend the Certificate of Incorporation as set forth above and to
file such amendment with the Secretary of State of the State of
Delaware.
SECOND: That the sole stockholder of the corporation has duly adopted
such resolutions by a written consent effective as of March 17, 1999, in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance
with the applicable provisions of Section 242 of the General Corporation Law of
the State of Delaware.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
- 5 -
IN WITNESS WHEREOF, said Advanstar Holdings, Inc. has caused this
certificate to be executed by David W. Montgomery, its Chief Financial Officer,
on this 17th day of March, 1999.
ADVANSTAR HOLDINGS, INC.
By: /s/ David W. Montgomery
-----------------------
David W. Montgomery
Chief Financial Officer
<PAGE>
Exhibit A
---------
FIRST. The name of the corporation is Advanstar, Inc.
<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER MERGING
ADVANSTAR HOLDINGS, INC. WITH AND INTO AHI HOLDING CORP.
The undersigned, being a duly authorized officer of AHI HOLDING CORP., a
Delaware corporation (the "Corporation") does hereby certify, pursuant to
Section 253 of the General Corporation Law of the State of Delaware, to the
following information relating to the merger of ADVANSTAR HOLDINGS, INC., a
Delaware corporation ("Advanstar Holdings"), with and into the Corporation:
1. The Corporation was incorporated on April 11, 1996 pursuant to and in
accordance with the General Corporation Law of the State of Delaware.
2. The Corporation owns 100% of the outstanding shares of capital stock, $.01
par value per share, of Advanstar Holdings, a corporation incorporated on
November 19, 1993 pursuant to and in accordance with the General Corporation
Law of the State of Delaware.
3. The Board of Directors of the Corporation unanimously consented on April 7,
1998 to the adoption of the following resolutions, which resolutions provided
that Advanstar Holdings be merged with and into the Corporation:
RESOLVED: That, the Corporation merge (the "Merger") into itself Advanstar
Holdings, Inc., its wholly-owned subsidiary and a Delaware Corporation
("Holdings"); that the Agreement and Plan of Merger by and between the
Corporation and Holdings, in substantially the form attached hereto as
Exhibit A (the "Agreement and Plan of Merger"),
be, and it hereby is, adopted and approved; that; as provided in the
Agreement and Plan of Merger, the Certificate of Incorporation be
amended as of the effective time of the Merger so as to change the
name of the Corporation to Advanstar Holdings, Inc.; and that the
Chairman and Chief Executive Officer of the Corporation is hereby
authorized, acting singly, to execute and deliver the Agreement and
Plan of Merger in the name and on behalf of the Corporation, with such
additions, deletions or changes therein as the Chairman and Chief
Executive Officer may, acting alone, in his sole discretion, deem
necessary, desirable, convenient or appropriate and consistent with
the best interests of the Corporation, his execution and delivery
thereof to be conclusive evidence of his authority to so act and of
this approval thereof.
RESOLVED: That, the officers of the Corporation are hereby directed to make,
execute and acknowledge a Certificate of Ownership and Merger and to
cause the same to be filed in the office of the Secretary of State of
Delaware and to do all acts and things whatsoever, whether within or
without the State of Delaware, which may be necessary or proper to
effect the Merger and the foregoing resolution; and that the Merger
shall become effective upon the effective filing of all documents or
<PAGE>
-2-
instruments necessary to perfect the Merger pursuant to the
requirements of the General Corporation Law of the State of Delaware
and the laws of the State of Delaware.
RESOLVED: That the officers of the Corporation be, and each of the officers
acting alone hereby is, authorized and empowered, for and on behalf of
the Corporation, to execute and deliver any and all other documents,
papers or instruments and to do or cause to be done any and all such
acts and things as they, or any of them, may deem necessary,
appropriate or desirable in order to enable the Corporation fully and
promptly to carry out the purposes and intents of the foregoing
resolutions.
[Remainder of Page Intentionally Left Blank]
<PAGE>
-3-
IN WITNESS WHEREOF, the undersigned has caused this Certificate of
Ownership and Merger to be duly executed and delivered on behalf of the
Corporation this 10th day of
June, 1998.
AHI HOLDING CORP.
By: /s/ Robert L. Krakoff
------------------------------------
Robert L. Krakoff
Chairman and Chief Executive Officer
ATTEST:
/s/ David W. Montgomery
- --------------------------------
David W. Montgomery
Secretary
<PAGE>
-4-
Exhibit A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of the 10th
day of June, 1998 by and between AHI Holding Corp., a corporation organized
under the laws of the State of Delaware ("AHI"), and Advanstar Holdings, Inc., a
corporation organized under the laws of the State of Delaware and a wholly-owned
subsidiary of AHI ("Holdings"). The two corporations are hereinafter sometimes
called the "Constituent Corporations." Holdings is hereinafter also sometimes
referred to as the "Merged Corporation," and AHI is hereinafter also sometimes
referred to as the "Surviving Corporation."
WITNESSETH THAT:
WHEREAS, the Constituent Corporations deem it advisable and generally
to the welfare of the Constituent Corporations that Holdings be merged with and
into AHI under the terms and conditions hereinafter set forth, such merger to be
effected pursuant to the statutes of the State of Delaware; and
WHEREAS, AHI by its Certificate of Incorporation has an authorized
capital stock consisting of 20,000,000 shares of Common Stock, $.01 par value
per share, of which 16,733,333 shares of such Common Stock are now issued and
outstanding; and
WHEREAS, Holdings by its Certificate of Incorporation has an
authorized capital stock consisting of 3,000,000 shares of Common Stock, no par
value, of which 100 shares are now issued and outstanding, all of which are
owned solely by AHI, and 100,000 shares of Preferred Stock, $.01 par value per
share, of which no shares are outstanding; and
NOW, THEREFORE, the Constituent Corporations, parties to this
Agreement, in consideration of the mutual covenants, agreements and provisions
hereinafter contained, do hereby prescribe the terms and conditions of such
merger and mode of carrying the same into effect as follows:
FIRST: AHI hereby merges into itself Holdings and Holdings shall be
and hereby is merged into AHI, which shall be the Surviving Corporation. The
separate existence of Holdings shall cease at the effective time of the merger,
except insofar as it may be continued by law or in order to carry out the
purposes of this Agreement and except as continued in the Surviving Corporation.
SECOND: The Certificate of Incorporation of AHI, as in effect at the
time of the merger provided for in this Agreement, shall continue in full force
and effect as the Certificate of Incorporation of the Surviving Corporation
until the same shall be altered, amended or repealed as provided therein or in
accordance with the law; provided that the Certificate of the AHI shall
<PAGE>
-5-
be amended at the effective time of the merger to provide the name of the
Surviving Corporation shall be Advanstar Holdings, Inc.
THIRD: The effect of the Merger on the outstanding shares of the
capital stock of the Merged Corporation shall be as follows:
(a) Each share of Common Stock of the Merged Corporation which shall
be outstanding at the effective time of the merger, and all rights in respect
thereof shall, without any further action on the part of anyone, be canceled.
(b) After the effective time of the merger, each holder of a
certificate or certificates which theretofore represented shares of Common Stock
of the Merged Corporation shall cease to have any rights as a stockholder of the
Merged Corporation except as such are expressly reserved to such stockholder by
statute.
FOURTH: The terms and conditions of the merger are as follows:
(a) The by-laws of AHI as they shall exist at the effective time of
the merger shall be and remain the by-laws of the Surviving Corporation until
the same shall be altered, amended and repealed as therein provided or in
accordance with law.
(b) The directors and officers of AHI shall continue in office until
the next annual meeting of stockholders or directors, respectively, and until
their successors shall have been elected and qualified.
(c) At and after the effective time of the merger, the Surviving
Corporation shall succeed to and possess, without further act or deed, all the
rights, privileges, obligations, powers and franchises, both public and private,
and all of the property, real, personal and mixed, of each of the Constituent
Corporations; all debts due to either of the Constituent Corporations on
whatever account, as well as for stock subscriptions, shall be vested in the
Surviving Corporation; all claims, demands, property, rights, privileges, powers
and franchises and every other interest of either of the Constituent
Corporations shall be as effectively the property of the Surviving Corporation
as they were of the respective Constituent Corporations; the title to any real
estate vested by deed or otherwise in either of the Constituent Corporations
shall not revert or be in any way impaired by reason of the merger, but shall be
vested in the Surviving Corporation; all rights of creditors and all liens upon
any property of either of the Constituent Corporations shall be preserved
unimpaired; all debts, liabilities and duties of the respective Constituent
Corporations shall thenceforth attach to the Surviving Corporation and may be
enforced against it to the same extent as if such debts, liabilities and duties
had been incurred or contracted by it; and the Surviving Corporation shall
indemnify and hold harmless the officers and directors of each of the
Constituent Corporations against all such debts, liabilities and duties and
against all claims and demands arising out of the merger.
(d) As and when requested by the Surviving Corporation or by its
successors or assigns, the Merged Corporation will execute and deliver or cause
to be executed and delivered all such
<PAGE>
-6-
deeds and instruments and will take or cause to be taken all such further action
that the Surviving Corporation may deem necessary or desirable in order to vest
in and confirm to the Surviving Corporation title to and possession of any
property of either of the Constituent Corporations acquired by the Surviving
Corporation by reason or as a result of the merger herein provided for and
otherwise to carry out the intent and purposes hereof, and the officers and
directors of the Merged Corporation and the officers and directors of the
Surviving Corporation are fully authorized in the name of the Merged Corporation
or otherwise to take any and all such action.
(e) This Agreement shall not be submitted to the stockholders of each
of the Constituent Corporations as permitted by law and specifically by Section
253 of the General Corporation Law of the State of Delaware (the "DGCL"). The
merger shall take effect when any and all documents or instruments necessary to
perfect the merger, pursuant to the requirements of the DGCL, are accepted for
filing by the Secretary of State of the State of Delaware.
(f) This Agreement may be terminated or abandoned by the mutual
consent of the Constituent Corporations, each acting by its Board of Directors
prior to the effective time of the merger. In the event of such termination or
abandonment, this Agreement shall become wholly void and of no effect and there
shall be no further liability or obligation hereunder on the part of either of
the Constituent Corporations or of its Board of Directors or stockholders.
(g) All corporate acts, plans, policies, approvals and authorizations
of Holdings, its stockholders, Board of Directors, committees elected or
appointed by the Board of Directors, officers and agents, which were valid and
effective immediately prior to the effective time of the merger, shall be taken
for all purposes as the acts, plans, policies, approvals and authorizations of
the Surviving Corporation and shall be effective and binding thereon as they
were on Holdings. The employees of Holdings shall become the employees of the
Surviving Corporation and continue to be entitled to the same rights and
benefits they enjoyed as employees of Holdings.
(h) From the effective time of the merger, the officers and directors
of the Surviving Corporation are hereby authorized in the name of the
corporations that were the Constituent Corporations to execute, acknowledge and
deliver all instruments and do all things as may be necessary or desirable to
vest in the Surviving Corporation any property or rights of either of the
Constituent Corporations or to carry out the purposes of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
-7-
IN WITNESS WHEREOF, the parties to this Agreement, pursuant to the
approval and authority duly given by resolutions adopted by their respective
Boards of Directors, have caused these presents to be executed by the Chairman
and Chief Executive Officer and attested by the Secretary, as indicated below,
of each party hereto.
AHI HOLDING CORP.
By: /s/ Robert L. Krakoff
-------------------------------------
Robert L. Krakoff
Chairman and Chief Executive Officer
ATTEST:
/s/ David W. Montgomery
- -------------------------------
David W. Montgomery
Secretary
ADVANSTAR HOLDINGS, INC.
By: /s/ Robert L. Krakoff
-------------------------------------
Robert L. Krakoff
Chairman and Chief Executive Officer
ATTEST:
/s/ David W. Montgomery
- -------------------------------
David W. Montgomery
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF
INCORPORATION OF AHI HOLDING CORP.
AHI Holding Corp., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: Article Fourth of the Certificate of Incorporation of this
corporation be amended to read as follows:
FOURTH: This corporation is authorized to issue only one class of
shares of stock and the total number of shares which this corporation is
authorized to issue is 20,000 with a par value of $0.01 per share. Upon the
amendment of this article to read as herein set forth, each outstanding
share is split up and converted into 100 shares.
SECOND: That said amendment to the Certificate of Incorporation
herein certified has been duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware and has been
consented to in writing by the stockholders, and written notice has been given,
in accordance with Section 228 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said corporation has caused this Certificate to be
signed by Mitchell Cohen, its authorized officer, this 20th day of May, 1997.
--------------
By: /s/ Mitchell Cohen
--------------------------------
Mitchell Cohen
Title: Vice President
<PAGE>
-2-
CERTIFICATE OF CORRECTION OF AMENDMENT OF CERTIFICATE OF
INCORPORATION OF AHI HOLDING CORP.
AHI Holding Corp., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, pursuant to
Section 103 (f) of the General Corporation Law of the State of Delaware:
FIRST: The Certificate of Amendment of the Certificate of
Incorporation of AHI Holding Corporation dated May 28, 1996 (the "Amendment")
inaccurately states such Amendment, in that such certificate purported to change
the par value of the corporation's common stock from $0.01 per share to shares
without par value.
SECOND: Article First of the Certificate of Amendment is corrected
as follows:
FIRST: That the Board of Directors of said corporation at a
meeting duly convened and held, adopted the following resolution:
RESOLVED, that the Board of Directors hereby declares it
advisable and in the best interest of the corporation that Article
Fourth of the Certificate of Incorporation be amended to read as
follows:
FOURTH: The total number of shares of stock which this
corporation is authorized to issue is 200,000 with a par value of
$0.01 per share.
IN WITNESS WHEREOF, said corporation has caused this Certificate to be
signed by the undersigned officers this 30th day of May, 1996.
By: /s/ Mitchell R. Cohen
------------------------------
Mitchell R. Cohen
Title: Vice President
ATTEST:
/s/ Paul J. Mundie
- ----------------------------
By: Paul J. Mundie
Assistant Secretary
<PAGE>
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF AHI
HOLDING CORP.
AHI Holding Corp., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation at a meeting duly
convened and held, adopted the following resolution:
RESOLVED, that the Board of Directors hereby declares it advisable
and in the best interest of the corporation that Article Fourth of
the Certificate of Incorporation be amended to read as follows:
FOURTH: The total number of shares of stock which this corporation
is authorized to issue is 200,000 without par value.
SECOND: That the said amendment has been consented to and authorized by
the holders of a majority of the issued and outstanding stock entitled to vote
by written consent given in accordance with the provisions of Section 228 of the
General Corporation Law of the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Section 242 and 228 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, said corporation has caused this Certificate to be signed
by ______________ this 28th day of May, 1996.
----
/s/ Mitchell R. Cohen
------------------------------
By: Mitchell R. Cohen,
Vice President
ATTEST:
- -------------------------------
By: Timothy G. _________
<PAGE>
CERTIFICATE OF INCORPORATION OF AHI HOLDING CORP.
FIRST The name of the corporation is AHI Holding Corp.
-----
SECOND. The address of the corporation's registered office in the
------
State of Delaware is 1013 Centre Road, City of Wilmington, County of New Castle.
Its registered agent at that address is Corporation Service Company.
THIRD. The nature of the business or purposes to be conducted or
-----
promoted by the corporation is to engage in any lawful act or activity of which
corporation may be organized under the General Corporation Law of the State of
Delaware (the "GCL").
FOURTH. The total number of shares of all classes of capital stock
------
which the corporation is authorized to issue is 3,000 shares of common stock
with a par value of $0.01 per share.
FIFTH. The name and mailing address of the corporation's sole
-----
incorporator is:
Bonnie Thompson
Heller Ehrman White & McAuliffe
333 Bush Street
San Francisco, CA 94104
SIXTH. The corporation shall have a perpetual existence.
-----
SEVENTH. No director of the corporation shall be personally liable
-------
to the corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability: (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the GLC or (iv) for any
transaction from which the director derived any improper personal benefit. If
the GCL is amended to authorize or require corporate action that further
eliminates or limits the personal liability of directors, then the liability of
the directors of the corporation shall be eliminated or limited to the fullest
extent permitted by the GCL, as so amended. Any repeal or modification of this
Article SEVENTH shall not adversely affect any right or protection of a director
of the corporation existing at the time of the repeal or modification.
EIGHTH. In addition to all powers granted to the board of directors
------
under the GCL:
A. The board of directors of the corporation is expressly authorized
to make, alter or repeal the by-laws of the corporation.
B. Elections of directors need not be by written ballot unless the
by-laws of the corporation shall so provide.
<PAGE>
-2-
C. The books of the corporation may be kept at such place within or
without the State of Delaware as the by-laws of the corporation may provide or
as may be designated from time to time by the board of directors of the
corporation.
NINTH. The corporation reserves the right to amend or repeal any
-----
provision contained in this Certificate of Incorporation in the manner now or
hereafter prescribed by statute. All rights conferred upon the corporation's
stockholders are granted subject to this reservation.
* * *
Being the sole incorporator, for the purpose of forming a corporation
pursuant to the GCL, I do make this certificate, hereby declaring and certifying
that this is my act and deed and the facts stated above are true, and
accordingly have hereunto set my hand on April 11, 1996.
/s/ Bonnie Thompson
----------------------------
Bonnie Thompson,
Sole Incorporator
<PAGE>
EXHIBIT 3.3
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ADVANSTAR, INC.
(Incorporated April 11, 1996)
* * * * * *
I, Robert L. Krakoff, President of Advanstar, Inc. (the "Corporation"), a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, do hereby certify that the Certificate
of Incorporation of Advanstar, Inc., as amended, originally incorporated under
the name, AHI Holding Corp., has been further amended, and restated as amended,
in accordance with provisions of Sections 242 and 245 of the General Corporation
Law of the State of Delaware, and, as amended and restated, is set forth in its
entirety as follows:
FIRST. The name of the Corporation is Advanstar, Inc.
SECOND. The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, Wilmington, County of New Castle,
Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD. The nature of the business or purposes to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
FOURTH. The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue is 220,000,000 shares, consisting
of 200,000,000 shares of Common Stock with a par value of $.01 per share (the
"Common Stock") and 20,000,000 shares of Preferred Stock with a par value of
$.01 per share (the "Preferred Stock").
A description of the respective classes of stock and a statement of the
designations, powers, preferences and rights, and the qualifications,
limitations and restrictions of the Preferred Stock and Common Stock are as
follows:
<PAGE>
- 2 -
A. COMMON STOCK
------------
1. General. All shares of Common Stock will be identical and will entitle
-------
the holders thereof to the same rights, powers and privileges. The rights,
powers and privileges of the holders of the Common Stock are subject to and
qualified by the rights of holders of the Preferred Stock.
2. Dividends. Dividends may be declared and paid on the Common Stock from
---------
funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
3. Dissolution, Liquidation or Winding Up. In the event of any
--------------------------------------
dissolution, liquidation or winding up of the affairs of the Corporation,
whether voluntary or involuntary, each issued and outstanding share of Common
Stock shall entitle the holder thereof to receive an equal portion of the net
assets of the Corporation available for distribution to the holders of Common
Stock, subject to any preferential rights of any then outstanding Preferred
Stock.
4. Voting Rights. Except as otherwise required by law or this Amended and
-------------
Restated Certificate of Incorporation, each holder of Common Stock shall have
one vote in respect of each share of stock held of record by such holder on the
books of the Corporation for the election of directors and on all matters
submitted to a vote of stockholders of the Corporation. Except as otherwise
required by law or provided herein, holders of Common Stock shall vote together
with holders of the Preferred Stock as a single class, subject to any special or
preferential voting rights of any then outstanding Preferred Stock. There shall
be no cumulative voting.
B. PREFERRED STOCK
---------------
The Preferred Stock may be issued in one or more series at such time or
times and for such consideration or considerations as the Board of Directors of
the Corporation may determine. Each series shall be so designated as to
distinguish the shares thereof from the shares of all other series and classes.
Except as otherwise provided in this Amended and Restated Certificate of
Incorporation, different series of Preferred Stock shall not be construed to
constitute different classes of shares for the purpose of voting by classes.
The Board of Directors is expressly authorized to provide for the issuance
of all or any shares of the undesignated Preferred Stock in one or more series,
each with such designations, preferences, voting powers (or special,
preferential or no voting powers), relative, participating, optional or other
special rights and privileges and such qualifications, limitations or
restrictions thereof as shall be stated in the resolution or resolutions adopted
by the Board of Directors to create such series, and a certificate of said
resolution or resolutions (a "Certificate of Designation") shall be filed in
accordance with the General Corporation Law of the State of Delaware. The
authority of the Board of Directors with respect to each such series shall
include, without limitation of the foregoing, the right to provide that the
shares of each such series may be: (i) subject to redemption at such time or
times and at such price or prices; (ii) entitled to
<PAGE>
- 3 -
receive dividends (which may be cumulative or non-cumulative) at such rates, on
such conditions, and at such times, and payable in preference to, or in such
relation to, the dividends payable on any other class or classes or any other
series; (iii) entitled to such rights upon the dissolution of, or upon any
distribution of the assets of, the Corporation; (iv) convertible into, or
exchangeable for, shares of any other class or classes of stock, or of any other
series of the same or any other class or classes of stock of the Corporation at
such price or prices or at such rates of exchange and with such adjustments, if
any; (v) entitled to the benefit of such limitations, if any, on the issuance of
additional shares of such series or shares of any other series of Preferred
Stock; or (vi) entitled to such other preferences, powers, qualifications,
rights and privileges, all as the Board of Directors may deem advisable and as
are not inconsistent with law and the provisions of this Amended and Restated
Certificate of Incorporation.
FIFTH. The Corporation is to have perpetual existence.
SIXTH. The following provisions are included for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its Board of Directors and stockholders:
1. The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors of the Corporation.
2. The Board of Directors of the Corporation is expressly authorized to
adopt, amend or repeal the By-Laws of the Corporation, subject to any limitation
thereof contained in the By-Laws. The stockholders shall also have the power to
adopt, amend or repeal the By-Laws of the Corporation.
3. Special meetings of stockholders may be called at any time only by the
President, the Chairman of the Board of Directors (if any) or a majority of the
Board of Directors. Business transacted at any special meeting of stockholders
shall be limited to matters relating to the purpose or purposes stated in the
notice of meeting.
4. The books of the Corporation may be kept at such place within or
without the State of Delaware as the By-Laws of the Corporation may provide or
as may be designated from time to time by the Board of Directors of the
Corporation.
<PAGE>
- 4 -
SEVENTH. The number of directors which shall constitute the whole Board
of Directors shall be determined by resolution of a majority of the Board of
Directors, but in no event shall the number of directors be less than three.
The number of directors may be decreased at any time and from time to time by a
majority of the directors then in office, but only to eliminate vacancies
existing by reason of the death, resignation, removal or expiration of the term
of one or more directors. The directors shall be elected at the annual meeting
of stockholders by such stockholders as have the right to vote on such election.
Directors need not be stockholders of the Corporation. Elections of directors
need not be by written ballot except as and to the extent provided in the By-
Laws of the Corporation.
EIGHTH. The Corporation eliminates the personal liability of each member
of its Board of Directors to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided, however, that, to
the extent provided by applicable law, the foregoing shall not eliminate the
liability of a director (i) for any breach of such director's duty of loyalty to
the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the General Corporation Law of the State of Delaware,
or (iv) for any transaction from which such director derived an improper
personal benefit.
If the General Corporation Law of the State of Delaware is amended in the
future to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the General Corporation Law of the State of Delaware, as so amended from time to
time.
Any repeal or modification of this Article SEVENTH shall not increase the
personal liability of any director of the Corporation for any act or occurrence
taking place prior to such repeal or modification, or otherwise adversely affect
any right or protection of a director of the Corporation existing at the time of
such repeal or modification.
NINTH.
1. Actions, Suits and Proceedings Other than by or in the Right of the
-------------------------------------------------------------------
Corporation. The Corporation shall indemnify each person who was or is a party
- -----------
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) (each such person being
referred to hereafter as an "Indemnitee"), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best
<PAGE>
- 5 -
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, shall not, of
---------------
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in, or not opposed to, best interests
of the Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful. Notwithstanding
anything to the contrary in this Article, except as set forth in Section 7
below, the Corporation shall not indemnify an Indemnitee seeking indemnification
in connection with an actual or threatened claim, action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Corporation) (i) initiated by the Indemnitee unless
the initiation thereof was approved by the Board of Directors of the Corporation
or (ii) initiated and approved by the Board of Directors of the Corporation
against the Indemnitee. Notwithstanding anything to the contrary in this
Article, the Corporation shall not indemnify an Indemnitee to the extent such
Indemnitee is reimbursed from the proceeds of insurance, and in the event the
Corporation makes any indemnification payments to an Indemnitee and such
Indemnitee is subsequently reimbursed from the proceeds of insurance, such
Indemnitee shall promptly refund such indemnification payments to the
Corporation to the extent of such insurance reimbursement.
2. Actions or Suits by or in the Right of the Corporation. The
------------------------------------------------------
Corporation shall indemnify any Indemnitee who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan), or by reason of any
action alleged to have been taken or omitted in such capacity, against all
expenses (including attorneys' fees) and, to the extent permitted by law,
amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such action, suit or proceeding and any appeal
therefrom, if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to, the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of Delaware or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of such liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses (including attorneys fees) which the Court of
Chancery of Delaware or such other court shall deem proper.
3. Indemnification for Expenses of Successful Party. Notwithstanding
------------------------------------------------
the other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in defense of any
claim issue or matter therein or on appeal from any such action, suit or
proceeding he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith. Without limiting the foregoing, if any action, suit or proceeding is
disposed of, on the merits or otherwise (including a
<PAGE>
- 6 -
disposition without prejudice), without (i) the disposition being adverse to the
Indemnitee, (ii) an adjudication that the Indemnitee was liable to the
Corporation, (iii) a plea of guilty or nolo contendere by the Indemnitee, (iv)
---------------
an adjudication that the Indemnitee did not act in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, or (v) with respect to any criminal proceeding, an adjudication
that the Indemnitee had reasonable cause to believe his conduct was unlawful,
the Indemnitee shall be considered for the purposes hereof to have been wholly
successful with respect thereto.
4. Notification and Defense of Claim. As a condition precedent to his
---------------------------------
right to be indemnified, the Indemnitee must notify the Corporation in writing
as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of which the Corporation is so
notified, the Corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee. After notice from the
Corporation to the Indemnitee of its election so to assume such defense, the
Corporation shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such a
claim, other than as provided below in this Section 4. The Indemnitee shall have
the right to employ his own counsel in connection with such claim, but the fees
and expenses of such counsel incurred after notice by the Corporation of its
assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
that there may be a conflict of interest or position on any significant issue
between the Corporation and the Indemnitee in the conduct of the defense of such
action or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of counsel for the Indemnitee shall be at the expense of the Corporation, except
as otherwise expressly provided by this Article. The Corporation shall not be
entitled, without the consent of the Indemnitee, to assume the defense of any
claim brought by or in the right of the Corporation or as to which counsel for
the Indemnitee shall have reasonably made the conclusion provided for in clause
(ii) above.
5. Advance of Expenses. Subject to the provisions of Section 6 below,
--------------------
in the event that the Corporation does not assume the defense pursuant to
Section 4 of this Article of any action, suit, proceeding or investigation of
which the Corporation receives notice under this Article, any expenses
(including attorneys fees) incurred by an Indemnitee in defending a civil or
criminal action, suit, proceeding or investigation or any appeal from shall be
paid by the Corporation in advance of the final disposition of such matter;
provided, however, that the payment of such expenses incurred by an Indemnitee
- --------- -------
in advance of the final disposition of such matter shall be made only upon
receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts
so advanced in the event that it shall ultimately be determined that the
Indemnitee is not entitled to be indemnified by the Corporation as authorized in
this Article. Such undertaking shall be accepted without reference to the
financial ability of the Indemnitee to make such repayment.
6. Procedure for Indemnification. In order to obtain indemnification
-----------------------------
or advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article, the
Indemnitee shall
<PAGE>
- 7 -
submit to the Corporation a written request, including in such request such
documentation and information as is reasonably available to the Indemnitee and
is reasonably necessary to determine whether and to what extent the Indemnitee
is entitled to indemnification or advancement of expenses. Any such
indemnification or advancement of expenses shall be made promptly, and in any
event within 60 days (90 days, if within such 60-day period the Corporation
submits such determination of the stockholders as contemplated in clause (b) of
this Section 6) after receipt by the Corporation of the written request of the
Indemnitee, unless with respect to requests under Section 1, 2 or 5 the
Corporation determines within such 60-day period that the Indemnitee did not
meet the applicable standard of conduct set forth in Section 1 or 2, as the case
may be. Such determination shall be made in each instance by (a) a majority of
the directors of the Corporation consisting of persons who are not at that time
parties to the action, suit or proceeding in question ("disinterested
directors"), whether or not a quorum, (b) a majority vote of a quorum of the
outstanding shares of stock of all classes entitled to vote for directors,
voting as a single class, which quorum shall consist of stockholders who are not
at that time parties to the action, suit or proceeding in question, (c)
independent legal counsel (who may, to the extent permitted by law, be regular
legal counsel to the Corporation), or (d) a court of competent jurisdiction.
7. Remedies. The right to indemnification or advances as granted by
---------
this Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or in part, or if
no disruption thereof is made within the 60-day period referred to above in
Section 6. Unless otherwise required by law, the burden of proving that the
Indemnitee is not entitled to indemnification or advancement of expenses under
this Article shall be on the Corporation. Neither the failure of the
Corporation to have made a determination prior to the commencement of such
action that indemnification is proper in the circumstances because the
Indemnitee has met the applicable standard of conduct, nor an actual
determination by the Corporation pursuant to Section 6 that the Indemnitee has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the Indemnitee has not met the applicable standard of
conduct. The Indemnitee's expenses (including attorneys' fees) incurred in
connection with successfully establishing his right to indemnification, in whole
or in part, in any such proceeding shall also be indemnified by the Corporation.
8. Subsequent Amendment. No amendment, termination or repeal of this
--------------------
Article or of the relevant provisions of the General Corporation Law of the
State of Delaware or any other applicable laws shall affect or diminish in any
way the rights of any Indemnitee to indemnification under the provisions hereof
with respect to any action suit, proceeding or investigation lancing out of or
relating to any actions, transactions or facts occurring prior to the final
adoption of such amendment, termination or repeal.
9. Other Rights. The indemnification and advancement of expenses
-------------
provided by this Article shall not be deemed exclusive of any other rights to
which an Indemnitee seeking indemnification or advancement of expenses may be
entitled under any law (common or statutory), agreement or vote of stockholders
or disinterested directors or otherwise, both as to action in his official
capacity and as to action in any other capacity while holding office for the
Corporation, and shall continue as to an Indemnitee who has ceased to be a
director or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of the Indemnitee.
<PAGE>
- 8 -
Nothing contained in this Article shall be deemed to prohibit, and the
Corporation is specifically authorized to enter into, agreements with officers
and directors providing indemnification rights and procedures different from
those set forth in this Article. In addition, the Corporation may, to the extent
authorized from time to time by its Board of Directors, grant indemnification
rights to other employees or agents of the Corporation or other persons serving
the Corporation and such rights may be equivalent to, or greater or less than,
those set form in this Article and as limited by applicable law.
10. Partial Indemnification. If an Indemnitee is entitled under any
------------------------
provision of this Article to Indemnification by the Corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and any appeal
therefrom but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
11. Insurance. The Corporation may purchase and maintain insurance, at
---------
its expense, to protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) against any expense,
liability or loss incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
such person against such expense, liability or loss under the General
Corporation Law of the State of Delaware.
12. Merger or Consolidation. If the Corporation is merged into or
-----------------------
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
13. Savings Clause. If this Article or any portion hereof shall be
---------------
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
correction with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the fullest extent permitted by any applicable portion of this
Article that shall not have been invalidated and to the fullest extent permitted
by applicable law.
14. Definitions. Terms used herein and defined in Section 145(h) and
------------
Section 145(i) of the General Corporation Law of the State of Delaware shall
have the respective meanings assigned to such terms in such Section 145(h) and
Section 145(i).
15. Subsequent Legislation. If the General Corporation Law of the
----------------------
State of Delaware is amended after adoption of this Article to expand further
the indemnification
<PAGE>
- 9 -
permitted to Indemnitees, then the Corporation shall indemnify such persons to
the fullest extent permitted by the General Corporation Law of the State of
Delaware, as so amended.
TENTH. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
ELEVENTH. Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of the General Corporation Law of the State of
Delaware or on the application of trustees in dissolution or of any receiver or
receivers appointed for the Corporation under the provisions of Section 279 of
the General Corporation Law of the State of Delaware, order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as such court directs. If a majority in number representing three-fourths
in value of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of the Corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of the Corporation as a
consequence of such compromise or arrangement, such compromise or arrangement
and such reorganization shall, if sanctioned by the court to which such
application has been made, be binding on all the creditors or class of
creditors, and/or on all the stockholders or class of stockholders, of the
Corporation, as the case may be, and also on the Corporation.
[Remainder of Page Intentionally Left Blank]
<PAGE>
- 10 -
IN WITNESS WHEREOF, the undersigned has hereunto signed his name and affirms
that the statements made in this Amended and Restated Certificate of
Incorporation are true under the penalties of perjury this ____ day of ____,
1999.
------------------------------
Robert L. Krakoff
President and CEO
<PAGE>
EXHIBIT 3.4
AMENDED AND RESTATED
BY-LAWS
OF
ADVANSTAR, INC.
<PAGE>
BY-LAWS
-------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 - Stockholders.................................................................................1
1.1 Place of Meetings.................................................................................1
1.2 Annual Meeting....................................................................................1
1.3 Special Meetings..................................................................................1
1.4 Notice of Meetings................................................................................1
1.5 Voting List.......................................................................................1
1.6 Quorum............................................................................................2
1.7 Adjournments......................................................................................2
1.8 Voting and Proxies................................................................................2
1.9 Action at Meeting.................................................................................3
1.10 Introduction of Business at Meetings.............................................................4
1.11 Action without Meeting...........................................................................6
ARTICLE 2 - Directors....................................................................................6
2.1 General Powers....................................................................................6
2.2 Number; Election and Qualification................................................................7
2.3 Terms in Office...................................................................................7
2.4 Tenure............................................................................................7
2.5 Vacancies.........................................................................................8
2.6 Resignation.......................................................................................8
2.7 Regular Meetings..................................................................................8
2.8 Special Meetings..................................................................................8
2.9 Notice of Special Meetings........................................................................8
2.10 Meetings by Telephone Conference Calls...........................................................8
2.11 Quorum...........................................................................................8
2.12 Action at Meeting................................................................................8
2.13 Action by Unanimous Written Consent..............................................................9
2.14 Removal..........................................................................................9
2.15 Committees.......................................................................................9
2.16 Compensation of Directors........................................................................9
ARTICLE 3 - Officers....................................................................................10
3.1 Enumeration......................................................................................10
3.2 Election.........................................................................................10
3.3 Qualification....................................................................................10
3.4 Tenure...........................................................................................10
3.5 Resignation and Removal..........................................................................10
</TABLE>
<PAGE>
-ii-
<TABLE>
<S> <C>
3.6 Vacancies........................................................................................10
3.7 Chairman of the Board and Vice-Chairman of the Board.............................................11
3.8 President........................................................................................11
3.9 Vice Presidents..................................................................................11
3.10 Secretary and Assistant Secretaries.............................................................11
3.11 Treasurer and Assistant Treasurers..............................................................12
3.12 Salaries........................................................................................12
3.13 Action with Respect to Securities of Other Corporations.........................................12
ARTICLE 4 - Capital Stock...............................................................................12
4.1 Issuance of Stock................................................................................12
4.2 Certificates of Stock............................................................................13
4.3 Transfers........................................................................................13
4.4 Lost, Stolen or Destroyed Certificates...........................................................13
4.5 Record Date......................................................................................13
ARTICLE 5 - General Provisions..........................................................................14
5.1 Fiscal Year......................................................................................14
5.2 Corporate Seal...................................................................................14
5.3 Notices..........................................................................................14
5.4 Waiver of Notice.................................................................................14
5.5 Evidence of Authority............................................................................15
5.6 Facsimile Signatures.............................................................................15
5.7 Reliance upon Books, Reports and Records.........................................................15
5.8 Time Periods.....................................................................................15
5.9 Certificate of Incorporation.....................................................................15
5.10 Transactions with Interested Parties............................................................15
5.11 Severability....................................................................................16
5.12 Pronouns........................................................................................16
ARTICLE 6 - Amendments..................................................................................16
6.1 By the Board of Directors........................................................................16
6.2 By the Stockholders..............................................................................16
</TABLE>
<PAGE>
AMENDED AND RESTATED
BY-LAWS
OF
ADVANSTAR, INC. (THE "CORPORATION")
ARTICLE 1 - Stockholders
------------------------
1.1 Place of Meetings. All meetings of stockholders shall be held
-----------------
at such place within or without the State of Delaware as may be designated from
time to time by the Chairman of the Board (if any), the board of directors of
the Corporation (the "Board of Directors") or the President or, if not so
designated, at the registered office of the Corporation.
1.2 Annual Meeting. The annual meeting of stockholders for the
--------------
election of directors and for the transaction of such other business as may
properly be brought before the meeting shall be held on a date to be fixed by
the Chairman of the Board (if any), Board of Directors or the President (which
date shall not be a legal holiday in the place where the meeting is to be held)
at the time and place to be fixed by the Chairman of the Board, the Board of
Directors or the President and stated in the notice of the meeting.
1.3 Special Meetings. Special meetings of stockholders may be
----------------
called at any time by the Chairman of the Board (if any), a majority of the
Board of Directors or the President and shall be held at such place, on such
date and at such time as shall be fixed by the Board of Directors or the person
calling the meeting. Business transacted at any special meeting of stockholders
shall be limited to matters relating to the purpose or purposes stated in the
notice of meeting.
1.4 Notice of Meetings. Except as otherwise provided by law,
------------------
written notice of each meeting of stockholders, whether annual or special, shall
be given not less than 10 nor more than 60 days before the date of the meeting
to each stockholder entitled to vote at such meeting. The notices of all
meetings shall state the place, date and hour of the meeting. The notice of a
special meeting shall state, in addition, the purpose or purposes for which the
meeting is called. If mailed, notice is given when deposited in the United
States mail, postage prepaid, directed to the stockholder at his or her address
as it appears on the records of the Corporation.
1.5 Voting List. The officer who has charge of the stock ledger of
-----------
the Corporation shall prepare, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in
<PAGE>
- 2 -
the notice of the meeting, or if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time of the meeting, and may be inspected
by any stockholder who is present. This list shall presumptively determine the
identity of the stockholders entitled to vote at the meeting and the number of
shares held by each of them.
1.6 Quorum. Except as otherwise provided by law, the Certificate
------
of Incorporation or these By-Laws, the holders of a majority of the shares of
the capital stock of the Corporation issued and outstanding and entitled to vote
at the meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business. Shares held by brokers which such
brokers are prohibited from voting (pursuant to their discretionary authority on
behalf of beneficial owners of such shares who have not submitted a proxy with
respect to such shares) on some or all of the matters before the stockholders,
but which shares would otherwise be entitled to vote at the meeting ("Broker
Non-Votes") shall be counted, for the purpose of determining the presence or
absence of a quorum, toward the total voting power of the shares of capital
stock of the Corporation and (b) as being represented by proxy. If a quorum has
been established for the purpose of conducting the meeting, a quorum shall be
deemed to be present for the purpose of all votes to be conducted at such
meeting, provided that where a separate vote by a class or classes, or series
thereof, is required, a majority of the voting power of the shares of such class
or classes, or series, present in person or represented by proxy shall
constitute a quorum entitled to take action with respect to that vote on that
matter. If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of a majority of the voting power of the shares of stock
entitled to vote who are present, in person or by proxy, may adjourn the meeting
to another place, date, or time.
1.7 Adjournments. Any meeting of stockholders may be adjourned to
------------
any other time and to any other place at which a meeting of stockholders may be
held under these By-Laws by the stockholders present or represented at the
meeting and entitled to vote, although less than a quorum, or, if no stockholder
is present, by any officer entitled to preside at or to act as Secretary of such
meeting. It shall not be necessary to notify any stockholder of any adjournment
of less than 30 days if the time and place of the adjourned meeting are
announced at the meeting at which adjournment is taken, unless after the
adjournment a new record date is fixed for the adjourned meeting. At the
adjourned meeting, the Corporation may transact any business which might have
been transacted at the original meeting.
1.8 Voting and Proxies. At any meeting of the stockholders, each
------------------
stockholder shall have one vote for each share of stock entitled to vote at such
meeting held of record by such stockholder and a proportionate vote for each
fractional share so held, unless otherwise provided in the Certificate of
Incorporation. Each stockholder of record entitled to vote at a meeting of
stockholders, or to express consent or dissent to corporate action in writing
without a meeting (to the extent not otherwise prohibited by the Certificate of
Incorporation or these By-Laws), may vote or express such consent or dissent in
person or may authorize another person or persons to vote or act for such
stockholder by written proxy executed by such stockholder or his or her
authorized agent or by a transmission permitted by law and delivered to the
Secretary of the Corporation. No such proxy shall be voted or acted upon after
three years from the date of its
<PAGE>
- 3 -
execution, unless the proxy expressly provides for a longer period. Any copy,
facsimile telecommunication or other reliable reproduction of the writing or
transmission created pursuant to this Section 1.8 may be substituted or used in
lieu of the original writing or transmission for any and all purposes for which
the original writing or transmission could be used, provided that such copy,
facsimile telecommunication or reproduction shall be a complete reproduction of
the entire original writing or transmission.
All voting, including on the election of directors but excepting where
otherwise required by law, may take place via a voice vote. Any vote not taken
by voice shall be taken by ballots, each of which shall state the name of the
stockholder or proxy voting and such other information as may be required under
the procedure established for the meeting.
The Corporation may, and to the extent required by law or the
Certificate of Incorporation, shall, in advance of any meeting of stockholders,
appoint one or more inspectors to act at such meeting and make a written report
thereof. The Corporation may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate is able to act at a meeting of stockholders, the person presiding at
such meeting may, and to the extent required by law or the Certificate of
Incorporation, shall, appoint one or more inspectors to act at such meeting.
Each inspector, before entering upon the discharge of his duties, shall take and
sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his or her ability.
1.9 Action at Meeting. When a quorum is present at any meeting of
-----------------
stockholders, the holders of a majority of the stock present or represented and
voting on a matter (or if there are two or more classes of stock entitled to
vote as separate classes, then in the case of each such class, the holders of a
majority of the stock of that class present or represented and voting on such
matter) shall decide any matter to be voted upon by the stockholders at such
meeting (other than the election of directors), except when a different vote is
required by express provision of law, the Certificate of Incorporation or these
By-Laws. Any election of directors by the stockholders shall be determined by a
plurality of the votes cast by the stockholders entitled to vote at such
election, except as otherwise provided by the Certificate of Incorporation. For
the purposes of this paragraph, Broker Non-Votes represented at the meeting but
not permitted to vote on a particular matter shall not be counted, with respect
to the vote on such matter, in the number of (a) votes cast, (b) votes cast
affirmatively, or (c) votes cast negatively.
1.10 Introduction of Business at Meetings.
A. Annual Meetings of Stockholders.
-------------------------------
(1) Nominations of persons for election to the Board of
Directors and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders (a)
pursuant to the Corporation's notice of meeting, (b) by or at the
direction of the Board of Directors or (c) by any stockholder of the
Corporation who was a stockholder of record at the time of giving of
notice provided
<PAGE>
- 4 -
for in this Section 1.10, who is entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 1.10.
(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (c) of
paragraph (A)(1) of this Section 1.10, the stockholder must have given
timely notice thereof in writing to the Secretary of the Corporation and
such other business must otherwise be a proper matter for stockholder
action. To be timely, a stockholder's notice shall be delivered to the
Secretary at the principal executive offices of the Corporation not later
than the close of business on the one hundred twentieth (120th) day nor
earlier than the close of business on the one hundred fiftieth (150th)
day prior to the first anniversary of the date of the proxy statement
delivered to stockholders in connection with the preceding year's annual
meeting; provided, however, that if either (i) the date of the annual
meeting is more than thirty (30) days before or more than sixty (60) days
after such an anniversary date or (ii) no proxy statement was delivered
to stockholders in connection with the preceding year's annual meeting,
notice by the stockholder to be timely must be so delivered not earlier
than the close of business on the ninetieth (90th) day prior to such
annual meeting and not later than the close of business on the later of
the sixtieth (60th) day prior to such annual meeting or the close of
business on the tenth (10th) day following the day on which public
announcement of the date of such meeting is first made by the
Corporation. Such stockholder's notice shall set forth (a) as to each
person whom the stockholder proposes to nominate for election or
reelection as a director, all information relating to such person that is
required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation
14A under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected);
(b) as to any other business that the stockholder proposes to bring
before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at
the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the
proposal is made; and (c) as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or proposal is
made (i) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (ii) the class and
number of shares of capital stock of the Corporation that are owned
beneficially and held of record by such stockholder and such beneficial
owner.
(3) Notwithstanding anything in the second sentence of
paragraph (A)(2) of this Section 1.10 to the contrary, in the event that
the number of directors to be elected to the Board of Directors of the
Corporation is increased and there is no public announcement by the
Corporation naming all of the nominees for director or specifying the
size of the increased Board of Directors at least seventy (70) days prior
to the first anniversary of the preceding year's annual meeting (or, if
the annual meeting is held more than thirty (30) days before or sixty
(60) days after such
<PAGE>
- 5 -
anniversary date, at least seventy (70) days prior to such annual
meeting), a stockholder's notice required by this Section 1.10 shall also
be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the
Secretary at the principal executive office of the Corporation not later
than the close of business on the tenth (10th) day following the day on
which such public announcement is first made by the Corporation.
B. Special Meetings of Stockholders. Only such business shall
--------------------------------
be conducted at a special meeting of stockholders as shall have been
brought before the meeting pursuant to the Corporation's notice of
meeting. Nominations of persons for election to the Board of Directors
may be made at a special meeting of stockholders at which directors are
to be elected pursuant to the Corporation's notice of meeting (a) by or
at the direction of the Board of Directors or (b) provided that the Board
of Directors has determined that directors shall be elected at such
meeting, by any stockholder of the Corporation who is a stockholder of
record at the time of giving of notice of the special meeting, who shall
be entitled to vote at the meeting and who complies with the notice
procedures set forth in this Section 1.10. If the Corporation calls a
special meeting of stockholders for the purpose of electing one or more
directors to the Board of Directors, any such stockholder may nominate a
person or persons (as the case may be), for election to such position(s)
as specified in the Corporation's notice of meeting, if the stockholder's
notice required by paragraph (A)(2) of this Section 1.10 shall be
delivered to the Secretary at the principal executive offices of the
Corporation not earlier than the ninetieth (90th) day prior to such
special meeting nor later than the later of (x) the close of business on
the sixtieth (60th) day prior to such special meeting or (y) the close of
business on the tenth (10th) day following the day on which public
announcement is first made of the date of such special meeting and of the
nominees proposed by the Board of Directors to be elected at such
meeting.
C. General.
-------
(1) Only such persons who are nominated in accordance with the
procedures set forth in this Section 1.10 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance
with the procedures set forth in this Section 1.10. Except as otherwise
provided by law, the Certificate of Incorporation or these By-Laws, the
chairman of the meeting shall have the power and duty to determine
whether a nomination or any business proposed to be brought before the
meeting was made or proposed, as the case may be, in accordance with the
procedures set forth in this Section 1.10 and, if any proposed nomination
or business is not in compliance herewith, to declare that such defective
proposal or nomination shall be disregarded.
(2) For purposes of this Section 1.10, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News
Service,
<PAGE>
- 6 -
Associated Press or comparable national news service or in a document
publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section
1.10, a stockholder shall also comply with all applicable requirements of
the Exchange Act and the rules and regulations thereunder with respect to
the matters set forth herein. Nothing in this Section 1.10 shall be
deemed to affect any rights (i) of stockholders to request inclusion of
proposals in the Corporation's proxy statement pursuant to Rule 14a-8
under the Exchange Act or (ii) of the holders of any series of Preferred
Stock to elect directors under specified circumstances.
1.11 Action without Meeting. Stockholders of the Corporation may
----------------------
not take any action by written consent in lieu of a meeting.
ARTICLE 2 - Directors
---------------------
2.1 General Powers. The business and affairs of the Corporation
--------------
shall be managed by or under the direction of a Board of Directors, who may
exercise all of the powers of the Corporation except as otherwise provided by
law or the Certificate of Incorporation. In the event of a vacancy in the Board
of Directors, the remaining directors, except as otherwise provided by law or
the Certificate of Incorporation, may exercise the powers of the full Board of
Directors until the vacancy is filled. Without limiting the foregoing, the
Board of Directors may:
(a) declare dividends from time to time in accordance with law;
(b) purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(c) authorize the creation, making and issuance, in such form as it
may determine, of written obligations of every kind, negotiable or non-
negotiable, secured or unsecured, to borrow funds and guarantee obligations,
and to do all things necessary in connection therewith;
(d) remove any officer of the Corporation with or without cause,
and from time to time to devolve the powers and duties of any officer upon
any other person for the time being;
(e) confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, employees and agents;
(f) adopt from time to time such stock option, stock purchase,
bonus or other compensation plans for directors, officers, employees,
consultants and agents of the Corporation and its subsidiaries as it may
determine;
<PAGE>
- 7 -
(g) adopt from time to time such insurance, retirement, and other
benefit plans for directors, officers, employees, consultants and agents of
the Corporation and its subsidiaries as it may determine; and
(h) adopt from time to time regulations, not inconsistent herewith,
for the management of the Corporation's business and affairs.
2.2 Number; Election and Qualification. The number of directors
----------------------------------
which shall constitute the whole Board of Directors shall be determined by
resolution of the Board of Directors, but in no event shall be less than three.
The number of directors may be decreased at any time and from time to time by a
majority of the directors then in office, but only to eliminate vacancies
existing by reason of the death, resignation, removal or expiration of the term
of one or more directors. The directors shall be elected at the annual meeting
of stockholders (or, if so determined by the Board of Directors pursuant to
Section 10 hereof, at a special meeting of stockholders), by such stockholders
as have the right to vote on such election. Directors need not be stockholders
of the Corporation.
2.3 Terms in Office. Each director shall serve for a term ending
---------------
on the date of the annual meeting following the annual meeting at which such
director was elected.
2.4 Tenure. Notwithstanding any provisions to the contrary
------
contained herein, each director shall hold office until his or her successor is
elected and qualified, or until his or her earlier death, resignation or
removal.
2.5 Vacancies. Unless and until filled by the stockholders, any
---------
vacancy in the Board of Directors, however occurring, including a vacancy
resulting from an enlargement thereof, may be filled by vote of a majority of
the directors then in office, although less than a quorum, or by a sole
remaining director. A director elected to fill a vacancy shall be elected for
the unexpired term of his or her predecessor in office, if any, and a director
chosen to fill a position resulting from an increase in the number of directors
shall hold office until the next election of directors and until his or her
successor is elected and qualified, or until his or her earlier death,
resignation or removal.
2.6 Resignation. Any director may resign by delivering his or her
-----------
written resignation to the Corporation at its principal office or to the
President or Secretary. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of some
other event.
2.7 Regular Meetings. Regular meetings of the Board of Directors
----------------
may be held without notice at such time and place, either within or without the
State of Delaware, as shall be determined from time to time by the Board of
Directors; provided that any director who is absent when such a determination is
made shall be given notice of the determination.
<PAGE>
- 8 -
2.8 Special Meetings. Special meetings of the Board of Directors
----------------
may be held at any time and place, within or without the State of Delaware,
designated in a call by the Chairman of the Board (if any), the President, two
or more directors, or by one director in the event that there is only a single
director in office.
2.9 Notice of Special Meetings. Notice of any special meeting of
--------------------------
directors shall be given to each director by the Secretary or by the officer or
one of the directors calling the meeting. Notice shall be duly given to each
director (i) by giving notice to such director in person or by telephone at
least 48 hours in advance of the meeting, (ii) by sending a telegram or
delivering written notice by facsimile transmission or by hand, to his or her
last known business or home address at least 48 hours in advance of the meeting,
or (iii) by mailing written notice to his or her last known business or home
address at least 72 hours in advance of the meeting. A notice or waiver of
notice of a meeting of the Board of Directors need not specify the purposes of
the meeting.
2.10 Meetings by Telephone Conference Calls. Directors or any
--------------------------------------
members of any committee designated by the Board of Directors may participate in
a meeting of the Board of Directors or such committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation by such
means shall be deemed to constitute presence in person at such meeting.
2.11 Quorum. A majority of the total number of the whole Board of
------
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; provided, however, that in no case shall less than one-third
(1/3) of the total number of the whole Board of Directors constitute a quorum.
In the absence of a quorum at any such meeting, a majority of the directors
present may adjourn the meeting from time to time without further notice other
than announcement at the meeting, until a quorum shall be present.
2.12 Action at Meeting. At any meeting of the Board of Directors
-----------------
at which a quorum is present, the vote of a majority of those present shall be
sufficient to take any action, unless a different vote is specified by law, the
Certificate of Incorporation or these By-Laws.
2.13 Action by Unanimous Written Consent. Any action required or
-----------------------------------
permitted to be taken at any meeting of the Board of Directors or of any
committee of the Board of Directors may be taken without a meeting, if all
members of the Board of Directors or committee, as the case may be, consent to
such action in writing, and the written consents are filed with the minutes of
proceedings of the Board of Directors or committee.
2.14 Removal. Unless otherwise provided in the Certificate of
-------
Incorporation, any one or more or all of the directors may be removed, only for
cause, by the holders of at least a majority of the shares then entitled to vote
at an election of directors.
<PAGE>
- 9 -
2.15 Committees. The Board of Directors may, by resolution passed
----------
by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of such committee. In the absence or disqualification of a member of a
committee, the member or members of such committee present at any meeting and
not disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at such meeting in the place of any such absent or disqualified member. Any
such committee, to the extent provided in the resolution of the Board of
Directors and subject to the provisions of the General Corporation Law of the
State of Delaware, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
Corporation and may authorize the seal of the Corporation to be affixed to all
papers which may require it. Each such committee shall keep minutes and make
such reports as the Board of Directors may from time to time request. Except as
the Board of Directors may otherwise determine or as provided herein, any
committee may make rules for the conduct of its business, but unless otherwise
provided by the directors or in such rules, its business shall be conducted as
nearly as possible in the same manner as is provided in these By-Laws for the
Board of Directors. Adequate provisions shall be made for notice to members of
all meeting of committees. One-third (1/3) of the members of any committee
shall constitute a quorum unless the committee shall consist of one (1) or two
(2) members, in which event one (1) member shall constitute a quorum; and all
matters shall be determined by a majority vote of the members present. Action
may be taken by any committee without a meeting if all members thereof consent
thereto in writing, and the writing or writings are filed with the minutes of
the proceedings of such committee.
2.16 Compensation of Directors. Directors may be paid such
-------------------------
compensation for their services and such reimbursement for expenses of
attendance at meetings as the Board of Directors may from time to time
determine. No such payment shall preclude any director from serving the
Corporation or any of its parent or subsidiary corporations in any other
capacity and receiving compensation for such service.
ARTICLE 3 - Officers
--------------------
3.1 Enumeration. The officers of the Corporation shall consist of
-----------
a President, a Secretary, a Treasurer and such other officers with such other
titles as the Board of Directors shall determine, including, but not limited to,
a Chairman of the Board, a Chief Executive Officer, one or more Vice-Chairmen of
the Board, and one or more Vice Presidents, Assistant Treasurers and Assistant
Secretaries. The Board of Directors may appoint such other officers as it may
deem appropriate.
3.2 Election. The President, Treasurer and Secretary shall be
--------
elected annually by the Board of Directors at its first meeting following the
annual meeting of stockholders. Other officers may be appointed by the Board of
Directors at such meeting or at any other meeting.
<PAGE>
- 10 -
3.3 Qualification. No officer need be a stockholder. Any two or more
-------------
offices may be held by the same person.
3.4 Tenure. Except as otherwise provided by law, by the
------
Certificate of Incorporation or by these By-Laws, each officer shall hold office
until his or her successor is elected and qualified, unless a different term is
specified in the vote choosing or appointing such officer, or until his or her
earlier death, resignation or removal.
3.5 Resignation and Removal. Any officer may resign by delivering
-----------------------
his or her written resignation to the Chairman of the Board (if any), to the
Board of Directors at a meeting thereof, to the Corporation at its principal
office or to the President or Secretary. Such resignation shall be effective
upon receipt unless it is specified to be effective at some other time or upon
the happening of some other event.
Any officer may be removed at any time, with or without cause, by vote
of a majority of the entire number of directors then in office.
Except as the Board of Directors may otherwise determine, no officer
who resigns or is removed shall have any right to any compensation as an officer
for any period following his or her resignation or removal, or any right to
damages on account of such removal, whether his or her compensation be by the
month or by the year or otherwise, unless such compensation is expressly
provided in a duly authorized written agreement with the Corporation.
3.6 Vacancies. The Board of Directors may fill any vacancy
---------
occurring in any office for any reason and may, in its discretion, leave
unfilled for such period as it may determine any offices other than those of
President, Treasurer and Secretary. Each such successor shall hold office for
the unexpired term of his predecessor and until his or her successor is elected
and qualified, or until his or her earlier death, resignation or removal.
3.7 Chairman of the Board and Vice-Chairman of the Board. The
----------------------------------------------------
Chairman of the Board, if any, shall preside at all meetings of the Board of
Directors and stockholders at which he or she is present and shall perform such
duties and possess such powers as are designated by the Board of Directors. If
the Board of Directors appoints a Vice-Chairman of the Board, he or she shall,
in the absence or disability of the Chairman of the Board, perform the duties
and exercise the powers of the Chairman of the Board and shall perform such
other duties and possess such other powers as may from time to time be
designated by the Board of Directors.
3.8 President. The President shall, subject to the direction of
---------
the Board of Directors, have general charge and supervision of the business of
the Corporation. Unless otherwise provided by the Board of Directors, and
provided that there is no Chairman of the Board or that the Chairman and Vice-
Chairman, if any, are not available, the President shall preside at all meetings
of the stockholders, and, if a director, at all meetings of the Board of
Directors. Unless the Board of Directors has designated another officer as the
Chief Executive Officer, the President shall be the Chief Executive Officer of
the Corporation. The President shall perform such other duties and shall have
such other powers as the Board of Directors may from time to
<PAGE>
- 11 -
time prescribe. The President shall have the power to enter into contracts and
otherwise bind the Corporation in matters arising in the ordinary course of the
Corporation's business.
3.9 Vice Presidents. Any Vice President shall perform such duties
---------------
and possess such powers as the Board of Directors or the President may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the President, the Vice President (or if there shall be more than one, the Vice
Presidents in the order determined by the Board of Directors) shall perform the
duties of the President and, when so performing, shall have all the powers of
and be subject to all the restrictions upon the President. The Board of
Directors may assign to any Vice President the title of Executive Vice
President, Senior Vice President or any other title selected by the Board of
Directors. Unless otherwise determined by the Board of Directors, any Vice
President shall have the power to enter into contracts and otherwise bind the
Corporation in matters arising in the ordinary course of the Corporation's
business.
3.10 Secretary and Assistant Secretaries. The Secretary shall
-----------------------------------
perform such duties and shall have such powers as the Board of Directors or the
President may from time to time prescribe. In addition, the Secretary shall
perform such duties and have such powers as are incident to the office of
secretary, including without limitation the duty and power to give notices of
all meetings of stockholders and special meetings of the Board of Directors, to
attend all meetings of stockholders and the Board of Directors and keep a record
of the proceedings, to maintain a stock ledger and prepare lists of stockholders
and their addresses as required, to be custodian of corporate records and the
corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess such
powers as the Board of Directors, the President or the Secretary may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the Secretary, the Assistant Secretary (or if there shall be more than one, the
Assistant Secretaries in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any
meeting of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
3.11 Treasurer and Assistant Treasurers. The Treasurer shall
----------------------------------
perform such duties and shall have such powers as the Board of Directors or the
President may from time to time prescribe. In addition, the Treasurer shall
perform such duties and have such powers as are incident to the office of
treasurer, including without limitation the duty and power to keep and be
responsible for all funds and securities of the Corporation, to deposit funds of
the Corporation in depositories selected in accordance with these By-Laws, to
disburse such funds as ordered by the Board of Directors, to make proper
accounts for such funds, and to render as required by the Board of Directors
statements of all such transactions and of the financial condition of the
Corporation.
<PAGE>
- 12 -
The Assistant Treasurers shall perform such duties and possess such
powers as the Board of Directors, the President or the Treasurer may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the Treasurer, the Assistant Treasurer (or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Treasurer.
3.12 Salaries. Officers of the Corporation shall be entitled to
--------
such salaries, compensation or reimbursement as shall be fixed or allowed from
time to time by the Board of Directors.
3.13 Action with Respect to Securities of Other Corporations.
-------------------------------------------------------
Unless otherwise directed by the Board of Directors, the President or any
officer of the Corporation authorized by the President shall have power to vote
and otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of any
other corporation in which the Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other corporation.
ARTICLE 4 - Capital Stock
-------------------------
4.1 Issuance of Stock. Unless otherwise voted by the stockholders
-----------------
and subject to the provisions of the Certificate of Incorporation, the whole or
any part of any unissued balance of the authorized capital stock of the
Corporation or the whole or any part of any issued, authorized capital stock of
the Corporation held in its treasury may be issued, sold, transferred or
otherwise disposed of by vote of the Board of Directors in such manner, for such
consideration and on such terms as the Board of Directors may determine.
4.2 Certificates of Stock. Every holder of stock of the
---------------------
Corporation shall be entitled to have a certificate, in such form as may be
prescribed by law and by the Board of Directors, certifying the number and class
of shares owned by such stockholder in the Corporation. Each such certificate
shall be signed by, or in the name of the Corporation by, the Chairman or Vice-
Chairman, if any, of the Board of Directors, or the President or a Vice
President, and the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the Corporation. Any or all of the signatures on such
certificate may be a facsimile.
Each certificate for shares of stock which are subject to any
restriction on transfer pursuant to the Certificate of Incorporation, the By-
Laws, applicable securities laws or any agreement among any number of
shareholders or among such holders and the Corporation shall have conspicuously
noted on the face or back of such certificate either the full text of such
restriction or a statement of the existence of such restriction.
4.3 Transfers. Except as otherwise established by rules and
---------
regulations adopted by the Board of Directors, and subject to applicable law,
shares of stock may be transferred on the books of the Corporation by the
surrender to the Corporation or its transfer agent of the
<PAGE>
- 13 -
certificate representing such shares, properly endorsed or accompanied by a
written assignment or power of attorney properly executed, and with such proof
of authority or the authenticity of signature as the Corporation or its transfer
agent may reasonably require. Except as may be otherwise required by law, by the
Certificate of Incorporation or by these By-Laws, the Corporation shall be
entitled to treat the record holder of stock as shown on its books as the owner
of such stock for all purposes, including the payment of dividends and the right
to vote with respect to such stock, regardless of any transfer, pledge or other
disposition of such stock, until the shares have been transferred on the books
of the Corporation in accordance with the requirements of these By-Laws.
4.4 Lost, Stolen or Destroyed Certificates. The Corporation may
--------------------------------------
issue a new certificate of stock in place of any previously issued certificate
alleged to have been lost, stolen, or destroyed, upon such terms and conditions
as the President may prescribe, including the presentation of reasonable
evidence of such loss, theft or destruction and the giving of such indemnity as
the President may require for the protection of the Corporation or any transfer
agent or registrar.
4.5 Record Date. The Board of Directors may fix in advance a date
-----------
as a record date for the determination of the stockholders entitled to notice of
or to vote at any meeting of stockholders or, to the extent permitted by the
Certificate of Incorporation and these By-Laws, to express consent (or dissent)
to corporate action in writing without a meeting, or entitled to receive payment
of any dividend or other distribution or allotment of any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action. Such record date shall not be more than 60 nor less than 10 days
before the date of such meeting, nor more than 60 days prior to any other action
to which such record date relates.
If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day before the day on which notice is given,
or, if notice is waived, at the close of business on the day before the day on
which the meeting is held. The record date for determining stockholders
entitled to express consent to corporate action in writing without a meeting (to
the extent permitted by the Certificate of Incorporation and these By-Laws) when
no prior action by the Board of Directors is necessary, shall be the day on
which the first written consent is expressed. The record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating to such purpose.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
ARTICLE 5 - General Provisions
------------------------------
5.1 Fiscal Year. The fiscal year of the Corporation shall be fixed
-----------
by resolution of the Board of Directors.
<PAGE>
- 14 -
5.2 Corporate Seal. The corporate seal shall be in such form as
--------------
shall be approved by the Board of Directors.
5.3 Notices. Except as otherwise specifically provided herein or
-------
required by law or the Certificate of Incorporation, all notices required to be
given to any stockholder, director, officer, employee or agent of the
Corporation shall be in writing and may in every instance be effectively given
by hand delivery to the recipient thereof, by depositing such notice in the
mails, postage paid, or by sending such notice by prepaid telegram or facsimile
transmission. Any such notice shall be addressed to such stockholder, director,
officer, employee or agent at his or her last known address as the same appears
on the books of the Corporation. The time when such notice is received shall be
deemed to be the time of the giving of the notice.
5.4 Waiver of Notice. Whenever any notice whatsoever is required
----------------
to be given by law, by the Certificate of Incorporation or by these By-Laws, a
waiver of such notice either in writing signed by the person entitled to such
notice or such person's duly authorized attorney, or by telegraph, facsimile
transmission or any other available method, whether before, at or after the time
stated in such waiver, or the appearance of such person or persons at such
meeting in person or by proxy, shall be deemed equivalent to such notice.
5.5 Evidence of Authority. A certificate by the Secretary, or an
---------------------
Assistant Secretary, or a temporary Secretary, as to any action taken by the
stockholders, directors, a committee or any officer or representative of the
Corporation shall, as to all persons who rely on the certificate in good faith,
be conclusive evidence of such action.
5.6 Facsimile Signatures. In addition to the provisions for use of
--------------------
facsimile signatures elsewhere specifically authorized in these By-Laws,
facsimile signatures of any officer or officers of the Corporation may be used
whenever and as authorized by the Board of Directors or a committee thereof.
5.7 Reliance upon Books, Reports and Records. Each director, each
----------------------------------------
member of any committee designated by the Board of Directors, and each officer
of the Corporation shall, in the performance of his or her duties, be fully
protected in relying in good faith upon the books of account or other records of
the Corporation and upon such information, opinions, reports or statements
presented to the Corporation by any of its officers or employees or committees
of the Board of Directors so designated, or by any other person as to matters
which such director or committee member reasonably believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
5.8 Time Periods. In applying any provision of these By-Laws that
------------
requires that an act be done or not be done a specified number of days prior to
an event or that an act be done during a period of a specified number of days
prior to an event, calendar days shall be used, the day of the doing of the act
shall be excluded, and the day of the event shall be included.
<PAGE>
- 15 -
5.9 Certificate of Incorporation. All references in these By-Laws
----------------------------
to the Certificate of Incorporation shall be deemed to refer to the Certificate
of Incorporation of the Corporation, as amended and in effect from time to time.
5.10 Transactions with Interested Parties. No contract or
------------------------------------
transaction between the Corporation and one or more of the directors or
officers, or between the Corporation and any other corporation, partnership,
association, or other organization in which one or more of the directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because such director or officer
is present at or participates in the meeting of the Board of Directors or a
committee of the Board of Directors which authorizes the contract or transaction
or solely because his, her or their votes are counted for such purpose, if:
(1) The material facts as to his or her relationship or interest
and as to the contract or transaction are disclosed or are known to the Board
of Directors or the committee, and the Board or committee in good faith
authorizes the contract or transaction by the affirmative vote of a majority
of the disinterested directors, even though the disinterested directors be
less than a quorum;
(2) The material facts as to his or her relationship or interest
and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the Corporation as of
the time it is authorized, approved or ratified, by the Board of Directors, a
committee of the Board of Directors, or the stockholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
5.11 Severability. Any determination that any provision of these
------------
By-Laws is for any reason inapplicable, illegal or ineffective shall not affect
or invalidate any other provision of these By-Laws.
5.12 Pronouns. All pronouns used in these By-Laws shall be deemed
--------
to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the persons or persons so designated may require.
ARTICLE 6 - Amendments
----------------------
6.1 By the Board of Directors. Except as is otherwise set forth in
-------------------------
these By-Laws, these By-Laws may be altered, amended or repealed, or new by-laws
may be adopted, by the affirmative vote of a majority of the directors present
at any regular or special meeting of the Board of Directors at which a quorum is
present.
<PAGE>
- 16 -
6.2 By the Stockholders. Except as otherwise set forth in these
-------------------
By-Laws, these By-Laws may be altered, amended or repealed or new by-laws may be
adopted by the affirmative vote of the holders of a majority of the shares of
the capital stock of the Corporation issued and outstanding and entitled to vote
at any regular meeting of stockholders, or at any special meeting of
stockholders, provided notice of such alteration, amendment, repeal or adoption
of new by-laws shall have been stated in the notice of such special meeting.
<PAGE>
EXHIBIT 5.1
April 22, 1999
Advanstar, Inc.
545 Boylston Street
Boston, MA 02116
RE: Registration Statement on Form S-1
(File No. 333-74683)
--------------------
Ladies and Gentlemen:
This opinion relates to an aggregate of 16,100,000 shares of Common Stock,
par value $.01 per share (the "Common Stock"), of Advanstar, Inc. (the
"Company"), which are the subject matter of a Registration Statement on Form S-1
as filed with the Securities and Exchange Commission (the "Commission") on March
19, 1999, as amended by Amendment No. 1 to Registration Statement on Form S-1 as
filed with the Commission on April 22, 1999 (the "Registration Statement").
The 16,100,000 shares of Common Stock covered by the Registration Statement
consist of 7,000,000 shares being sold by the Company, 7,000,000 shares being
sold by certain stockholders of the Company and 2,100,000 shares subject to an
over-allotment option granted by certain stockholders of the Company to the
underwriters named in the prospectuses (the "Prospectuses") incorporated by
reference in the Registration Statement.
Based upon such investigation as we have deemed necessary, we are of the
opinion that when the 7,000,000 shares of Common Stock to be sold by the Company
pursuant to the Prospectuses have been issued and paid for in accordance with
the terms described in the Prospectuses, such shares of Common Stock will have
been validly issued and will be fully paid and nonassessable. Further, we are
of the opinion that the 9,100,000 shares of Common Stock to be sold by the
stockholders of the Company pursuant to the Prospectuses have been validly
issued and are fully paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to our firm in the Prospectus under
the caption "Legal Matters."
Very truly yours,
/s/ Testa, Hurwitz & Thibeault, LLP
TESTA, HURWITZ & THIBEAULT, LLP
<PAGE>
EXHIBIT 10.2
ADVANSTAR, INC.
AMENDED AND RESTATED
1996 STOCK OPTION PLAN
----------------------
1. Purpose. The purpose of this Amended and Restated 1996 Stock Option
-------
Plan (the "Plan") is to amend and restate in its entirety the 1996 Stock Option
Plan, as amended, of Advanstar, Inc. (the "Company") and to encourage employees
of the Company and of any present or future parent or subsidiary of the Company
(collectively, "Related Corporations"), and other individuals who render
services to the Company or a Related Corporation, by providing opportunities to
purchase stock in the Company pursuant to options granted hereunder ("Non-
Qualified Options"). Non-Qualified Options are referred to hereafter
individually as an "Option" and collectively as "Options." As used herein, the
terms "parent" and "subsidiary" mean "parent corporation" and "subsidiary
corporation," respectively, as those terms are defined in Section 424 of the
Internal Revenue Code of 1986, as amended (the "Code").
2. Administration of the Plan.
--------------------------
A. Board or Committee Administration. The Plan shall be administered by
---------------------------------
the Board of Directors of the Company (the "Board") or, by a committee
appointed by the Board (the "Committee"). Hereinafter, all references in
this Plan to the "Committee" shall mean the Board if no Committee has been
appointed. Subject to ratification of the grant or authorization of each
Option by the Board (if so required by applicable state law), and subject
to the terms of the Plan, the Committee shall have the authority to (i)
determine to whom Options may be granted; (ii) determine the time or times
at which Options shall be granted; (iii) determine the exercise price of
shares subject to each Option, which price shall not be less than the
minimum price specified in paragraph 6; (iv) determine (subject to
paragraph 7) the time or times when each Option shall become exercisable
and the duration of the exercise period; (v) extend the period during which
outstanding Options may be exercised; (vi) determine whether restrictions
such as repurchase options are to be imposed on shares subject to Options
and the nature of such restrictions, if any; and (vii) interpret the Plan
and prescribe and rescind rules and regulations relating to it. The
Committee shall take whatever actions it deems necessary, under Section 422
of the Code and the regulations promulgated thereunder, to ensure that
Options granted hereunder are not treated as "incentive stock options"
("ISOs"). The interpretation and construction by the Committee of any
provisions of the Plan or of any Option granted under it shall be final
unless otherwise determined by the Board. The Committee may from time to
time adopt such rules and regulations for carrying out the Plan as it may
deem advisable. No member of the Board or the Committee shall be liable
for any action or determination made in good faith with respect to the Plan
or any Option
<PAGE>
- 2 -
granted under it.
B. Committee Actions. The Committee may select one of its members as
-----------------
its chairman, and shall hold meetings at such time and places as it may
determine. A majority of the Committee shall constitute a quorum and acts
by a majority of the members of the Committee at a meeting at which a
quorum is present, or acts reduced to or approved in writing by a majority
of the members of the Committee (if consistent with applicable state law),
shall constitute the valid acts of the Committee. From time to time the
Board may increase the size of the Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies however caused, or remove all members
of the Committee and thereafter directly administer the Plan.
C. Grant of Options to Board Members. All grants of Options to members
---------------------------------
of the Board shall in all respects be made in accordance with the
provisions of this Plan applicable to other eligible persons. Consistent
with the provisions of the first sentence of paragraph 2(A) above, members
of the Board who either (i) are eligible to receive grants of Options
pursuant to the Plan or (ii) have been granted Options may vote on any
matters affecting the administration of the Plan or the grant of any
Options pursuant to the Plan, except that no such member shall act upon the
granting to himself or herself of Options, but any such member may be
counted in determining the existence of a quorum at any meeting of the
Board during which action is taken with respect to the granting to such
member of Options.
D. Performance-Based Compensation. The Board, in its discretion, may
------------------------------
take such action as may be necessary to ensure that Options granted under
the Plan qualify as "qualified performance-based compensation" within the
meaning of Section 162(m) of the Code and applicable regulations
promulgated thereunder ("Performance-Based Compensation"). Such action may
include, in the Board's discretion, some or all of the following (i) if the
Board determines that Options granted under the Plan generally shall
constitute Performance-Based Compensation, the Plan shall be administered,
to the extent required for such Options to constitute Performance-Based
Compensation, by a Committee consisting solely of two or more "outside
directors" (as defined in applicable regulations promulgated under Section
162(m) of the Code), (ii) if any Options with an exercise price less than
the fair market value per share of Common Stock are granted under the Plan
and the Board determines that such Options should constitute Performance-
Based Compensation, such options shall be made exercisable only upon the
attainment of a pre-established, objective performance goal established by
the Committee, and such grant shall be submitted for, and shall be
contingent upon shareholder approval and (iii) Options granted under the
Plan may be subject to such other terms and conditions as are necessary for
compensation recognized in connection with the exercise or disposition of
such
<PAGE>
- 3 -
stock option or the disposition of Common Stock acquired pursuant to such
stock option, to constitute Performance-Based Compensation.
3. Eligible Employees and Others. Options may be granted to any employee,
-----------------------------
officer or director (whether or not also an employee) or consultant of the
Company or any Related Corporation. The granting of any Option to any
individual or entity shall neither entitle that individual or entity to, nor
disqualify such individual or entity from, participation in any other grant of
Options.
4. Stock. The stock subject to Options shall be authorized but unissued
-----
shares of Common Stock of the Company, par value $ 0.01 per share (the "Common
Stock"), or shares of Common Stock reacquired by the Company in any manner. The
aggregate number of shares which may be issued pursuant to the Plan is 1,811,124
(giving effect both to the 100-for-1 split of the Common Stock in May 1997 and
the 2-for-1 split of the Common Stock in April 1999), subject to adjustment as
provided in paragraph 13. If any Option granted under the Plan after April 1,
1999 shall expire or terminate for any reason without having been exercised in
full or shall cease for any reason to be exercisable in whole or in part or
shall be repurchased by the Company, the shares subject to such Option shall not
again be available for grants of Options under the Plan.
5. Granting of Options. Options may be granted under the Plan at any time
-------------------
on or after November 15, 1996 and prior to November 15, 2006. The date of grant
of an Option under the Plan will be the date specified by the Committee at the
time it grants the Option; provided, however, that such date shall not be prior
to the date on which the Committee acts to approve the grant.
6. Minimum Option Price.
--------------------
A. Price for Options. Subject to Paragraph 2(D) (relating to compliance
-----------------
with Section 162(m) of the Code), the exercise price per share of each
Option granted under the Plan shall be the fair market value of the Common
Stock of the Company on the date of grant, unless otherwise specified in
the agreement relating to the grant of such Option; provided that in no
event shall such exercise price be less than the minimum legal
consideration required therefor under the laws of any jurisdiction in which
the Company or its successors in interest may be organized.
B. Reserved.
--------
C. Reserved.
--------
D. Determination of Fair Market Value. If, at the time an Option is
----------------------------------
granted under the Plan, the Company's Common Stock is publicly traded,
"fair market value" shall be determined as of the date of grant or, if the
prices or quotes
<PAGE>
- 4 -
discussed in this sentence are unavailable for such date, the last business
day for which such prices or quotes are available prior to the date of
grant and shall mean (i) the average (on that date) of the high and low
prices of the Common Stock on the principal national securities exchange on
which the Common Stock is traded, if the Common Stock is then traded on a
national securities exchange; or (ii) the last reported sale price (on that
date) of the Common Stock on the Nasdaq National Market, if the Common
Stock is not then traded on a national securities exchange; or (iii) the
closing bid price (or average of bid prices) last quoted (on that date) by
an established quotation service for over-the-counter securities, if the
Common Stock is not reported on the Nasdaq National Market. If the Common
Stock is not publicly traded at the time an Option is granted under the
Plan, "fair market value" shall be deemed to be the fair value of the
Common Stock as determined by the Committee after taking into consideration
all factors which it deems appropriate, including, without limitation,
recent sale and offer prices of the Common Stock in private transactions
negotiated at arm's length.
7. Option Duration. Subject to earlier termination as provided in
---------------
paragraphs 9 and 10 or in the agreement relating to such Option, each Option
shall expire on the date specified by the Committee, but not more than ten years
from the date of grant.
8. Exercise of Option. Subject to the provisions of paragraphs 9 through
------------------
12, each Option granted under the Plan shall be exercisable as follows:
A. Vesting. The Option shall either be fully exercisable on the date of
-------
grant or shall become exercisable thereafter in such installments as the
Committee may specify.
B. Full Vesting of Installments. Once an installment becomes
----------------------------
exercisable it shall remain exercisable until expiration or termination of
the Option, unless otherwise specified by the Committee.
C. Partial Exercise. Each Option or installment may be exercised at any
----------------
time or from time to time, in whole or in part, for up to the total number
of shares with respect to which it is then exercisable.
D. Acceleration of Vesting. The Committee shall have the right to
-----------------------
accelerate the date on which any installment of any Option becomes
exercisable.
9. Termination of Employment. The termination of employment of an
-------------------------
optionee shall cause such optionee's Options to terminate immediately unless
otherwise specified in the agreement relating to the grant of such Options.
Nothing in the Plan shall be deemed to give any optionee the right to be
retained in employment or other service by the Company or any Related
Corporation for any period of time. For purposes of this paragraph 9, employment
shall be considered as continuing uninterrupted during any
<PAGE>
- 5 -
bona fide leave of absence (such as those attributable to illness, military
obligations or governmental service) provided that the period of such leave does
not exceed 90 days or, if longer, any period during which such optionee's right
to reemployment is guaranteed by statute or by contract. A bona fide leave of
absence with the written approval of the Committee shall not be considered an
interruption of employment under this paragraph 9, provided that such written
approval contractually obligates the Company or any Related Corporation to
continue the employment of the optionee after the approved period of absence.
10. Death; Disability.
-----------------
A. Death. If an optionee ceases to be employed by the Company and all
-----
Related Corporations by reason of his or her death, any Option owned by
such optionee may be exercised, to the extent otherwise exercisable on the
date of death, by the estate, personal representative or beneficiary who
has acquired the Option by will or by the laws of descent and
distribution, until the earlier of (i) the specified expiration date of the
Option or (ii) 365 days from the date of the optionee's death.
B. Disability. If an optionee ceases to be employed by the Company and
----------
all Related Corporations by reason of his or her disability, such optionee
shall have the right to exercise any Option held by him or her on the date
of termination of employment, to the extent of the number of shares with
respect to which he or she could have exercised it on that date, until the
earlier of (i) the specified expiration date of such Option or (ii) 365
days from the date of the termination of the optionee's employment. For
the purposes of the Plan, the term "disability" shall mean "permanent and
total disability" as defined in Section 22(e)(3) of the Code or any
successor statute.
11. Assignability. Options shall not be transferable except to the extent
-------------
set forth in the agreement relating thereto.
12. Terms and Conditions of Options. Options shall be evidenced by
-------------------------------
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including termination and cancellation provisions and
restrictions applicable to shares of Common Stock issuable upon exercise of
Options. The Committee may from time to time confer authority and responsibility
on one or more of its own members and/or one or more officers of the Company to
execute and deliver such instruments. The proper officers of the Company are
authorized and directed to take any and all action necessary or advisable from
time to time to carry out the terms of such instruments.
13. Adjustments. Upon the occurrence of any of the following events, an
-----------
<PAGE>
- 6 -
optionee's rights with respect to Options granted to such optionee hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the written agreement between the optionee and the Company relating
to such Option:
A. Stock Dividends and Stock Splits. If the shares of Common Stock
--------------------------------
shall be subdivided or combined into a greater or smaller number of shares
(excluding, for the purpose of this paragraph 13(A), the 100-for-1 split of
the Common Stock in March 1997) or if the Company shall issue any shares of
Common Stock as a stock dividend on its outstanding Common Stock, the
number of shares of Common Stock deliverable upon the exercise of Options
shall be appropriately increased or decreased proportionately, and
appropriate adjustments shall be made in the purchase price per share to
reflect such subdivision, combination or stock dividend.
B. Consolidations or Mergers. If the Company is to be consolidated with
-------------------------
or acquired by another entity in a merger or other reorganization in which
the holders of the outstanding voting stock of the Company immediately
preceding the consummation of such event, shall, immediately following such
event, hold, as a group, less than a majority of the voting securities of
the surviving or successor entity, or in the event of a sale of all or
substantially all of the Company's assets or otherwise (each, an
"Acquisition"), the Committee or, if in the absence of action by the
Committee, the board of directors of any entity assuming the obligations of
the Company hereunder (the "Successor Board"), shall, as to outstanding
Options, either (i) make appropriate provision for the continuation of such
Options by substituting on an equitable basis for the shares then subject
to such Options either (a) the consideration payable with respect to the
outstanding shares of Common Stock in connection with the Acquisition, (b)
shares of stock of the surviving or successor corporation or (c) such other
securities as the Successor Board deems appropriate, the fair market value
of which shall not materially exceed the fair market value of the shares of
Common Stock subject to such Options immediately preceding the Acquisition;
or (ii) upon written notice to the optionees, provide that all Options must
be exercised, to the extent then exercisable or to be exercisable as a
result of the Acquisition, within a specified number of days of the date of
such notice, at the end of which period the Options shall terminate; or
(iii) terminate all Options in exchange for a cash payment equal to the
excess of the fair market value of the shares subject to such Options (to
the extent then exercisable or to be exercisable as a result of the
Acquisition) over the exercise price thereof.
C. Recapitalization or Reorganization. In the event of a
----------------------------------
recapitalization or reorganization of the Company (other than a transaction
described in subparagraph B above) pursuant to which securities of the
Company or of another corporation are issued with respect to the
outstanding shares of Common Stock, an optionee upon exercising an Option
shall be entitled to receive for the purchase price paid upon such exercise
the securities he or she would have received if he or
<PAGE>
- 7 -
she had exercised such Option prior to such recapitalization or
reorganization.
D. Reserved.
--------
E. Dissolution or Liquidation. In the event of the proposed dissolution
--------------------------
or liquidation of the Company, each Option will terminate immediately prior
to the consummation of such proposed action or at such other time and
subject to such other conditions as shall be determined by the Committee.
F. Issuances of Securities. Except as expressly provided herein, no
-----------------------
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of shares subject to Options. No adjustments shall be made for
dividends paid in cash or in property other than securities of the Company.
G. Fractional Shares. No fractional shares shall be issued under the
-----------------
Plan and the optionee shall receive from the Company cash in lieu of such
fractional shares.
H. Adjustments. Upon the happening of any of the events described in
-----------
subparagraphs A, B or C above, the class and aggregate number of shares set
forth in paragraph 4 hereof that are subject to Options which previously
have been or subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such
subparagraphs. The Committee or the Successor Board shall determine the
specific adjustments to be made under this paragraph 13 and, subject to
paragraph 2, its determination shall be conclusive.
14. Means of Exercising Options. An Option (or any part or installment
---------------------------
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify
the number of shares as to which such Option is being exercised, accompanied by
full payment of the purchase price therefor either (a) in United States dollars
in cash or by check, (b) at the discretion of the Committee, through delivery of
shares of Common Stock having a fair market value equal as of the date of the
exercise to the cash exercise price of the Option, (c) at the discretion of the
Committee and consistent with applicable law, through the delivery of an
assignment to the Company of a sufficient amount of the proceeds from the sale
of the Common Stock acquired upon exercise of the Option and an authorization to
the broker or selling agent to pay that amount to the Company, which sale shall
be at the participant's direction at the time of exercise, or (d) at the
discretion of the Committee, by any combination of (a), (b) and (c) above. The
holder of an Option shall not have the rights of a shareholder with respect to
the shares covered by his Option until the date of issuance of a stock
certificate to such holder for such shares. Except as expressly provided above
in paragraph 13 with respect to changes in capitalization and stock
<PAGE>
- 8 -
dividends, no adjustment shall be made for dividends or similar rights for which
the record date is before the date such stock certificate is issued.
15. Term and Amendment of Plan. This Plan was adopted by the Board as of
--------------------------
November 15, 1996. The Plan shall expire at the end of the day on November 15,
2006 (except as to Options outstanding on that date). Subject to the provisions
of paragraph 5 above, Options may be granted under the Plan prior to the date of
stockholder approval of the Plan. The Board may terminate or amend the Plan in
any respect at any time. Except as otherwise provided in this paragraph 15, in
no event may action of the Board alter or impair the rights of an optionee,
without such optionee's consent, under any Option previously granted to such
optionee.
16. Reserved.
--------
17. Application Of Funds. The proceeds received by the Company from the
--------------------
sale of shares pursuant to Options granted under the Plan shall be used for
general corporate purposes.
18. Reserved.
--------
19. Withholding of Additional Income Taxes. Upon the exercise of an
--------------------------------------
Option, the transfer of an Option pursuant to an arm's length transaction, the
vesting or transfer of restricted stock or securities acquired on the exercise
of a Option hereunder, or the making of a distribution or other payment with
respect to such stock or securities, the Company may withhold taxes in respect
of amounts that constitute compensation includible in gross income. The
Committee in its discretion may condition (i) the exercise of an Option (ii) the
transfer of an Option, or (iii) the vesting or transferability of restricted
stock or securities acquired by exercising an Option, on the optionee's making
satisfactory arrangement for such withholding. Such arrangement may include
payment by the optionee in cash or by check of the amount of the withholding
taxes or, at the discretion of the Committee, by the optionee's delivery of
previously held shares of Common Stock or the withholding from the shares of
Common Stock otherwise deliverable upon exercise of a Option shares having an
aggregate fair market value equal to the amount of such withholding taxes.
20. Governmental Regulation. The Company's obligation to sell and deliver
-----------------------
shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares. The Committee shall not grant Options under the Plan
unless the Company has complied with all applicable securities laws in
connection with such grant.
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
send tax information statements to employees and former employees that exercise
ISOs under the Plan, and the Company may be required to file tax information
returns reporting the
<PAGE>
- 9 -
income received by optionees in connection with the Plan.
21. Governing Law. The validity and construction of the Plan and the
-------------
instruments evidencing Options shall be governed by the laws of the State of
Delaware, or the laws of any jurisdiction in which the Company or its successors
in interest may be organized.
<PAGE>
EXHIBIT 10.3
ADVANSTAR, INC.
1999 Stock Option and Incentive Plan
------------------------------------
1. Purpose and Eligibility
-----------------------
The purpose of this 1999 Stock Option and Incentive Plan (the "Plan") of
----
Advanstar, Inc. (the "Company") is to provide stock options and other equity
-------
interests in the Company (each an "Award") to employees, officers, directors,
-----
consultants and advisors of the Company and its Subsidiaries, all of whom are
eligible to receive Awards under the Plan. Any person to whom an Award has been
granted under the Plan is called a "Participant". Additional definitions are
-----------
contained in Section 8.
2. Administration
--------------
a. Administration by Board of Directors. The Plan will be administered by
------------------------------------
the Board of Directors of the Company (the "Board"). The Board, in its sole
-----
discretion, shall have the authority to grant and amend Awards, to adopt, amend
and repeal rules relating to the Plan and to interpret and correct the
provisions of the Plan and any Award. All decisions by the Board shall be
final and binding on all interested persons. Neither the Company nor any member
of the Board shall be liable for any action or determination relating to the
Plan.
b. Appointment of Committees. To the extent permitted by applicable law,
-------------------------
the Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a "Committee"). All references in the
---------
Plan to the "Board" shall mean such Committee or the Board.
-----
c. Delegation to Executive Officers. To the extent permitted by
--------------------------------
applicable law, the Board may delegate to one or more executive officers of the
Company the power to grant Awards and exercise such other powers under the Plan
as the Board may determine, provided that the Board shall fix the maximum number
of Awards to be granted and the maximum number of shares issuable to any one
Participant pursuant to Awards granted by such executive officers.
3. Stock Available for Awards
--------------------------
a. Number of Shares. Subject to adjustment under Section 3(c), the
----------------
aggregate number of shares of Common Stock of the Company (the "Common Stock")
------------
that may be issued pursuant to the Plan is 2,500,000 shares. If any Award
expires, or is terminated, surrendered or forfeited, in whole or in part, the
unissued Common Stock covered by such Award shall again be available for the
grant of Awards under the Plan. If shares of Common Stock issued pursuant to
the Plan are repurchased by, or are surrendered or forfeited to, the Company at
no more than cost, such shares of Common Stock shall again be available for the
grant of Awards under the Plan; provided, however, that the cumulative number of
such shares that may be so reissued under the
<PAGE>
- 2 -
Plan will not exceed 2,500,000 shares. Shares issued under the Plan may
consist in whole or in part of authorized but unissued shares or treasury
shares.
b. Per-Participant Limit. Subject to adjustment under Section 3(c), no
---------------------
Participant may be granted Awards during any one fiscal year to purchase more
than 625,000 shares of Common Stock.
c. Adjustment to Common Stock. In the event of any stock split, stock
--------------------------
dividend, extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, combination, exchange of shares, liquidation, spin-off, split-up,
or other similar change in capitalization or event, (i) the number and class of
securities available for Awards under the Plan and the per-Participant share
limit, (ii) the number and class of securities, vesting schedule and exercise
price per share subject to each outstanding Option, (iii) the repurchase price
per security subject to repurchase, and (iv) the terms of each other outstanding
stock-based Award shall be adjusted by the Company (or substituted Awards may be
made) to the extent the Board shall determine, in good faith, that such an
adjustment (or substitution) is appropriate.
4. Stock Options
-------------
a. General. The Board may grant options to purchase Common Stock (each,
-------
an "Option") and determine the number of shares of Common Stock to be covered by
------
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option and the Common Stock
issued upon the exercise of each Option, including vesting provisions,
repurchase provisions and restrictions relating to applicable federal or state
securities laws, as it considers advisable.
b. Incentive Stock Options. An Option that the Board intends to be an
-----------------------
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
---------
Stock Option") shall be granted only to employees of the Company and shall be
- ------------
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Board and the Company shall have no liability if an Option
or any part thereof that is intended to be an Incentive Stock Option does not
qualify as such. An Option or any part thereof that does not qualify as an
Incentive Stock Option is referred to herein as a "Nonstatutory Stock Option".
-------------------------
c. Exercise Price. The Board shall establish the exercise price (or
--------------
determine the method by which the exercise price shall be determined) at the
time each Option is granted and specify it in the applicable option agreement.
d. Duration of Options. Each Option shall be exercisable at such times
-------------------
and subject to such terms and conditions as the Board may specify in the
applicable option agreement.
e. Exercise of Option. Options may be exercised only by delivery to the
------------------
Company of a written notice of exercise signed by the proper person together
with payment in full as specified in Section 4(f) for the number of shares for
which the Option is exercised.
<PAGE>
- 3 -
f. Payment Upon Exercise. Common Stock purchased upon the exercise of an
---------------------
Option shall be paid for by one or any combination of the following forms of
payment:
(i) by check payable to the order of the Company;
(ii) except as otherwise explicitly provided in the applicable option
agreement, and only if the Common Stock is then publicly traded, delivery of an
irrevocable and unconditional undertaking by a creditworthy broker to deliver
promptly to the Company sufficient funds to pay the exercise price, or delivery
by the Participant to the Company of a copy of irrevocable and unconditional
instructions to a creditworthy broker to deliver promptly to the Company cash or
a check sufficient to pay the exercise price; or
(iii) to the extent explicitly provided in the applicable option
agreement, by (x) delivery of shares of Common Stock owned by the Participant
valued at fair market value (as determined by the Board or as determined
pursuant to the applicable option agreement), (y) delivery of a promissory note
of the Participant to the Company (and delivery to the Company by the
Participant of a check in an amount equal to the par value of the shares
purchased), or (z) payment of such other lawful consideration as the Board may
determine.
5. Restricted Stock
----------------
a. Grants. The Board may grant Awards entitling recipients to acquire
------
shares of Common Stock, subject to (i) delivery to the Company by the
Participant of a check in an amount at least equal to the par value of the
shares purchased, and (ii) the right of the Company to repurchase all or part of
such shares at their issue price or other stated or formula price from the
Participant in the event that conditions specified by the Board in the
applicable Award are not satisfied prior to the end of the applicable
restriction period or periods established by the Board for such Award (each, a
"Restricted Stock Award").
- -----------------------
b. Terms and Conditions. The Board shall determine the terms and
--------------------
conditions of any such Restricted Stock Award. Any stock certificates issued in
respect of a Restricted Stock Award shall be registered in the name of the
Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). After the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or, if the Participant has died, to the
beneficiary designated by a Participant, in a manner determined by the Board, to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the absence of an
----------------------
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
6. Other Stock-Based Awards
------------------------
The Board shall have the right to grant other Awards based upon the Common
Stock having such terms and conditions as the Board may determine, including,
without limitation, the
<PAGE>
- 4 -
grant of shares based upon certain conditions, the grant of securities
convertible into Common Stock and the grant of stock appreciation rights,
phantom stock awards or stock units.
7. General Provisions Applicable to Awards
---------------------------------------
a. Transferability of Awards. Except as the Board may otherwise determine
-------------------------
or provide in an Award, Awards shall not be sold, assigned, transferred, pledged
or otherwise encumbered by the person to whom they are granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution, and, during the life of the Participant, shall be exercisable only
by the Participant. References to a Participant, to the extent relevant in the
context, shall include references to authorized transferees.
b. Documentation. Each Award under the Plan shall be evidenced by a
-------------
written instrument in such form as the Board shall determine or as executed by
an officer of the Company pursuant to authority delegated by the Board. Each
Award may contain terms and conditions in addition to those set forth in the
Plan provided that such terms and conditions do not contravene the provisions of
the Plan.
c. Board Discretion. The terms of each type of Award need not be
----------------
identical, and the Board need not treat Participants uniformly.
d. Termination of Status. The Board shall determine the effect on an
---------------------
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, or the Participant's legal
representative, conservator, guardian or Designated Beneficiary, may exercise
rights under the Award.
e. Withholding. Each Participant shall pay to the Company, or make
-----------
provisions satisfactory to the Company for payment of, any taxes required by law
to be withheld in connection with Awards to such Participant no later than the
date of the event creating the tax liability. The Board may allow Participants
to satisfy such tax obligations in whole or in part by transferring shares of
Common Stock, including shares retained from the Award creating the tax
obligation, valued at their fair market value (as determined by the Board or as
determined pursuant to the applicable option agreement). The Company may, to
the extent permitted by law, deduct any such tax obligations from any payment of
any kind otherwise due to a Participant.
f. Amendment of Awards. The Board may amend, modify or terminate any
-------------------
outstanding Award including, but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that, the Participant's consent to such action shall be
required unless the Board determines that the action, taking into account any
related action, would not materially and adversely affect the Participant.
g. Conditions on Delivery of Stock. The Company will not be obligated to
-------------------------------
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares
<PAGE>
- 5 -
previously delivered under the Plan until (i) all conditions of the Award have
been met or removed to the satisfaction of the Company, (ii) in the opinion of
the Company's counsel, all other legal matters in connection with the issuance
and delivery of such shares have been satisfied, including any applicable
securities laws and any applicable stock exchange or stock market rules and
regulations, and (iii) the Participant has executed and delivered to the Company
such representations or agreements as the Company may consider appropriate to
satisfy the requirements of any applicable laws, rules or regulations.
h. Acceleration. The Board may at any time provide that any Options shall
------------
become immediately exercisable in full or in part, that any Restricted Stock
Awards shall be free of some or all restrictions, or that any other stock-based
Awards may become exercisable in full or in part or free of some or all
restrictions or conditions, or otherwise realizable in full or in part, as the
case may be, despite the fact that the foregoing actions may (i) cause the
application of Sections 280G and 4999 of the Code if a change in control of the
Company occurs, or (ii) disqualify all or part of the Option as an Incentive
Stock Option.
<PAGE>
- 6 -
8. Miscellaneous
-------------
a. Definitions.
-----------
(i) "Company," for purposes of eligibility under the Plan, shall include
--------
any present or future subsidiary corporations of Advanstar, Inc., as defined in
Section 424(f) of the Code (a "Subsidiary"), and any present or future parent
----------
corporation of Advanstar, Inc., as defined in Section 424(e) of the Code. For
purposes of Awards other than Incentive Stock Options, the term "Company" shall
-------
include any other business venture in which the Company has a direct or indirect
significant interest, as determined by the Board in its sole discretion.
(ii) "Code" means the Internal Revenue Code of 1986, as amended, and any
----
regulations promulgated thereunder.
(iii) "employee" for purposes of eligibility under the Plan shall include
--------
a person to whom an offer of employment has been extended by the Company.
b. No Right To Employment or Other Status. No person shall have any claim
--------------------------------------
or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan.
c. No Rights As Stockholder. Subject to the provisions of the applicable
------------------------
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder thereof.
d. Effective Date and Term of Plan. The Plan shall become effective on
-------------------------------
the date on which it is adopted by the Board. No Awards shall be granted under
the Plan after the completion of ten years from the date on which the Plan was
adopted by the Board, but Awards previously granted may extend beyond that date.
e. Amendment of Plan. The Board may amend, suspend or terminate the Plan
-----------------
or any portion thereof at any time.
<PAGE>
- 7 -
f. Governing Law. The provisions of the Plan and all Awards made
-------------
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without regard to any applicable conflicts of law.
Adopted by the Board of Directors on:
April 20, 1999
---------------
Approved by the stockholders on:
April 20, 1999
---------------
<PAGE>
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
April 19, 1999 by and between Advanstar, Inc., a Delaware corporation (the
"Company") and Martin C. ("Skip") Farber ("Executive").
WHEREAS, the Company currently operates certain trade exposition and
publishing businesses; and
WHEREAS, the Company wishes to continue to employ Executive and Executive
is prepared to continue to serve in those capacities required by the Company.
NOW, THEREFORE, the parties agree as follows:
1. Position and Authority. The Company agrees to employ the Executive,
----------------------
and the Executive accepts such employment and agrees to serve the Company as
Executive Vice President of the Company and any of its respective Subsidiaries
as may from time to time be requested by the Company, for the compensation and
benefits detailed in Sections 3 and 4 hereof. It is understood that the
Executive will report to the Chairman of the Board of Directors and Chief
Executive Officer or to the Vice Chairman of the Company. A "Subsidiary" shall
be any company in which the Company beneficially owns more than 50% of the
voting power of such company's outstanding voting securities.
2. Duties. Executive shall devote substantially all of his business time
------
(subject to four weeks of vacation, or such greater amount as is authorized by
the Board of Directors) to the affairs of the Company during the employment
term, except as may be consented to by the Board of Directors. Executive shall
perform such duties and responsibilities as the Board of Directors or Chief
Executive Officer of the Company may determine from time to time. Executive
will not be required to relocate his permanent residence outside of greater
Boston, Massachusetts; provided that, if Executive and the Company agree that
-------- ----
Executive will relocate his permanent residence to another city (a "New
Location") and perform his duties and responsibilities pursuant to the terms of
this contract at the Company's offices in the New Location, then Executive will
not be required to relocate his permanent residence outside the New Location.
3. Base Compensation and Bonus.
---------------------------
(a) Base Composition. Executive will be compensated at a base salary
----------------
rate of $310,000.00 per year (or such higher rate as may be set from time to
time by the Chief Executive Officer in his discretion) during the employment
term. Base compensation will be paid in installments on the same schedule as
the Company's Subsidiaries generally pay their employees. All compensation and
benefits will be subject to reduction by all federal, state, local and other
withholdings and similar taxes and payments required by applicable law.
<PAGE>
- 2 -
(b) Bonus for any Fiscal Year. The Executive shall be eligible to
-------------------------
receive an annual bonus as determined by the Chief Executive Officer of the
Company in accordance with the Company's bonus plan, if any, that may be in
effect at such time; provided that any bonus payable under this Section 3(c)
--------
upon a termination of this Agreement by the Company without Cause (as defined
below) or by the Executive for Good Reason (as defined below) will be a Pro Rata
Bonus Amount (as defined below). Any bonus payable will be paid after the end
of the applicable fiscal year at the same time as other bonuses to senior
management are payable as determined by the Chief Executive Officer.
4. Benefits.
--------
(a) During Executive's employment by the Company, Executive will
receive the same (or substantially similar) employee benefits to those provided
by the Company or its Subsidiaries to other executive vice presidents from time
to time.
(b) During and after the employment term the Company agrees that if
Executive is made a party, or compelled to testify or otherwise participate in,
any action, suit or proceeding (a "Proceeding"), by reason of the fact that he
is or was a director or officer of the Company or any of its Subsidiaries,
Executive shall be indemnified by the Company as provided in Section 145 of the
Delaware General Corporation Law or (but not to any lesser extent) as authorized
by the Company's certificate of incorporation or bylaws or resolutions of the
company's Board of Directors against all cost, expense, liability, damage and
loss reasonably incurred or suffered by Executive in connection therewith, and
such indemnification shall continue as to Executive even if he has ceased to be
a director or officer of the Company or Subsidiary for the period of any
applicable statute of limitations or, if longer, for the period in which any
such Proceeding which commenced within the period of any such statute of
limitations is pending. The Company shall advance to Executive all reasonable
costs and expenses incurred by him in connection with a Proceeding within 20
days after receipt by the Company of a written request for such advance. Such
request shall include an itemized list of the costs and expenses and an
undertaking by Executive to repay the amount of such advance if it shall
ultimately be determined, in a final judgment for which the time to appeal has
expired, that, pursuant to applicable law, he is not entitled to be indemnified
against such costs and expenses.
(c) The Company will reimburse Executive for his reasonable and
customary business expenses, including travel, accommodations and meals.
5. Stock Options. Executive shall be eligible to be granted non-
-------------
qualified stock options to purchase shares of the Common Stock, on such terms
and conditions as are customary for such grants by the Company; provided that
--------
nothing herein shall entitle Executive to any stock option grant.
6. Term. This Agreement shall have a term of three years from the
----
Effective Date (the "Employment Term"), provided that Sections 9 and 10 shall
--------
survive such expiration in accordance with their terms.
<PAGE>
- 3 -
7. Termination.
-----------
(a) This Agreement may be terminated by the Company at any time for
Cause upon written notice to Executive, which notice shall specify the reason
for termination. Such notice shall be given at any time prior to termination in
the case of matters described in clauses (B) or (C), and shall be given not less
than 30 days prior to the date of termination, in the case of matters described
in clauses (A), (D) or (E), and in the case of matters described in clauses (A),
(D) or (E) shall be rescinded if the Executive cures any misconduct, negligent
act, breach or failure giving rise to such notice to the reasonable satisfaction
of the Board of Directors, including curing any damage suffered by the Company
as a result thereof. As used herein, "Cause" shall mean (A) willful misconduct
or gross negligence by Executive in respect of his material obligations under
this Agreement, (B) commission of a felony involving moral turpitude, (C) theft
of Company property or other disloyal or dishonest conduct of the Executive that
materially harms the Company or its business or (in the case of dishonest
conduct) undermines the confidence of the Board or the Chief Executive Officer
in the Executive, (D) willful breach of this Agreement, or (E) willful failure
to observe Company policies or carry out the directives of the Board of
Directors or the Chief Executive Officer of the Company.
(b) Executive may terminate this Agreement for Good Reason by giving
thirty (30) days prior written notice to the Company. "Good Reason" shall exist
only if (i) Executive is removed or is not re-appointed as one of the Company's
executive vice presidents, except in connection with termination of this
Agreement by the Company for Cause or due to death or Disability (as defined
below) or (ii) breach by the Company of any material obligation of the Company
under this Agreement.
(c) Should the Executive terminate this Agreement for Good Reason, or
should the Company terminate this Agreement without Cause, then the Executive
shall be entitled to receive, for a period of one year, the base salary provided
for in Section 3(a) and such bonus payable under Section 3(b) hereof, provided
--------
that any bonus under Section 3(b) will be payable only with respect to that
portion of the fiscal year in which Executive's employment was terminated (or
any prior fiscal year for which bonus remains unpaid)); bonus for any partial
fiscal year shall be determined by multiplying the bonus Executive would have
received had he continued to work for the Company during the entire fiscal year
by a fraction, the numerator of which is the number of days in the fiscal year
during which Executive was employed by the Company, and the denominator of which
is 365 (such amount the "Pro Rata Bonus Amount"). The Company shall have no
obligation to Executive under this Section 7(c) if Executive breaches the
provisions of the letter agreement referred to in Section 9. This clause (c)
shall not apply to a termination under clause (d) below.
(d) This Agreement shall terminate automatically upon Executive's
death. This Agreement may be terminated by the Company upon written notice to
Executive, or by Executive upon written notice to the Company, upon Executive's
Disability. For purposes of this Agreement, "Disability" means the Executive's
suffering of a disability which shall have prevented him from performing his
obligations hereunder for a period of at least 90 consecutive days or 120 non-
consecutive days in any 365 day period. In the event of termination of this
Agreement due to Executive's death or Disability, in addition to any salary due
to Executive as of
<PAGE>
- 4 -
the date of death or Disability and remaining unpaid, Executive shall be
entitled to receive, at such time as Executive would otherwise would have
received such sum, the Pro Rata Bonus Amount for the portion of the fiscal year
in which Executive's death or Disability occurred during which Executive was
employed by the Company.
(e) If the Company terminates this Agreement with Cause or if the
Executive terminates this Agreement without Good Reason, or if this Agreement is
terminated under clause (d) above, then the Executive shall, from the date of
such termination, no longer be entitled to any compensation or any bonus under
Sections 3 or 4 (other than, in the case of termination for Disability,
disability benefits as provided pursuant to Section 4 and, in the case of
termination for death or Disability, any bonus payable pursuant to clause (d)
above). Nothing in this clause (e) shall affect Executive's rights under
Company health and disability plans in which Executive participates to the
extent such plans provide for benefits to be paid following the termination of
employment.
(f) Termination of this Agreement shall not discharge any liability
(of either the Company or the Executive) existing at the date of termination.
Further, notwithholding any termination, the provisions of Sections 9 and 10
shall survive in accordance with their terms.
8. Effective Date. This Agreement shall take effect upon consummation of
--------------
an underwritten public offering of the Company's equity securities under the
Securities Act of 1933, as amended (the "Effective Date").
9. Non-Competition and Confidentiality. Executive shall execute and
-----------------------------------
deliver a letter agreement in the form of Exhibit A hereto.
10. Arbitration. Any claim arising out of or relating to this Agreement
-----------
(including disputes regarding the presence or absence of "Cause" or "Good
Reason" in the event of a termination), or otherwise arising out of or relating
to the Executive's employment by the Company, will be subject to arbitration in
Boston, Massachusetts, in accordance with the Federal Arbitration Act and the
rules of the American Arbitration Association relating to commercial disputes.
The prevailing party in any such arbitration shall be entitled to recover from
the other party its reasonable expenses incurred in connection with such
arbitration, including the reasonable fees and expenses of counsel.
11. Severability. If any provision of this Agreement is determined to be
------------
invalid or unenforceable, it shall be adjusted rather than voided, to achieve
the intent of the parties to the extent possible, and the remainder of the
Agreement shall be enforced to the maximum extent possible.
12. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between Executive and the Company with respect to the terms and conditions of
the employment of Executive by the Company, and supersedes all prior or
concurrent arrangements, discussions, agreements or understandings with respect
to your employment.
<PAGE>
- 5 -
13. Governing Law. This Agreement shall be governed by the laws of the
-------------
Commonwealth of Massachusetts without regard to principles of conflicts of law.
14. Notice. Any notice, or other written communication to be given
------
pursuant to this Agreement for whatever reason shall be deemed duly given and
received (a) if delivered personally, from the date of delivery, or (b) by
certified mail, postage pre-paid, return receipt requested, three (3) days after
the date of mailing, addressed to the above parties as follows:
If to the Company:
Advanstar, Inc.
545 Boylston Street
Boston, MA 02116
Attn: Robert L. Krakoff
with a copy to:
Hellman & Friedman
One Maritime Plaza
Suite 1200
San Francisco, California 94111
Attn: Mitch Cohen
and
Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, Massachusetts 02110
Attn: F. George Davitt, Esq.
If to Executive:
Skip Farber
220 Country Drive
Weston, MA 02193
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
date and year first above written.
<PAGE>
- 6 -
ADVANSTAR, INC.
By: /s/ Robert. L. Krakoff
----------------------------------
Robert. L. Krakoff
Chairman and Chief Executive Officer
/s/ Skip Farber
----------------------------------
Martin C. ("Skip") Farber
<PAGE>
Exhibit A
---------
Advanstar, Inc.
April 19, 1999
Martin C. ("Skip") Farber
220 Country Drive
Weston, MA 02193
Dear Mr. Farber:
You are to be employed by Advanstar, Inc. (the "Company" and, together with
its subsidiaries "Advanstar"). In consideration of your employment with the
Company, you and the Company agree as follows:
1. Non-Competition. You agree that you will not, during the course of
---------------
your employment with the Company or for the Non-Compete Period following the
termination of such employment, compete with Advanstar, as defined in paragraph
4 below. As used herein "Non-Compete Period" means (a) if your employment is
terminated by the Company without Cause (as defined therein) or by you for Good
Reason (as defined therein), six months or (b) if your employment is terminated
for any other reason, one year. If there is any conflict between the provisions
of this letter agreement and the provisions of any other agreement between you
and the Company in respect of the subject matter hereof, the provisions of this
agreement shall govern.
2. Confidentiality. You acknowledge that your association with Advanstar
---------------
will bring you into close contact with many confidential affairs of Advanstar,
including information about costs, profits, markets, sales, publications, key
personnel, pricing policies, operational methods, other business affairs,
methods and other information not readily available to the public, and plans for
future development. In recognition of the foregoing, you covenant and agree
that you will keep confidential all material confidential to Advanstar that is
not otherwise in the public domain and that you will not intentionally disclose
any such information to anyone outside Advanstar or make any use thereof for
your own benefit or for any purpose other than the advancement of the business
of Advanstar at any time except with the prior written consent of Advanstar as
evidenced by a certified resolution of the Chief Executive Officer or the Board
of Directors of the Company. For purposes of this Agreement, the following
information shall be deemed not to constitute confidential information of
Advanstar:
(a) Any information developed independently by you;
(b) Information that was received by you from a third-party, which,
to your knowledge, is not bound by an agreement of
confidentiality with Advanstar; or
<PAGE>
- 2 -
(c) Any information that is in the public domain or generally
available to the public.
3. No Solicitation of Employees. You covenant that, for the duration of 1
----------------------------
year after any termination of your employment for any reason, you will not, and
no person, corporation, partnership, or other entity over which you exercise
control (whether as an officer, director, sole proprietor, holder, debt or
equity securities, consultant, partner, or otherwise) will, directly or
indirectly (a) enter into any written or oral agreement or understanding
relating to the services of any person who is then employed by Advanstar or, in
the case of any employee other than secretaries, clerks and similar employees
fulfilling merely clerical functions, who has been so employed within the
preceding six months, or (b) solicit, or bid against Advanstar in an attempt to
be awarded, any trade show or exposition business, or any publishing contract,
from any party sponsoring or arranging any trade show or exposition, or
publishing or sponsoring any publication, in either case with which Advanstar
then has such a relationship or contract. If there is any conflict between the
provisions of this letter agreement and the provisions of any other agreement
between you and the Company in respect of the subject matter hereof, the
provisions of this agreement shall govern.
4. Certain Definitions. For purposes of this Letter Agreement,
-------------------
competition with Advanstar shall include carrying on any business that is
competitive with the business of Advanstar, in the United States or in any other
country in which Advanstar conducts business as of the termination of your
employment. For purposes of this Letter Agreement, (a) the business of
Advanstar will be deemed to include (without limitation) the organization of
trade shows and expositions of the type and with respect to the industries held
by Advanstar as of the termination of your employment (it being understood that
industry shall be analogized to the categories of the category system of the
Standard Rate Data Service) and the publication (including electronic
publication) of trade journals and other magazines aimed at the particular
businesses, industries or professions (as defined by category according to the
category system of the Standard Rate Data Service) at which Advanstar's
operations are aimed, and (b) each of the following activities (without
limitation) will be deemed to constitute to carrying on business: to engage in,
work with, have interest in, advise, lend money to, guarantee the debts or
obligations of, or permit one's name or any part thereof to be used in
connection with, an enterprise or endeavor either individually, in partnership,
or in conjunction with any person, firm, association, company, or corporation,
whether as principal, agent, shareholder (other than holding of less than 1% of
the voting securities of any public company or 5% of the voting securities of
any private company), employee, director, consultant, or in any other capacity
or manner whatsoever.
5. Severability. The scope and effect of the terms and provisions
------------
contained in this Letter Agreement (including the noncompetition covenant
contained in Section 1) will be as broad in time (but not beyond the time
periods specified herein), geography, and all other respects as is permitted by
applicable law. If arbitrators, a court, or another body of competent
jurisdiction determine that any term or provision of this Agreement is excessive
in scope, then if possible such term or provision will be adjusted (rather than
voided) in accordance with the purpose stated in the preceding sentence and with
applicable law, but in such a manner as to minimize the change in the provision.
If such term or provision cannot be so adjusted, then it
<PAGE>
- 3 -
will be struck. All other terms and provisions of this Letter Agreement will be
deemed valid and enforceable to the full extent possible.
6. Remedies. If any of the covenants or agreements in Sections 1, 2 or 3
--------
are violated or threatened to be violated, you agree and acknowledge that such
violation or threatened violation will cause irreparable injury to Advanstar,
and that the remedy at law of Advanstar for any such violation or threatened
violation will be inadequate and that Advanstar will be entitled to obtain any
injunction prohibiting a continuance or occurrence of such violations or
threatened violations in addition to (not in limitation of) any other rights or
remedies available at law or in equity. Your services hereunder are of a
special, unique, unusual, extraordinary character which gives them peculiar
value, the loss of which cannot be reasonably or adequately computed in damages.
The provisions of this Letter Agreement will be binding upon and inure to
the benefit of our respective heirs, executives, administrators, successors and
assigns. This Letter Agreement will be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts.
Very truly yours,
ADVANSTAR, INC.
By: /s/ Robert L. Krakoff
--------------------------
ACCEPTED AND AGREED:
/s/ Skip Farber
- ------------------------------
Martin C. ("Skip") Farber
<PAGE>
EXHIBIT 10.18
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
April 20, 1999 by and between Advanstar, Inc., a Delaware corporation (the
"Company") and Robert L. Krakoff ("Executive").
WHEREAS, the Company currently operates certain trade exposition and
publishing businesses; and
WHEREAS, the Company wishes to continue to employ Executive and Executive
is prepared to continue to serve in those capacities required by the Company.
NOW, THEREFORE, the parties agree as follows:
1. Position and Authority. The Company agrees to employ the Executive, and
----------------------
the Executive accepts such employment and agrees to serve the Company as
Chairman of the Board of Directors and Chief Executive Officer of the Company
and any of its respective Subsidiaries as may from time to time be requested by
the Company, for the compensation and benefits detailed in Sections 3 and 4
hereof. It is understood that the Executive will report to the Board of
Directors and that no other officer shall regularly so report. During the
Employment Term, the Company shall nominate Executive, and shall use its
commercially reasonable best efforts to cause Executive to be elected, to the
Board of Directors. The Executive shall be the highest ranking officer of the
Company and shall have (in all cases subject to the overall authority and
control of the Board of Directors) such authority as is typical for executives
having similar positions in similar companies. A "Subsidiary" shall be any
company in which the Company beneficially owns more than 50% of the voting power
of such company's outstanding voting securities.
2. Duties. Executive shall devote substantially all of his business time
------
(subject to four weeks of vacation, or such greater amount as is authorized by
the Board of Directors) to the affairs of the Company during the employment
term, except as may be consented to by the Board of Directors. Notwithstanding
the foregoing, to the extent that it does not materially interfere with the
performance of his duties, Executive may devote such business time as is
reasonably necessary to his duties as a director of not more than two business
corporations not affiliated with the Company, and Executive may devote business
time to any charitable or not-for-profit activities. Executive shall perform
such duties and responsibilities as the Board of Directors of the Company may
reasonably determine from time to time, provided that such duties and
responsibilities are consistent with Executive's position as Chief Executive
Officer of the Company and do not diminish Executive's authority as set forth in
Section 1 hereof. Executive will not be required to relocate his permanent
residence outside of greater Boston, Massachusetts; provided that, if Executive
and the Company agree that Executive will relocate his permanent residence to
another city (such agreement to include the Company's reimbursement of
relocation expenses) (a "New Location") and perform his duties and
<PAGE>
responsibilities pursuant to the terms of this contract at the Company's offices
in the New Location, then Executive will not be required to relocate his
permanent residence outside the New Location.
3. Base Compensation and Bonus.
----------------------------
(a) Base Compensation. Executive will be compensated at a base salary
-----------------
rate of $500,000 per year (or such higher rate as may be set from time to time
by the Board of Directors in its discretion) during the employment term. Base
compensation will be paid in installments on the same schedule as the Company's
Subsidiaries generally pay their employees. All compensation and benefits will
be subject to reduction by all federal, state, local and other withholdings and
similar taxes and payments required by applicable law.
(b) Bonus for any Fiscal Year. The Executive shall receive bonus
-------------------------
compensation based on the relationship between the Company's actual earnings
before interest, taxes, depreciation and amortization and non-cash compensation
expense ("EBITDA") for each fiscal year starting with the fiscal year ending
December 31, 1999 (determined based on the Company's audited financial
statements for such fiscal year) and the EBITDA set for such year in the Company
"Adjusted Business Plan" (as defined below) as follows:
Actual EBITDA Bonus
as a Percentage (as a Percentage
of Plan of Base Salary
- ------------------- -------------------
Less than 80% No bonus
100% 50% of Base Salary
120% or More 100% of Base Salary
If actual EBITDA as a percentage of the Company's Adjusted Business Plan falls
between 80% and 120%, the amount of bonus shall be pro rated on a straight-line
basis. In no case shall bonus payable under this Section 3(b) exceed 100% of
Base Salary unless agreed to by the Board of Directors in its absolute
discretion. Nothing herein shall be construed to prohibit or restrict the
Company from paying additional compensation to Executive if the Board of
Directors so determines in its absolute discretion.
The "Adjusted Business Plan" shall be the Company's business plan for
the fiscal year in question as approved by the Board of Directors with the
consent of Executive, appropriately adjusted for acquisitions or dispositions
during the year as determined by the Board of Directors in good faith. If the
Board and the Executive do not adopt a mutually satisfactory business plan prior
to the beginning of any fiscal year, the business plan for purposes of this
Section 3(b) shall be the last business plan submitted by the Company to its
lenders, subject to adjustment as provided above for acquisitions and
dispositions occurring after the date thereof.
2
<PAGE>
Any bonus payable under this Section 3(b) shall be paid not later than
60 days after the applicable fiscal year end.
4. Benefits.
--------
(a) During Executive's employment by the Company, Executive will
receive the same (or substantially similar) employee benefits to those provided
by the Company or its Subsidiaries to other members of senior management from
time to time, including, without limitation, medical and dental insurance,
disability insurance and life insurance (the latter in an amount of not less
than $1,500,000), provided, that regardless of whether or not paid for other
members of senior management, the Company shall pay the entire amount of any
premium for life insurance in an amount of $1,500,000 and disability insurance
provided by the Company to Executive under this Agreement.
(b) During and after the employment term the Company agrees that if
Executive is made a party, or compelled to testify or otherwise participate in,
any action, suit or proceeding (a "Proceeding"), by reason of the fact that he
is or was a director or officer of the Company or any of its Subsidiaries,
Executive shall be indemnified by the Company as provided in Section 145 of the
Delaware General Corporation Law or (but not to any lesser extent) as authorized
by the Company's certificate of incorporation or bylaws or resolutions of the
Company's Board of Directors against all cost, expense, liability, damage and
loss reasonably incurred or suffered by Executive in connection therewith, and
such indemnification shall continue as to Executive even if he has ceased to be
a director or officer of the Company or Subsidiary for the period of any
applicable statute of limitations or, if longer, for the period in which any
such Proceeding which commenced within the period of any such statute of
limitations is pending. The Company shall advance to Executive all reasonable
costs and expenses incurred by him in connection with a Proceeding within 20
days after receipt by the Company of a written request for such advance. Such
request shall include an itemized list of the costs and expenses and an
undertaking by Executive to repay the amount of such advance if it shall
ultimately be determined, in a final judgment for which the time to appeal has
expired, that, pursuant to applicable law, he is not entitled to be indemnified
against such costs and expenses.
(c) The Company will reimburse Executive for his reasonable and
customary business expenses, including travel, accommodations and meals.
Such reimbursement shall include the reasonable cost of travel to and
from Boston (other than commuting expenses) and accommodations and meals when
outside of Boston.
(d) The Company shall lease in Boston office space, reasonably
satisfactory to Executive, at which the Company's principal executive offices
shall be located, including Executive's principal office. Any leasehold
improvements reasonably necessary to prepare such office space for use as the
Company's principal executive office, and all reasonably necessary office
equipment, shall be paid for by the Company. The Company shall provide
Executive with a secretary and such additional office staff as the Board of
Directors and Executive shall determine.
3
<PAGE>
5. Stock Options. If the Company prices an underwritten initial
-------------
public offering of equity securities at any time prior to September 30, 1999,
the Company will grant to Executive at the time of such pricing 439,940 options
(subject to adjustment for the actual IPO price) under the then applicable stock
option plan of the Company (giving effect to the 2-for-1 stock split
contemplated to be effected in April 1999). The terms of such options
(including vesting) will be those established by the Board of Directors for
grants to employees generally under such plan. Executive shall be eligible for
future stock option grants, but any such grant will be in the sole discretion of
the Board of Directors and nothing herein shall be construed to entitle
Executive to any such grant. Notwithstanding anything to the contrary contained
in any stock option grant, (a) if Executive's employment is terminated by the
Company without Cause or by the Executive for Good Reason, all unvested stock
options of the Company then held by Executive will vest and be fully exercisable
in accordance with their terms; and (b) if Executive's employment terminates as
a result of death or Disability, the portion of all unvested stock options of
the Company then held by Executive that would have vested within one year from
the date of death or the date of receipt of written notice of Disability will
vest and be fully exercisable in accordance with their terms. The provisions of
this Section 5 will survive any expiration of this Agreement so long as
Executive is employed by or is a consultant to the Company.
6. Term. This Agreement shall have a term of three (3) years from the
----
Effective Date (the "Employment Term"), provided that Sections 9 and 10 shall
--------
survive such expiration in accordance with their terms.
7. Termination.
-----------
(a) This Agreement may be terminated by the Company at any time for
Cause upon written notice to Executive, which notice shall specify the reason
for termination. Such notice shall be given at any time prior to termination in
the case of matters described in clauses (B) or (C), and shall be given not less
than 30 days prior to the date of termination, in the case of matters described
in clauses (A), (D) or (E), and in the case of matters described in clauses (A),
(D) or (E) shall be rescinded if the Executive cures any misconduct, negligent
act, breach or failure giving rise to such notice to the reasonable satisfaction
of the Board of Directors, including curing any damage suffered by the Company
as a result thereof. As used herein, "Cause" shall mean (A) willful misconduct
or gross negligence by Executive in respect of his material obligations under
this Agreement, (B) conviction of a felony involving moral turpitude, (C) theft
of Company property or other disloyal or dishonest conduct of the Executive that
materially harms the Company or its business or (in the case of dishonest
conduct) undermines the confidence of the Board of Directors, (D) willful breach
of this Agreement, or (E) willful failure to observe Company policies or carry
out the directives of the Board of Directors.
(b) Executive may terminate this Agreement for Good Reason by giving
thirty (30) days prior written notice to the Company. "Good Reason" shall exist
only if (i) Executive is removed or is not re-appointed as the Company's Chief
Executive Officer, except in connection with termination of this Agreement by
the Company for Cause or due to death or Disability (as defined below), (ii)
Executive is assigned duties, or authority is withdrawn from Executive,
inconsistent with Executive's authority pursuant to Section 1, without
Executive's express
4
<PAGE>
written consent, (iii) breach by the Company of any material obligation of the
Company under this Agreement or (iv) Hellman & Friedman and its affiliates shall
cease to beneficially own at least 50% of the voting securities of the Company,
and another person or group (as defined in Section 13 of the Securities Exchange
Act) beneficially owns greater than 50% of such voting securities.
(c) Should the Executive terminate this Agreement for Good Reason, or
should the Company terminate this Agreement without Cause, then the Executive
shall be entitled to receive, for a period of one year, the salary and the
benefits provided for in Sections 3 and 4 hereof, provided that any bonus under
--------
Section 3(b) will be payable only with respect to that portion of the fiscal
year in which Executive's employment was terminated (or any prior fiscal year
for which bonus remains unpaid)); bonus for any partial fiscal year shall be
determined by multiplying the bonus Executive would have received had he
continued to work for the Company during the entire fiscal year by a fraction,
the numerator of which is the number of days in the fiscal year during which
Executive was employed by the Company, and the denominator of which is 365 (such
amount the "Pro Rata Bonus Amount"). If any such benefits cannot be legally
provided, or the provision thereof would disqualify any plan for favorable tax
treatment under the Internal Revenue Code, a financially equivalent substitute
shall be provided. The Company shall have no obligation to Executive under this
Section 7(c) if Executive breaches the provisions of the letter agreement
referred to in Section 9. This clause (c) shall not apply to a termination
under clause (d) below.
(d) This Agreement shall terminate automatically upon Executive's
death. This Agreement may be terminated by the Company upon written notice to
Executive, or by Executive upon written notice to the Company, upon Executive's
Disability. For purposes of this Agreement, "Disability" means the Executive's
suffering of a disability which shall have prevented him from performing his
obligations hereunder for a period of at least 120 consecutive days or 180 non-
consecutive days in any 365 day period. In the event of termination of this
Agreement due to Executive's death or Disability, in addition to any salary due
to Executive as of the date of death or Disability and remaining unpaid,
Executive shall be entitled to receive, at such time as Executive would
otherwise would have received such sum, the Pro Rata Bonus Amount for the
portion of the fiscal year in which Executive's death or Disability occurred
during which Executive was employed by the Company.
(e) If the Company terminates this Agreement with Cause or if the
Executive terminates this Agreement without Good Reason, or if this Agreement is
terminated under clause (d) above, then the Executive shall, from the date of
such termination, no longer be entitled to any compensation under Sections 3 or
4 (other than, in the case of termination for Disability, disability benefits as
provided pursuant to Section 4 and, in the case of termination for death or
Disability, any bonus payable pursuant to clause (d) above). Nothing in this
clause (e) shall affect Executive's rights under Company health and disability
plans in which Executive participates to the extent such plans provide for
benefits to be paid following the termination of employment.
5
<PAGE>
(f) Termination of this Agreement shall not discharge any liability
(of either the Company or the Executive) existing at the date of termination.
Further, notwithstanding any termination, the provisions of Sections 9 and 10
shall survive in accordance with their terms.
(g) If Executive ceases to be employed by the Company for any reason,
Executive will resign from the Board of Directors if requested by the Company.
8. Effective Date. This Agreement shall take effect upon the consummation
--------------
of the Company's initial public offering of its equity securities under the
Securities Act of 1933, as amended the ("Effective Date").
9. Non-Competition and Confidentiality. Executive shall execute and
-----------------------------------
deliver a letter agreement in the form of Exhibit A hereto.
10. Arbitration. Any claim arising out of or relating to this Agreement
-----------
(including disputes regarding the presence or absence of "Cause" or "Good
Reason" in the event of a termination), or otherwise arising out of or relating
to the Executive's employment by the Company, will be subject to arbitration in
San Francisco, California (if brought by Executive) or Boston, Massachusetts (if
brought by the Company), in accordance with the Federal Arbitration Act and the
rules of the American Arbitration Association relating to commercial disputes.
The prevailing party in any such arbitration shall be entitled to recover from
the other party its reasonable expenses incurred in connection with such
arbitration, including the reasonable fees and expenses of counsel.
11. Severability. If any provision of this Agreement is determined to be
------------
invalid or unenforceable, it shall be adjusted rather than voided, to achieve
the intent of the parties to the extent possible, and the remainder of the
Agreement shall be enforced to the maximum extent possible.
12. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between Executive and the Company with respect to the terms and conditions of
the employment of Executive by the Company, and as of the Effective Date
supersedes all prior or concurrent arrangements, discussions, agreements or
understandings with respect to the Executive's employment.
13. Governing Law. This Agreement shall be governed by the laws of
-------------
California without regard to principles of conflicts of law.
14. Notice. Any notice, or other written communication to be given
------
pursuant to this Agreement for whatever reason shall be deemed duly given and
received (a) if delivered personally, from the date of delivery, or (b) by
certified mail, postage pre-paid, return receipt requested, three (3) days after
the date of mailing, addressed to the above parties as follows:
6
<PAGE>
If to the Company:
Advanstar, Inc.
545 Boylston Street
Boston, Massachusetts 02116
Attn: Board of Directors
with a copy to each of:
Hellman & Friedman
One Maritime Plaza
Suite 1200
San Francisco, California 94111
Attn: Mitchell R. Cohen
and
Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, California 94101
Attn: Timothy C. Hoxie, Esq.
If to Executive:
Robert L. Krakoff
257 Commonwealth Avenue
Boston, Massachusetts 02116
and:
Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, Massachusetts 02110
Attn: F. George Davitt, Esq.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
date and year first above written.
ADVANSTAR, INC.
By: /s/ David W. Montgomery
------------------------------
David W. Montgomery
Chief Financial Officer
/s/ Robert L. Krakoff
----------------------------------
Robert L. Krakoff
8
<PAGE>
Exhibit A
---------
Advanstar, Inc.
April 20, 1999
Robert L. Krakoff
257 Commonwealth Avenue
Boston, MA 02116
Dear Mr. Krakoff:
You are to be employed by Advanstar, Inc. (the "Company" and, together with
its subsidiaries "Advanstar"). In consideration of your employment with the
Company, you and the Company agree as follows:
1. Non-Competition. You agree that you will not, during the course of
---------------
your employment with the Company or for the Non-Compete Period following the
termination of such employment, compete with Advanstar, as defined in paragraph
4 below. As used herein "Non-Compete Period" means (a) if your employment is
terminated by the Company without Cause (as defined therein) or by you for Good
Reason (as defined therein), six months or (b) if your employment is terminated
for any other reason, one year.
2. Confidentiality. You acknowledge that your association with Advanstar
---------------
will bring you into close contact with many confidential affairs of Advanstar,
including information about costs, profits, markets, sales, publications, key
personnel, pricing policies, operational methods, other business affairs,
methods and other information not readily available to the public, and plans for
future development. In recognition of the foregoing, you covenant and agree
that you will keep confidential all material confidential to Advanstar that is
not otherwise in the public domain and that you will not intentionally disclose
any such information to anyone outside Advanstar or make any use thereof for
your own benefit or for any purpose other than the advancement of the business
of Advanstar at any time except with the prior written consent of Advanstar as
evidenced by a certified resolution of the Board of Directors of the Company.
For purposes of this Agreement, the following information shall be deemed not to
constitute confidential information of Advanstar:
(a) Any information developed independently by you;
(b) Information that was received by you from a third-party, which,
to your knowledge, is not bound by an agreement of
confidentiality with Advanstar; or
(c) Any information that is in the public domain or generally
available to the public.
<PAGE>
3. No Solicitation of Employees. You covenant that during the Non-Compete
----------------------------
Period, you will not, and no person, corporation, partnership, or other entity
over which you exercise control (whether as an officer, director, sole
proprietor, holder, debt or equity securities, consultant, partner, or
otherwise) will, directly or indirectly (a) enter into any written or oral
agreement or understanding relating to the services of any person who is then
employed by Advanstar or, in the case of any employee other than secretaries,
clerks and similar employees fulfilling merely clerical functions, who has been
so employed within the preceding six months, or (b) solicit, or bid against
Advanstar in an attempt to be awarded, any trade show or exposition business, or
any publishing contract, from any party sponsoring or arranging any trade show
or exposition, or publishing or sponsoring any publication, in either case with
which Advanstar then has such a relationship or contract.
4. Certain Definitions. For purposes of this Letter Agreement,
-------------------
competition with Advanstar shall include carrying on any business that is
competitive with the business of Advanstar, in the United States or in any other
country in which Advanstar conducts business as of the termination of your
employment. For purposes of this Letter Agreement, (a) the business of
Advanstar will be deemed to include (without limitation) the organization of
trade shows and expositions of the type and with respect to the industries held
by Advanstar as of the termination of your employment (it being understood that
industry shall be analogized to the categories of the category system of the
Standard Rate Data Service) and the publication (including electronic
publication) of trade journals and other magazines aimed at the particular
businesses, industries or professions (as defined by category according to the
category system of the Standard Rate Data Service) at which Advanstar's
operations are aimed, and (b) each of the following activities (without
limitation) will be deemed to constitute to carrying on business: to engage in,
work with, have interest in, advise, lend money to, guarantee the debts or
obligations of, or permit one's name or any part thereof to be used in
connection with, an enterprise or endeavor either individually, in partnership,
or in conjunction with any person, firm, association, company, or corporation,
whether as principal, agent, shareholder (other than holding of less than 1% of
the voting securities of any public company or 5% of the voting securities of
any private company), employee, director, consultant, or in any other capacity
or manner whatsoever.
5. Severability. The scope and effect of the terms and provisions
------------
contained in this Letter Agreement (including the noncompetition covenant
contained in Section 1) will be as broad in time (but not beyond the time
periods specified herein), geography, and all other respects as is permitted by
applicable law. If arbitrators, a court, or another body of competent
jurisdiction determine that any term or provision of this Agreement is excessive
in scope, then if possible such term or provision will be adjusted (rather than
voided) in accordance with the purpose stated in the preceding sentence and with
applicable law, but in such a manner as to minimize the change in the provision.
If such term or provision cannot be so adjusted, then it will be struck. All
other terms and provisions of this Letter Agreement will be deemed valid and
enforceable to the full extent possible.
6. Remedies. If any of the covenants or agreements in Sections 1, 2 or 3
--------
are violated or threatened to be violated, you agree and acknowledge that such
violation or threatened violation will cause irreparable injury to Advanstar,
and that the remedy at law of Advanstar for
10
<PAGE>
any such violation or threatened violation will be inadequate and that Advanstar
will be entitled to obtain any injunction prohibiting a continuance or
occurrence of such violations or threatened violations in addition to (not in
limitation of) any other rights or remedies available at law or in equity. Your
services hereunder are of a special, unique, unusual, extraordinary character
which gives them peculiar value, the loss of which cannot be reasonably or
adequately computed in damages.
The provisions of this Letter Agreement will be binding upon and inure to
the benefit of our respective heirs, executives, administrators, successors and
assigns. This Letter Agreement will be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts. If there is any conflict
between the provisions of this letter agreement and the provisions of any other
agreement between you and the Company in respect of the subject matter hereof,
the provisions of this agreement shall govern.
Very truly yours,
ADVANSTAR, INC.
By: /s/ David W. Montgomery
------------------------------
David W. Montgomery
Chief Financial Officer
ACCEPTED AND AGREED:
/s/ Robert L. Krakoff
______________________________
Robert L. Krakoff
11
<PAGE>
EXHIBIT 10.19
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
April 20, 1999 by and between Advanstar, Inc., a Delaware corporation (the
"Company") and James M. Alic ("Executive").
WHEREAS, the Company currently operates certain trade exposition and
publishing businesses; and
WHEREAS, the Company wishes to continue to employ Executive and Executive
is prepared to continue to serve in those capacities required by the Company.
NOW, THEREFORE, the parties agree as follows:
1. Position and Authority. The Company agrees to employ the Executive, and
----------------------
the Executive accepts such employment and agrees to serve the Company as Vice
Chairman of the Company and any of its respective Subsidiaries as may from time
to time be requested by the Company, for the compensation and benefits detailed
in Sections 3 and 4 hereof. It is understood that the Executive will report to
the Chief Executive Officer of the Company. During the Employment Term, the
Company shall nominate Executive, and shall use its commercially reasonable best
efforts to cause Executive to be elected, to the Board of Directors. A
"Subsidiary" shall be any company in which the Company beneficially owns more
than 50% of the voting power of such company's outstanding voting securities.
2. Duties. Executive shall devote substantially all of his business time
(subject to four weeks of vacation, or such greater amount as is authorized by
the Board of Directors) to the affairs of the Company during the employment
term, except as may be consented to by the Board of Directors. Notwithstanding
the foregoing, to the extent that it does not materially interfere with the
performance of his duties, Executive may devote such business time as is
reasonably necessary to his duties as a director of not more than two business
corporations not affiliated with the Company, and Executive may devote business
time to any charitable or not-for-profit activities. Executive shall perform
such duties and responsibilities as the Board of Directors or Chief Executive
Officer of the Company may reasonably determine from time to time, provided that
such duties and responsibilities are consistent with Executive's position as
Vice Chairman of the Company and do not diminish Executive's authority as set
forth in Section 1 hereof. Executive will not be required to relocate his
permanent residence.
3. Base Compensation and Bonus.
---------------------------
(a) Base Composition. Executive will be compensated at a base salary
----------------
rate of $400,000 per year (or such higher rate as may be set from time to time
by the Board of Directors in its discretion) during the employment term. Base
compensation will be paid in installments on the same schedule as the Company's
Subsidiaries generally pay their employees. All
<PAGE>
compensation and benefits will be subject to reduction by all federal, state,
local and other withholdings and similar taxes and payments required by
applicable law.
(b) Bonus for any Fiscal Year. The Executive shall receive bonus
-------------------------
compensation based on the relationship between the Company's actual earnings
before interest, taxes, depreciation and amortization and non-cash compensation
expense ("EBITDA") for each fiscal year starting with the fiscal year ending
December 31, 1999 (determined based on the Company's audited financial
statements for such fiscal year) and the EBITDA set for such year in the Company
"Adjusted Business Plan" (as defined below) as follows:
Actual EBITDA Bonus
as a Percentage (as a Percentage
of Plan of Base Salary
- --------------- -------------------
Less than 80% No bonus
100% 50% of Base Salary
120% or More 100% of Base Salary
If actual EBITDA as a percentage of the Company's Adjusted Business Plan falls
between 80% and 120%, the amount of bonus shall be pro rated on a straight-line
basis. In no case shall bonus payable under this Section 3(b) exceed 100% of
Base Salary unless agreed to by the Board of Directors in its absolute
discretion. Nothing herein shall be construed to prohibit or restrict the
Company from paying additional compensation to Executive if the Board of
Directors so determines in its absolute discretion.
The "Adjusted Business Plan" shall be the Company's business plan for
the fiscal year in question as approved by the Board of Directors with the
consent of the Chief Executive Officer of the Company, appropriately adjusted
for acquisitions or dispositions during the year as determined by the Board of
Directors in good faith. If the Board and the Chief Executive Officer do not
adopt a mutually satisfactory business plan prior to the beginning of any fiscal
year, the business plan for purposes of this Section 3(b) shall be the last
business plan submitted by the Company to its lenders, subject to adjustment as
provided above for acquisitions and dispositions occurring after the date
thereof.
Any bonus payable under this Section 3(b) shall be paid not later than
60 days after the applicable fiscal year end.
4. Benefits.
--------
(a) During Executive's employment by the Company, Executive will
receive the same (or substantially similar) employee benefits to those provided
by the Company or its Subsidiaries to other members of senior management from
time to time.
-2-
<PAGE>
(b) During and after the employment term the Company agrees that if
Executive is made a party, or compelled to testify or otherwise participate in,
any action, suit or proceeding (a "Proceeding"), by reason of the fact that he
is or was a director or officer of the Company or any of its Subsidiaries,
Executive shall be indemnified by the Company as provided in Section 145 of the
Delaware General Corporation Law or (but not to any lesser extent) as authorized
by the Company's certificate of incorporation or bylaws or resolutions of the
Company's Board of Directors against all cost, expense, liability, damage and
loss reasonably incurred or suffered by Executive in connection therewith, and
such indemnification shall continue as to Executive even if he has ceased to be
a director or officer of the Company or Subsidiary for the period of any
applicable statute of limitations or, if longer, for the period in which any
such Proceeding which commenced within the period of any such statute of
limitations is pending. The Company shall advance to Executive all reasonable
costs and expenses incurred by him in connection with a Proceeding within 20
days after receipt by the Company of a written request for such advance. Such
request shall include an itemized list of the costs and expenses and an
undertaking by Executive to repay the amount of such advance if it shall
ultimately be determined, in a final judgment for which the time to appeal has
expired, that, pursuant to applicable law, he is not entitled to be indemnified
against such costs and expenses.
(c) The Company will reimburse Executive for his reasonable and
customary business expenses, including travel, accommodations and meals.
Such reimbursement shall include the reasonable cost of travel to and
from Boston, Cleveland and other Company offices and accommodations and meals
when outside of his residence location.
5. Stock Options. If the Company prices an underwritten initial
-------------
public offering of equity securities at any time prior to September 30, 1999,
the Company will grant to Executive at the time of such pricing 137,480 options
(subject to adjustment for the actual IPO price) under the then applicable stock
option plan of the Company (giving effect to the 2-for-1 stock split
contemplated to be effected in April 1999). The terms of such options
(including vesting) will be those established by the Board of Directors for
grants to employees generally under such plan. Executive shall be eligible for
future stock option grants, but any such grant will be in the sole discretion of
the Board of Directors and nothing herein shall be construed to entitle
Executive to any such grant. Notwithstanding anything to the contrary contained
in any stock option grant, (a) if Executive's employment is terminated by the
Company without Cause or by the Executive for Good Reason (other than clause (v)
of the definition of Good Reason), all unvested stock options of the Company
then held by Executive will vest and be fully exercisable in accordance with
their terms; and (b) if Executive's employment terminates as a result of death
or Disability, the portion of all unvested stock options of the Company then
held by Executive that would have vested within one year from the date of death
or the date of receipt of written notice of Disability will vest and be fully
exercisable in accordance with their terms. The provisions of this Section 5
will survive any expiration of this Agreement so long as Executive is employed
by or is a consultant to the Company.
-3-
<PAGE>
6. Term. This Agreement shall have a term of three (3) years from the
----
Effective Date (the "Employment Term"), provided that Sections 9 and 10 shall
--------
survive such expiration in accordance with their terms.
7. Termination.
-----------
(a) This Agreement may be terminated by the Company at any time for
Cause upon written notice to Executive, which notice shall specify the reason
for termination. Such notice shall be given at any time prior to termination in
the case of matters described in clauses (B) or (C), and shall be given not less
than 30 days prior to the date of termination, in the case of matters described
in clauses (A), (D) or (E), and in the case of matters described in clauses (A),
(D) or (E) shall be rescinded if the Executive cures any misconduct, negligent
act, breach or failure giving rise to such notice to the reasonable satisfaction
of the Board of Directors, including curing any damage suffered by the Company
as a result thereof. As used herein, "Cause" shall mean (A) willful misconduct
or gross negligence by Executive in respect of his material obligations under
this Agreement, (B) conviction of a felony involving moral turpitude, (C) theft
of Company property or other disloyal or dishonest conduct of the Executive that
materially harms the Company or its business or (in the case of dishonest
conduct) undermines the confidence of the Board of Directors, (D) willful breach
of this Agreement, or (E) willful failure to observe Company policies or carry
out the directives of the Board of Directors.
(b) Executive may terminate this Agreement for Good Reason by giving
thirty (30) days prior written notice to the Company. "Good Reason" shall exist
only if (i) Executive is removed or is not re-appointed as the Company's Vice
Chairman, except in connection with termination of this Agreement by the Company
for Cause or due to death or Disability (as defined below), (ii) Executive is
assigned duties, or authority is withdrawn from Executive, inconsistent with
Executive's authority pursuant to Section 1, without Executive's express written
consent, (iii) breach by the Company of any material obligation of the Company
under this Agreement, (iv) Hellman & Friedman and its affiliates shall cease to
beneficially own at least 50% of the voting securities of the Company, and
another person or group (as defined in Section 13 of the Securities Exchange
Act) beneficially owns greater than 50% of such voting securities or (v) Robert
Krakoff ceases to be Chief Executive Officer of the Company and Executive is not
appointed Chief Executive Officer of the Company.
(c) Should the Executive terminate this Agreement for Good Reason, or
should the Company terminate this Agreement without Cause, then the Executive
shall be entitled to receive, for a period of one year, the salary and the
benefits provided for in Section Sections 3 and 4 hereof, provided that any
bonus under Section 3(b) will be payable only with respect to that portion of
the fiscal year in which Executive's employment was terminated (or any prior
fiscal year for which bonus remains unpaid)); bonus for any partial fiscal year
shall be determined by multiplying the bonus Executive would have received had
he continued to work for the Company during the entire fiscal year by a
fraction, the numerator of which is the number of days in the fiscal year during
which Executive was employed by the Company, and the denominator of which is 365
(such amount the "Pro Rata Bonus Amount"). If any such benefits cannot be
legally provided, or the provision thereof would disqualify any plan for
favorable tax
-4-
<PAGE>
treatment under the Internal Revenue Code, a financially equivalent substitute
shall be provided. The Company shall have no obligation to Executive under this
Section 7(c) if Executive breaches the provisions of the letter agreement
referred to in Section 9. This clause (c) shall not apply to a termination under
clause (d) below.
(d) This Agreement shall terminate automatically upon Executive's
death. This Agreement may be terminated by the Company upon written notice to
Executive, or by Executive upon written notice to the Company, upon Executive's
Disability. For purposes of this Agreement, "Disability" means the Executive's
suffering of a disability which shall have prevented him from performing his
obligations hereunder for a period of at least 120 consecutive days or 180 non-
consecutive days in any 365 day period. In the event of termination of this
Agreement due to Executive's death or Disability, in addition to any salary due
to Executive as of the date of death or Disability and remaining unpaid,
Executive shall be entitled to receive, at such time as Executive would
otherwise would have received such sum, the Pro Rata Bonus Amount for the
portion of the fiscal year in which Executive's death or Disability occurred
during which Executive was employed by the Company.
(e) If the Company terminates this Agreement with Cause or if the
Executive terminates this Agreement without Good Reason, or if this Agreement is
terminated under clause (d) above, then the Executive shall, from the date of
such termination, no longer be entitled to any compensation under Sections 3 or
4 (other than, in the case of termination for Disability, disability benefits as
provided pursuant to Section 4 and, in the case of termination for death or
Disability, any bonus payable pursuant to clause (d) above). Nothing in this
clause (e) shall affect Executive's rights under Company health and disability
plans in which Executive participates to the extent such plans provide for
benefits to be paid following the termination of employment.
(f) Termination of this Agreement shall not discharge any liability
(of either the Company or the Executive) existing at the date of termination.
Further, notwithstanding any termination, the provisions of Sections 9 and 10
shall survive in accordance with their terms.
(g) If Executive ceases to be employed by the Company for any reason,
Executive will resign from the Board of Directors if requested by the Company.
8. Effective Date. This Agreement shall take effect upon the consummation
--------------
of the Company's initial public offering of its equity securities under the
Securities Act of 1933, as amended (the "Effective Date").
9. Non-Competition and Confidentiality. Executive shall execute and
-----------------------------------
deliver a letter agreement in the form of Exhibit A hereto.
10. Arbitration. Any claim arising out of or relating to this Agreement
-----------
(including disputes regarding the presence or absence of "Cause" or "Good
Reason" in the event of a termination), or otherwise arising out of or relating
to the Executive's employment by the Company, will be subject to arbitration in
San Francisco, California (if brought by Executive) or Boston, Massachusetts (if
brought by the Company), in accordance with the Federal Arbitration
-5-
<PAGE>
Act and the rules of the American Arbitration Association relating to commercial
disputes. The prevailing party in any such arbitration shall be entitled to
recover from the other party its reasonable expenses incurred in connection with
such arbitration, including the reasonable fees and expenses of counsel.
11. Severability. If any provision of this Agreement is determined to be
------------
invalid or unenforceable, it shall be adjusted rather than voided, to achieve
the intent of the parties to the extent possible, and the remainder of the
Agreement shall be enforced to the maximum extent possible.
12. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between Executive and the Company with respect to the terms and conditions of
the employment of Executive by the Company, and, as of the Effective Date,
supersedes all prior or concurrent arrangements, discussions, agreements or
understandings with respect to the Executive's employment.
13. Governing Law. This Agreement shall be governed by the laws of
-------------
California without regard to principles of conflicts of law.
14. Notice. Any notice, or other written communication to be given
------
pursuant to this Agreement for whatever reason shall be deemed duly given and
received (a) if delivered personally, from the date of delivery, or (b) by
certified mail, postage pre-paid, return receipt requested, three (3) days after
the date of mailing, addressed to the above parties as follows:
If to the Company:
Advanstar, Inc.
545 Boylston Street
Boston, Massachusetts 02116
Attn: Board of Directors
Hellman & Friedman
One Maritime Plaza
Suite 1200
San Francisco, California 94111
Attn: Mitchell R. Cohen
with a copy to:
Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, California 94101
Attn: Timothy C. Hoxie, Esq.
-6-
<PAGE>
If to Executive:
James M. Alic
6 Snowflake Lane
Westport, Connecticut 06880
with a copy to:
Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, Massachusetts 02110
Attn: F. George Davitt, Esq.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
date and year first above written.
ADVANSTAR, INC.
By: /s/ Robert L. Krakoff
-----------------------------------------
Robert L. Krakoff
Chairman of the Board and Chief Executive
Officer
/s/ James M. Alic
-----------------------------------------
James M. Alic
-8-
<PAGE>
Exhibit A
---------
Advanstar, Inc.
April 20, 1999
James M. Alic
6 Snowflake Lane
Westport, CT 06880
Dear Mr. Alic:
You are to be employed by Advanstar, Inc. (the "Company" and, together with
its subsidiaries "Advanstar"). In consideration of your employment with the
Company, you and the Company agree as follows:
1. Non-Competition. You agree that you will not, during the course of
---------------
your employment with the Company or for the Non-Compete Period following the
termination of such employment, compete with Advanstar, as defined in paragraph
4 below. As used herein "Non-Compete Period" means (a) if your employment is
terminated by the Company without Cause (as defined therein) or by you for Good
Reason (as defined therein), six months or (b) if your employment is terminated
for any other reason, one year.
2. Confidentiality. You acknowledge that your association with Advanstar
---------------
will bring you into close contact with many confidential affairs of Advanstar,
including information about costs, profits, markets, sales, publications, key
personnel, pricing policies, operational methods, other business affairs,
methods and other information not readily available to the public, and plans for
future development. In recognition of the foregoing, you covenant and agree
that you will keep confidential all material confidential to Advanstar that is
not otherwise in the public domain and that you will not intentionally disclose
any such information to anyone outside Advanstar or make any use thereof for
your own benefit or for any purpose other than the advancement of the business
of Advanstar at any time except with the prior written consent of Advanstar as
evidenced by a certified resolution of the Board of Directors of the Company.
For purposes of this Agreement, the following information shall be deemed not to
constitute confidential information of Advanstar:
(a) Any information developed independently by you;
(b) Information that was received by you from a third-party, which,
to your knowledge, is not bound by an agreement of
confidentiality with Advanstar; or
(c) Any information that is in the public domain or generally
available to the public.
<PAGE>
3. No Solicitation of Employees. You covenant that during the Non-Compete
----------------------------
Period, you will not, and no person, corporation, partnership, or other entity
over which you exercise control (whether as an officer, director, sole
proprietor, holder, debt or equity securities, consultant, partner, or
otherwise) will, directly or indirectly (a) enter into any written or oral
agreement or understanding relating to the services of any person who is then
employed by Advanstar or, in the case of any employee other than secretaries,
clerks and similar employees fulfilling merely clerical functions, who has been
so employed within the preceding six months, or (b) solicit, or bid against
Advanstar in an attempt to be awarded, any trade show or exposition business, or
any publishing contract, from any party sponsoring or arranging any trade show
or exposition, or publishing or sponsoring any publication, in either case with
which Advanstar then has such a relationship or contract.
4. Certain Definitions. For purposes of this Letter Agreement,
-------------------
competition with Advanstar shall include carrying on any business that is
competitive with the business of Advanstar, in the United States or in any other
country in which Advanstar conducts business as of the termination of your
employment. For purposes of this Letter Agreement, (a) the business of
Advanstar will be deemed to include (without limitation) the organization of
trade shows and expositions of the type and with respect to the industries held
by Advanstar as of the termination of your employment (it being understood that
industry shall be analogized to the categories of the category system of the
Standard Rate Data Service) and the publication (including electronic
publication) of trade journals and other magazines aimed at the particular
businesses, industries or professions (as defined by category according to the
category system of the Standard Rate Data Service) at which Advanstar's
operations are aimed, and (b) each of the following activities (without
limitation) will be deemed to constitute to carrying on business: to engage in,
work with, have interest in, advise, lend money to, guarantee the debts or
obligations of, or permit one's name or any part thereof to be used in
connection with, an enterprise or endeavor either individually, in partnership,
or in conjunction with any person, firm, association, company, or corporation,
whether as principal, agent, shareholder (other than holding of less than 1% of
the voting securities of any public company or 5% of the voting securities of
any private company), employee, director, consultant, or in any other capacity
or manner whatsoever.
5. Severability. The scope and effect of the terms and provisions
------------
contained in this Letter Agreement (including the noncompetition covenant
contained in Section 1) will be as broad in time (but not beyond the time
periods specified herein), geography, and all other respects as is permitted by
applicable law. If arbitrators, a court, or another body of competent
jurisdiction determine that any term or provision of this Agreement is excessive
in scope, then if possible such term or provision will be adjusted (rather than
voided) in accordance with the purpose stated in the preceding sentence and with
applicable law, but in such a manner as to minimize the change in the provision.
If such term or provision cannot be so adjusted, then it will be struck. All
other terms and provisions of this Letter Agreement will be deemed valid and
enforceable to the full extent possible.
6. Remedies. If any of the covenants or agreements in Sections 1, 2 or 3
--------
are violated or threatened to be violated, you agree and acknowledge that such
violation or threatened violation will cause irreparable injury to Advanstar,
and that the remedy at law of Advanstar for
-10-
<PAGE>
any such violation or threatened violation will be inadequate and that Advanstar
will be entitled to obtain any injunction prohibiting a continuance or
occurrence of such violations or threatened violations in addition to (not in
limitation of) any other rights or remedies available at law or in equity. Your
services hereunder are of a special, unique, unusual, extraordinary character
which gives them peculiar value, the loss of which cannot be reasonably or
adequately computed in damages.
The provisions of this Letter Agreement will be binding upon and inure to
the benefit of our respective heirs, executives, administrators, successors and
assigns. This Letter Agreement will be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts. If there is any conflict
between the provisions of this letter agreement and the provisions of any other
agreement between you and the Company in respect of the subject matter hereof,
the provisions of this agreement shall govern.
Very truly yours,
ADVANSTAR, INC.
By: /s/ Robert L. Krakoff
-----------------------------------------
Robert L. Krakoff
Chairman of the Board and Chief Executive
Officer
ACCEPTED AND AGREED:
/s/ James M. Alic
______________________________
James M. Alic
-11-
<PAGE>
EXHIBIT 10.20
Section 5 (setting for the registration rights provisions) to the Amended
and Restated Stockholders Agreement, dated April 20, 1999 by and among
Advanstar, Inc., AHI Advanstar, LLC, Robert L. Krakoff, James Alic, Peter J.
Solomon, Co., Ltd., Hellman & Friedman Capital Partners III, L.P., H&F Orchard
Partners III, L.P. and H&F International Partners III, L.P.
5. Registration Rights.
-------------------
(a) Incidental Registration. If the Company at any time (other than
-----------------------
pursuant to paragraph (b) below), proposes to register any of its securities
under the Securities Act for a Public Sale, whether for its own account or for
the account of other security holders or both (except with respect to
registration statements on Forms S-4, S-8 or another form not available for
registering Restricted Stock for sale to the public), each such time it will
give written notice to all holders of outstanding Restricted Stock of its
intention so to do. Upon the written request of any such holder, received by the
Company within 30 days after the giving of any such notice by the Company, to
register any of its Restricted Stock, the Company will use its best efforts to
cause the Restricted Stock as to which registration shall have been so requested
to be included in the securities to be covered by the registration statement
proposed to be filed by the Company, all to the extent requisite to permit the
sale or other disposition by the holder of such Restricted Stock so registered.
In the event that any registration pursuant to this paragraph (a) shall be, in
whole or in part, an underwritten public offering of Common Stock, the number of
shares of Restricted Stock to be included in such an underwriting may be reduced
(pro rata among the requesting holders and other Sellers Stockholders based upon
the number of shares of Restricted Stock or other shares of Common Stock owned
by such holders) if and to the extent that the managing underwriter shall be of
the opinion that such inclusion would adversely affect the marketing of the
securities to be sold by the Company therein. Notwithstanding the foregoing
provisions, the Company may withdraw any registration statement referred to in
this paragraph (a) without thereby incurring any liability to the holders of
Restricted Stock.
(b) Registration on Form S-3. If at any time (i) a holder or
------------------------
holders of Restricted Stock request that the Company file a registration
statement on Form S-3 or any successor thereto for a public offering of all or
any portion of the shares of Restricted Stock held by such requesting holder or
holders, the reasonably anticipated aggregate price to the public of which would
exceed $2,500,000, and (ii) the Company is a registrant entitled to use Form S-3
or any successor thereto to register such shares, then the Company shall use its
best efforts to register under the Securities Act on Form S-3 or
<PAGE>
A-2
any successor thereto, for Public Sale in accordance with the method of
disposition specified in such notice, the number of shares of Restricted Stock
specified in such notice. Whenever the Company is required by this paragraph (b)
to use its best efforts to effect the registration of Restricted Stock, each of
the procedures and requirements of paragraph (a) (including but not limited to
the requirement that the Company notify all holders of Restricted Stock and
provide them with the opportunity to participate in the offering) shall apply to
such registration, provided, however, that there shall be no limitation on the
number of registrations on Form S-3 which may be requested and obtained under
this paragraph (b). Notwithstanding the other provision of this paragraph (b),
the Company need not register any proposed distribution of Restricted Stock for
a holder or holders if the shares of Restricted Stock proposed to be distributed
could be sold by such requesting holder or holders within three months of such
request pursuant to Rule 144.
(c) Registration Procedures. If and whenever the Company is
-----------------------
required by the provisions of paragraphs (a) or (b) above to use its best
efforts to effect the registration of any shares of Restricted Stock under the
Securities Act, the Company will:
(i) prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as hereinafter provided);
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in clause (i) above and comply with the provisions of the
Securities Act with respect to the disposition of all Restricted Stock covered
by such registration statement in accordance with the sellers' intended method
of disposition set forth in such registration statement for such period;
(iii) furnish to each seller of Restricted Stock and to each
underwriter, if any, such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the Public Sale or other
disposition of the Restricted Stock covered by such registration statement;
(iv) use its best efforts to register or qualify the Restricted
Stock covered by such registration statement under the securities or "blue sky"
laws of such jurisdictions as the sellers of Restricted Stock or, in the case of
an underwritten public offering, the managing underwriter reasonably shall
request, provided, however, that the Company shall not for any such purpose be
required to qualify generally to transact
<PAGE>
A-3
business as a foreign corporation in any jurisdiction where it is not so
qualified or to consent to general service of process in any such jurisdiction;
(v) use its best efforts to list the Restricted Stock covered
by such registration statement with any securities exchange on which the Common
Stock of the Company is then listed;
(vi) immediately notify each seller of Restricted Stock and each
underwriter, if any, under such registration statement, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event of which the Company has knowledge as a
result of which the prospectus contained in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(vii) if the offering is underwritten and at the request of any
seller of Restricted Stock, use its best efforts to furnish on the date that
Restricted Stock is delivered to the underwriters for sale pursuant to such
registration: (A) an opinion dated such date of counsel representing the Company
for the purposes of such registration, addressed to the underwriters and to such
seller, stating that such registration statement has become effective under the
Securities Act and that (x) to the best knowledge of such counsel, no stop order
suspending the effectiveness thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the Securities
Act, (y) the registration statement, the related prospectus and each amendment
or supplement thereof comply as to form in all material respects with the
requirements of the Securities Act (except that such counsel need not express
any opinion as to financial statements contained therein) and (z) to such other
effects as reasonably may be requested by counsel for the underwriters and (B) a
letter dated such date from the independent public accountants retained by the
Company, addressed to the underwriters and to such seller, stating that they are
independent public accountants within the meaning of the Securities Act and
that, in the opinion of such accountants, the financial statements of the
Company included in the registration statement or the prospectus, or any
amendment or supplement thereto, comply as to form in all material respects with
the applicable accounting requirements of the Securities Act, and such letter
shall additionally cover such other financial matters (including information as
to the period ending no more than five business days prior to the date of such
letter) with respect to such registration as such underwriters reasonably may
request; and
(viii) make available for inspection by each seller of Restricted
Stock, any underwriter participating in any distribution pursuant to such
registration statement, and any attorney, accountant or other agent retained by
such seller or underwriter, all financial and other records, pertinent corporate
documents and properties
<PAGE>
A-4
of the Company, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration statement.
For purposes of clauses (i) and (ii) of this paragraph (c), the
period of distribution of Restricted Stock in a firm commitment underwritten
public offering shall be deemed to extend until each underwriter has completed
the distribution of all securities purchased by it, and the period of
distribution of Restricted Stock in any other registration shall be deemed to
extend until the earlier of the sale of all Restricted Stock covered thereby and
30 days after the effective date thereof.
In connection with each registration hereunder, the sellers of
Restricted Stock will furnish to the Company in writing such information with
respect to themselves and the proposed distribution by them as reasonably shall
be necessary in order to assure compliance with federal and applicable state
securities laws.
In connection with each registration pursuant to paragraphs (a) or
(b) above covering an underwritten public offering, the Company and each seller
agree to enter into a written agreement with the managing underwriter selected
by the Company in such form and containing such provisions as are customary in
the securities business for such an arrangement between such underwriter and
companies of the Company's size and investment stature.
(d) Expenses. All expenses incurred by the Company in
--------
complying herewith, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses (including counsel fees)
incurred in connection with complying with state securities or "blue sky" laws,
fees of the National Association of Securities Dealers, Inc., transfer taxes,
fees of transfer agents and registrars, costs of insurance, but excluding any
Selling Expenses, are called "Registration Expenses". All underwriting discounts
and selling commissions applicable to the sale of Restricted Stock are called
"Selling Expenses".
The Company will pay all Registration Expenses in connection with
each registration statement hereunder. All Selling Expenses in connection with
each registration statement hereunder shall be borne by the participating
sellers in proportion to the number of shares sold by each (including the
Company, if it is a seller).
(e) Indemnification and Contribution.
--------------------------------
(i) In the event of a registration of any of the Restricted
Stock hereunder, the Company will indemnify and hold harmless each seller of
such Restricted Stock thereunder, each underwriter of such Restricted Stock
thereunder and each other
<PAGE>
A-5
person, if any, who controls such seller or underwriter within the meaning of
the Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such seller, underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such Restricted Stock was
registered, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse each such seller, each such underwriter and each such controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action, provided, however, that the Company will not be liable in any such
-------- -------
case if and to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission so made in conformity with information furnished by
any such seller, any such underwriter or any such controlling person in writing
specifically for use in such registration statement or prospectus.
(ii) In the event of a registration of any of the Restricted
Stock hereunder, each seller of such Restricted Stock thereunder, severally and
not jointly, will indemnify and hold harmless the Company, each person, if any,
who controls the Company within the meaning of the Securities Act, each officer
of the Company who signs the registration statement, each director of the
Company, each underwriter and each person who controls any underwriter within
the meaning of the Securities Act, against all losses, claims, damages or
liabilities, joint or several, to which the Company or such officer, director,
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration statement
under which such Restricted Stock was registered, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and each such
officer, director, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
that such seller will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
such seller, as such, furnished in writing to the Company by such seller
specifically for use in such registration statement or prospectus.
<PAGE>
A-6
(iii) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this paragraph (e) and shall only
relieve it from any liability which it may have to such indemnified party under
this paragraph (e) if and to the extent the indemnifying party is materially
prejudiced by such omission. In case any such action shall be brought against
any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel satisfactory to such indemnified party, and, after notice from the
indemnifying party to such indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall not be liable to
such indemnified party under this paragraph (e) for any legal expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected, provided, however, that, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, the indemnified party shall have the right to select a separate counsel
and to assume such legal defenses and otherwise to participate in the defense of
such action, with the expenses and fees of such separate counsel and other
expenses related to such participation to be reimbursed by the indemnifying
party as incurred.
(iv) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which either (A) any
holder of Restricted Stock exercising rights under this Agreement, or any
controlling person of any such holder, makes a claim for indemnification
pursuant to this paragraph (e) but it is judicially determined (by the entry of
a final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this paragraph (e) provides for indemnification in such case, or (B)
contribution under the Securities Act may be required on the part of any such
selling holder or any such controlling person in circumstances for which
indemnification is provided under this paragraph (e); then, and in each such
case, the Company and such holder will contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion so that such holder is responsible for the
portion represented by the percentage that the public offering price of its
Restricted Stock offered by the registration statement bears to the public
offering price of all securities offered by such registration statement, and the
Company is responsible for the remaining
<PAGE>
A-7
portion; provided, however, that, in any such case, (x) no such holder will be
required to contribute any amount in excess of the public offering price of all
such Restricted Stock offered by it pursuant to such registration statement; and
(y) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
(f) Changes in Common Stock. If, and as often as, there is any
-----------------------
change in the Common Stock by way of a stock split, stock dividend, combination
or reclassification, or through a merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof so that the rights and privileges granted hereby shall
continue with respect to the Common Stock as so changed.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report (and to all references to our firm) included in or made a part of this
Registration Statement on Form S-1.
/s/ Arthur Andersen LLP
Minneapolis, Minnesota
April 21, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form S-1 of
our report dated June 24, 1997 on our audits of the consolidated balance sheets
of Men's Apparel Guild in California, Inc. and subsidiary as of May 31, 1997
and 1996, and the related consolidated statements of income, shareholders'
equity and cash flows for each of the years in the three year period ended May
31, 1997. We also consent to the reference to our firm under the caption
"Experts."
/s/ PricewaterhouseCoopers LLP
Los Angeles, California
April 21, 1999
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form S-1 of
our report dated March 6, 1998, except for Note 13 as to which the date is
August 17, 1998, on our audit of the financial statements of Universal Media,
Inc. We also consent to the reference to our firm under the caption "Experts"
in the Prospectus.
/s/ Mahoney Cohen & Company, CPA, P.C.
New York, New York
April 21 , 1999
