SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement / / Confidential, for use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Under Rule 14a-12
PENTON MEDIA, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No Fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
[PENTON MEDIA, INC. LOGO]
The Penton Media Building
1300 East Ninth Street
Cleveland, Ohio 44114-1503
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD
ON MAY ___, 2002
TO THE STOCKHOLDERS:
The annual meeting of stockholders of Penton Media, Inc. will be held on
___________, May ___, 2002, at 2:00 P.M., local time, at the Penton Media
Conference Center, 1300 East Ninth Street, Cleveland, Ohio, for the following
purposes:
1. To elect four directors to the Board of Directors for a three-year term
expiring in 2005.
2. To ratify the appointment of Penton's independent certified accountants for
the fiscal year ending December 31, 2002.
3. To act upon a proposal of the Board of Directors to approve the issuance of
common stock upon conversion of our preferred stock and the exercise of
related warrants that were issued in a private placement.
4. To adopt an amendment to Penton's Restated Certificate of Incorporation to
increase the number of authorized shares of Common Stock.
5. To adopt an amendment to Penton's Restated Certificate of Incorporation to
remove the provision limiting the number of directors to thirteen.
6. To adopt an amendment to Penton's Restated Certificate of Incorporation to
permit the holders of preferred stock, acting together as a separate class,
to (a) call special meetings of the holders of preferred stock and (b) act
by unanimous written consent.
7. To act upon a proposal of the Board of Directors to permit employees to
surrender outstanding stock options for new stock options.
8. To act upon a proposal by GAMCO Investors, Inc.
9. To transact such other business as may properly be brought before the
meeting.
The annual meeting may be postponed or adjourned from time to time without any
notice other than announcement at the meeting, and any and all business for
which notice is hereby given may be transacted at any such postponed or
adjourned meeting.
The Board of Directors has fixed the close of business on April 8, 2002, as the
record date for determination of stockholders entitled to notice of and to vote
at the meeting.
A list of stockholders entitled to vote at the annual meeting will be available
for examination by any stockholder, for any purpose concerning the meeting,
during ordinary business hours at Penton's principal executive offices, 1300
East Ninth Street, Cleveland, Ohio 44114-1503 during the ten days preceding the
meeting.
Stockholders are requested to complete and sign the enclosed proxy, which is
solicited by the Board of Directors, and promptly return it in the accompanying
envelope, whether or not they plan to attend the annual meeting.
By Order of the Board of Directors
PRESTON L. VICE
Secretary
Cleveland, Ohio
April [ ], 2002
[PENTON MEDIA, INC. LOGO]
PROXY STATEMENT
This proxy statement contains information related to the annual meeting of the
stockholders of Penton Media, Inc. to be held on ________, May ___, 2002,
beginning at 2:00 P.M., local time, at the Penton Media Conference Center, 1300
East Ninth Street, Cleveland, Ohio. This proxy statement is being provided in
connection with the solicitation of proxies by the Board of Directors for use at
the 2002 annual meeting of stockholders and at any adjournment or postponement
of the meeting. This proxy statement and the enclosed proxy card are first being
mailed to stockholders on or about [APRIL ], 2002.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At Penton's annual meeting, stockholders will act upon the matters described in
the accompanying notice of annual meeting of stockholders. These matters
include:
- To elect four directors for a three-year term expiring in 2005;
- To ratify the appointment of Penton's independent certified
accountants for the fiscal year ending December 31, 2002;
- To act upon a proposal of the Board of Directors to approve the
issuance of common stock upon conversion of our preferred stock and
the exercise of related warrants that were issued in a private
placement;
- To adopt an amendment to Penton's Restated Certificate of
Incorporation to increase the number of authorized shares of Common
Stock;
- To adopt an amendment to Penton's Restated Certificate of
Incorporation to remove the provision limiting the number of directors
to thirteen;
- To adopt an amendment to Penton's Restated Certificate of
Incorporation to permit the holders of preferred stock, acting
together as a separate class, to (a) call special meetings of the
holders of preferred stock and (b) act by unanimous written consent;
- To act upon a proposal of the Board of Directors to permit employees
to surrender outstanding stock options for new stock options;
- To act upon a proposal by GAMCO Investors, Inc.; and
- To transact such other business as may properly be brought before the
meeting.
In addition, Penton's management will report on the performance of Penton during
the 2001 Fiscal Year and respond to questions from stockholders.
WHO IS ENTITLED TO VOTE?
Only holders of record of our outstanding common stock and preferred stock at
the close of business on the record date, April 8, 2002, are entitled to receive
notice of and to vote at the meeting, or any postponement or adjournment of the
meeting.
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A list of stockholders entitled to vote at the annual meeting will be available
for examination by any stockholder, for any purpose concerning the meeting,
during ordinary business hours at Penton's principle executive offices, 1300
East Ninth Street, Cleveland, Ohio 44114-1503 during the ten days preceding the
meeting.
HOW MANY VOTES DO I GET?
Each holder of common stock is entitled to one vote per share of common stock
with respect to all matters on which the holders of common stock are entitled to
vote. The holders of the preferred stock are entitled to a total of 6,378,874
votes.
WHO CAN ATTEND THE MEETING?
All stockholders as of the record date, or their duly appointed proxies, may
attend the meeting. Cameras, recording devices and other electronic devices will
not be permitted at the meeting.
WHAT CONSTITUTES A QUORUM?
Under Penton's Bylaws, the presence at the annual meeting, in person or by
proxy, of the holders of shares of Penton stock entitled to cast at least a
majority of the votes which the outstanding stock entitled to vote at the annual
meeting is entitled to cast on a particular matter will constitute a quorum
entitled to take action with respect to that vote on that matter. As of April 8,
2002, the record date for the annual meeting, 31,910,325 shares of common stock
of Penton were outstanding and traded on the New York Stock Exchange. Also as of
April 8, 2002, there were 50,000 shares of preferred stock outstanding, and the
holders of those shares are entitled to a total of 6,378,874 votes. The holders
of Penton's common stock are entitled to vote on all matters. The holders of
Penton's preferred stock are entitled to vote on all matters except Proposal 3.
Abstentions and broker "non-votes" are counted as present and entitled to vote
for the purposes of determining a quorum.
WHAT IS A BROKER "NON-VOTE"?
A broker "non-vote" occurs when a nominee holding stock for a beneficial owner
does not vote on a particular proposal because the nominee does not have
discretionary power with respect to that item and has not received instructions
from the beneficial owner.
HOW DO I VOTE?
Sign and date each proxy card you receive and return it in the prepaid envelope.
All shares of stock entitled to vote at the annual meeting that are represented
by properly executed proxies will, unless such proxies have been revoked, be
voted in accordance with the instructions given in such proxies or, if no
contrary instructions are given therein, will be voted in accordance with the
Board's recommendations. If you return your signed proxy card but do not mark
the boxes showing how you wish to vote, your shares will be voted in accordance
with the Board's recommendations.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
The Board's recommendations are set forth after the description of each proposal
in this proxy statement. In summary, the Board recommends a vote:
- FOR the election of the directors as described under "Election of
Directors;"
- FOR the proposal of the Board of Directors to ratify the appointment
of Penton's independent certified accountants for the fiscal year
ending December 31, 2002;
- FOR the proposal of the Board of Directors to approve the issuance of
common stock upon conversion of our preferred stock and the exercise
of related warrants that were issued in a private placement;
- FOR the amendment to Penton's Restated Certificate of Incorporation to
increase the number of authorized shares of Common Stock;
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- FOR the amendment to Penton's Restated Certificate of Incorporation to
remove the provision limiting the number of directors to thirteen;
- FOR the amendment to Penton's Restated Certificate of Incorporation to
permit the holders of preferred stock, acting together as a separate
class, to (a) call special meetings of the holders of preferred stock
and (b) act by unanimous written consent;
- FOR the proposal of the Board of Directors to permit employees to
surrender outstanding stock options for new stock options; and
- AGAINST the proposal by GAMCO Investors, Inc.
With respect to any other matter that properly comes before the meeting, the
proxy holders will vote as recommended by the Board or, if no recommendation is
given, in their own discretion.
The designees of the holders of our preferred stock to our Board of Directors
abstain from all references to the Board of Directors' recommendation in this
proxy statement with respect to proposals three through six because of their
possible conflict of interest as a result of their affiliation to the holders of
the preferred stock and warrants. The members of our Board of Directors
designated by the holders of our preferred stock are Daniel C. Budde, Peni A.
Garber and Hannah C. Stone.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Any stockholder who has given a proxy with respect to any matter may revoke
it at any time prior to the closing of the polls as to that matter at the annual
meeting by delivering a notice of revocation or a duly executed proxy bearing a
later date to the Secretary of Penton, or by attending the annual meeting and
voting in person.
WHO WILL COUNT THE VOTE?
National City Bank, our independent stock transfer agent, will count the votes
and act as the inspector of election.
WHAT SHARES ARE INCLUDED ON THE PROXY CARD(S)?
The shares on your proxy card(s) represent ALL of your shares of stock of
Penton. If you have shares in the 401(k) Plan and do not vote by proxy, or
return your proxy card with an unclear voting designation or no voting
designation at all, The Northern Trust Company will vote your plan shares in
proportion to the way the other plan participants voted their shares held in the
plan.
WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
If your shares are registered differently and are in more than one account, you
will receive more than one proxy card. To ensure that all your shares are voted,
sign and return all proxy cards. We encourage you to have all accounts
registered in the same name and address (whenever possible). You can accomplish
this by contacting our stock transfer agent, National City Bank, at (800)
622-6757.
HOW ARE PROXIES SOLICITED?
Proxies will be solicited by mail. Proxies may also be solicited by directors,
officers and a small number of regular employees of Penton personally or by
mail, telephone or telegraph, but such persons will not be specially compensated
for such services. Brokerage houses, custodians, nominees and fiduciaries will
be requested to forward the soliciting material to the beneficial owners of
stock held of record by such persons, and Penton will reimburse them for their
expenses in doing so.
The entire cost of the solicitation will be borne by Penton.
WHEN ARE STOCKHOLDER PROPOSALS FOR THE 2003 ANNUAL MEETING OF STOCKHOLDERS DUE?
To be considered for inclusion in Penton's proxy statement for the 2003 annual
stockholders meeting, stockholder proposals must be received at Penton's offices
no later than December 5, 2002. Proposals must be in compliance with Rule 14a-8
under the Securities Exchange Act of 1934 and Penton's Bylaws, and must be
submitted in
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writing, delivered or mailed to the Corporate Secretary, Penton Media, Inc.,
1300 East Ninth Street, Cleveland, Ohio 44114-1503.
In addition, Penton's Bylaws require that if a stockholder desires to introduce
a stockholder proposal or nominate a director candidate from the floor of the
2003 annual meeting of the stockholders, such proposal or nomination must be
submitted in writing to Penton's Corporate Secretary at the above address not
less than 60 days nor more than 90 days prior to the first anniversary of the
2002 annual meeting of the stockholders or, if the date of the annual meeting is
more than 30 days prior to or more than 60 days after the preceding anniversary
date, notice by the stockholder will be timely if received not earlier than the
90th day prior to the 2003 annual stockholders meeting and not later than the
close of business on the later of (i) the 60th day prior to the 2003 annual
stockholders meeting or (ii) the 10th day following public announcement of the
2003 annual stockholders meeting.
Each notice by stockholders must set forth (i) the name and address of the
stockholder who intends to make the nomination or proposal and of any beneficial
owner on whose behalf the nomination or proposal is made and (ii) the class and
number of shares of common stock that are owned beneficially and of record by
such stockholder and beneficial owner, if any. In the case of a stockholder
proposal, the notice must also set forth a brief description of the business
desired to be brought before the meeting, the reasons for conducting such
business at the meeting and any material interest of such stockholder or
beneficial owner, if any, in that proposed business.
CAN A STOCKHOLDER NOMINATE SOMEONE TO BE A DIRECTOR OF PENTON?
As a stockholder, you may recommend any person as a nominee for director of
Penton. Each nomination must be submitted in the same manner as for other
stockholder proposals. Also, the notice must set forth any information regarding
the nominee proposed by the stockholder that would be required to be included in
a proxy statement filed pursuant to the proxy rules of the Securities and
Exchange Commission and the consent, if so required, of the nominee to be named
in a proxy statement as a candidate for election and to serve as a director of
Penton if elected.
DO THE STOCKHOLDERS HAVE ANY APPRAISAL RIGHTS WITH REGARD TO ANY OF THE
PROPOSALS?
No. Under Delaware law, stockholders are not entitled to appraisal rights with
respect to these proposals.
ARE THERE ANY INDIVIDUALS OR ENTITIES THAT HAVE A SPECIAL INTEREST IN ANY OF THE
PROPOSALS?
Mr. Budde, Ms. Garber and Ms. Stone, the directors designated by the holders of
our preferred stock, may be deemed to have an interest in Proposals 3, 4, 5, and
6 due to their affiliation with the holders of the preferred stock and these
holders' interest in these proposals. Penton does not believe that any interest
they may have with regard to these proposals would be opposed to the best
interests of the Company.
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WHAT IS THE SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT?
The following table sets forth information with respect to the beneficial
ownership of Penton's common stock and preferred stock as of [APRIL ], 2002, by
(a) the persons known by Penton to be the beneficial owners of more than 5% of
the outstanding shares of common stock, (b) each director, and nominee for
director, of Penton, (c) each of the executive officers of Penton listed in the
Summary Compensation Table, and (d) all directors, nominees and executive
officers of Penton as a group. The information set forth in the table as to
directors, nominees and executive officers is based upon information furnished
to Penton by them in connection with the preparation of this Proxy Statement.
Except where otherwise indicated, the mailing address of each of the
stockholders named in the table is: c/o Penton Media, Inc., 1300 East Ninth
Street, Cleveland, Ohio 44114-1503.
Number of Shares of Percent of Outstanding
Name Common Stock(1) Shares of Common Stock(2)
---- --------------- -------------------------
ABRY Mezzanine Partners, L.P.(3) ...... 4,902,181(4)(5) 13.32
c/o ABRY Partners, LLC
111 Huntington Avenue
30th Floor
Boston, Massachusetts 02199
Artisan Partners Limited Partnership(6) 2,608,865 8.18
1000 North Water Street, #1770
Milwaukee, Wisconsin 53202
David L. Babson & Company(7) .......... 1,812,050 5.68
One Memorial Drive
Cambridge, Massachusetts 02142
Mario J. Gabelli, et al(8) ............ 6,080,284 19.05
One Corporate Center
Rye, New York 10580
R. Douglas Greene(9) .................. 2,022,368 6.34
c/o New Hope Group LLC
600 Linden Ave
Boulder, Colorado 80304
J. P. Morgan Chase & Co.(10) .......... 1,863,884 5.84
270 Park Avenue
New York, New York 10017
Sandler Capital Management(11) ........ 2,451,091(5)(12) 7.13
767 Fifth Avenue, 45th Floor
New York, New York 10153
Paul W. Brown ......................... 3,499 *
Daniel C. Budde(13) ................... 4,903,181 13.32
Darrell C. Denny ...................... 13,538 *
Peni A. Garber(13) .................... 4,902,181 13.32
King Harris(14) ....................... 154,474 *
Thomas L. Kemp(15) .................... 310,484 *
John J. Meehan ........................ 376,719 1.18
Joseph G. NeCastro .................... 84,195 *
David B. Nussbaum ..................... 93,119 *
Daniel J. Ramella(16) ................. 236,139 *
Edward J. Schwartz .................... 28,310 *
Hannah Stone(17) ...................... 2,451,091 7.13
William B. Summers .................... 10,066 *
Richard B. Swank ...................... 15,166 *
All Directors and Executive Officers
as a Group (19 persons) ............. 11,299,503(18) 28.45
------------------
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* Less than one percent
(1) Except as otherwise indicated below, beneficial ownership means the sole
power to vote and dispose of shares.
(2) Calculated using 31,910,325, the number of shares of common stock
outstanding as of the record date.
(3) The information as to ABRY Mezzanine Partners, L.P. and entities controlled
directly or indirectly by ABRY is derived in part from Schedule 13D, as
filed with the commission on March 28, 2002, statements required to be
filed by ABRY pursuant to Section 16(a) of the Exchange Act, and
information furnished to Penton separately by ABRY.
(4) ABRY does not currently own any shares of common stock. This number
represents the number of shares of common stock ABRY would be entitled to
receive upon conversion of its preferred stock and exercise of its warrants
to purchase common stock. ABRY and its affiliated entities currently own
30,000 shares of preferred stock convertible into approximately 3,942,181
shares of common stock and hold warrants to purchase an aggregate of
960,000 shares of common stock.
(5) This number reflects the total number of shares of common stock such holder
is entitled to receive upon conversion of its preferred stock and exercise
of the related warrants without regard to any limits on conversion and
exercise imposed by the terms of the preferred stock and warrants. The
number of shares of common stock that ABRY Mezzanine Partners, L.P. and its
affiliated entities, ABACUS Master Fund Ltd. and Sandler Capital Management
and its affiliated entities are entitled to receive pursuant to the
conversion of their preferred stock and exercise of the warrants is limited
by the rules of The New York Stock Exchange to 19.99% of the common stock
outstanding prior to the transaction, or 6,378,874 shares of common stock,
until the stockholders approve the issuance of the common stock.
(6) The information as to Artisan Partners Limited Partnership (Artisan
Partners) and entities controlled directly or indirectly by Artisan
Partners is derived from Scheduled 13G, as filed with the Commission on
February 13, 2002.
(7) The information as to David L. Babson & Company (Babson) is derived from
Scheduled 13G, as filed with the Commission on January 28, 2002.
(8) The information as to Mario J. Gabelli and entities controlled directly or
indirectly by Mr. Gabelli is derived from Schedule 13D/A, as filed with the
Commission on November 2, 2001, and statements required to be filed by Mr.
Gabelli and entities controlled directly or indirectly by Mr. Gabelli
pursuant to Section 16(a) of the Exchange Act. Such statement discloses
that (i) Mr. Gabelli is the chief investment officer for most of the
entities signing such statements and is deemed to have beneficial ownership
of the shares beneficially owned by all such entities, (ii) Mr. Gabelli and
such entities do not admit that they constitute a group within the meaning
of Section 13(d) of the Exchange Act and the rules and regulations
thereunder, and (iii) with respect to Penton common stock, Mr. Gabelli and
such entities have the sole power to vote and dispose of all the shares of
which they are beneficial owners, unless the aggregate voting interest of
all such entities exceeds 25% of Penton's total voting interest or other
special circumstances exist, in which case the proxy voting committees of
certain of such entities would have the sole power to vote certain shares
of Penton common stock except 158,683 shares of Penton's common stock as to
which they have no voting power.
(9) The information as to Mr. Greene is derived in part from Schedule 13D, as
filed with the commission on June 21, 1999, statements required to be filed
by Mr. Greene pursuant to Section 16(a) of the Exchange Act, and
information furnished to Penton separately by Mr. Greene. Mr. Greene has
indirect beneficial ownership of the common stock under Rule 13d-3 of the
Securities Exchange Act of 1934 through New Hope Group, LLC, a Colorado
corporation ("New Hope Group"). Mr. Greene is the chief executive officer,
sole director and sole shareholder of New Hope Group. Mr. Greene is a
director of Penton.
(10) The information as to J.P. Morgan Chase & Co. (Morgan) and entities
controlled directly or indirectly by Morgan is derived from Scheduled
13G/A, as filed with the Commission on February 14, 2002.
(11) The information as to Sandler Capital Management and entities controlled
directly or indirectly by Sandler is derived in part from Schedule 13D, as
filed with the commission on March 28, 2002 and information furnished to
Penton separately by Sandler.
(12) Sandler does not currently own any shares of common stock. This number
represents the number of shares of common stock Sandler would be entitled
to receive upon conversion of its preferred stock and exercise of its
warrants to purchase common stock. Sandler and its affiliated entities
currently own 15,000 shares of preferred stock convertible into 1,971,091
shares of common stock and hold warrants to purchase an aggregate of
480,000 shares of common stock.
(13) Ms. Garber and Mr. Budde may be deemed to beneficially own the stock
beneficially owned by ABRY and its affiliated entities because of their
relationship with ABRY and its affiliated entities and because they were
appointed to Penton's Board of Directors at the request of ABRY. Ms. Garber
and Mr. Budde disclaim any beneficial ownership of the shares of stock
owned by ABRY and its affiliates. In addition, Mr. Budde owns 1,000 shares
individually.
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(14) Mr. King Harris shares the power to vote and dispose of 25,000 such shares.
(15) Includes 2,625 shares held in trust for the benefit of Mr. Kemp's children,
for which Mr. Kemp disclaims beneficial ownership.
(16) Mr. Ramella shares the power to vote and dispose of 58,886 such shares.
(17) Ms. Stone may be deemed to beneficially own the stock beneficially owned by
Sandler and its affiliated entities because of her relationship with
Sandler and its affiliated entities and because she was appointed to
Penton's Board of Directors at the request of Sandler. Ms. Stone disclaims
any beneficial ownership of the shares of stock owned by Sandler and its
affiliates.
(18) This number includes the 4,902,181 shares of common stock that may be
deemed to be beneficially owned by Ms. Garber and Mr. Budde and the
2,451,091 shares of common stock that may be deemed to be beneficially
owned by Ms. Stone.
PROPOSAL TO ELECT FOUR DIRECTORS TO THE BOARD (PROPOSAL 1)
WHAT ARE WE ASKING YOU TO APPROVE?
Four directors are to be elected to serve a three-year term expiring in 2005 and
until their respective successors have been elected.
The holders of the preferred stock are entitled to three seats on the Board of
Directors. In connection with the private placement of the preferred stock and
related warrants, Don E. Schultz and William J. Friend resigned as directors. In
addition, the board of directors created a new directorship. The Board appointed
Peni A. Garber, Daniel C. Budde, and Hannah C. Stone to fill the vacancies and
the newly created directorship to serve until the annual meeting.
Richard B. Swank has decided not to stand for re-election as a director of
Penton. Consequently, the Board of Directors has determined to reduce the number
of directors comprising the Board of Directors from 13 to 12. Nominees for
election this year are: Mr. Budde, Ms. Garber, R. Douglas Greene, and Ms. Stone.
WHAT DOES THE BOARD OF DIRECTORS RECOMMEND WITH RESPECT TO PROPOSAL 1?
THE BOARD RECOMMENDS A VOTE FOR THE NOMINEES.
WHAT VOTE IS REQUIRED FOR THIS PROPOSAL?
A plurality of the votes of the shares of common stock and preferred stock
present in person or represented by proxy and entitled to vote on the election
of directors is required to elect Mr. Greene.
For the election of Mr. Budde, Ms. Garber and Ms. Stone, a plurality of the
votes of the holders of preferred stock, voting separately as a single class and
to the exclusion of the holders of the common stock is required to elect each
nominee.
Abstentions and broker "non-votes" are not counted for purposes of election of
the directors.
Except to the extent that stockholders indicate otherwise on their proxies
solicited by Penton's Board of Directors, the holders of such proxies intend to
vote such proxies for the election as directors of the persons named above as
nominees for election, provided that if any of the nominees for election shall
be unable or shall fail to act as such by virtue of an unexpected occurrence,
such proxies will be voted for such other person or persons as shall be
determined by the holders of such proxies in their discretion. Alternatively, so
long as such action does not conflict with the provisions of Penton's Restated
Certificate of Incorporation, as amended, the Board of Directors may, in its
discretion, reduce the number of directors to be elected.
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BOARD OF DIRECTORS
NOMINEES FOR DIRECTOR FOR A THREE-YEAR TERM EXPIRING 2005:
DIRECTOR PRINCIPAL OCCUPATION
NAME SINCE AGE AND DIRECTORSHIPS
---- ----- --- -----------------
Daniel C. Budde 2002 41 Partner of ABRY Partners, LLC (investment holding company)
since 2001. Managing Director, Bond and Corporate Finance
Group, John Hancock Financial Services Company (investment
holding company) from 1989 to 2001. Co-President, Hancock
Mezzanine Investments, LLC from August 2000 to July 2001.
Peni A. Garber 2002 39 Partner of ABRY Partners, LLC (investment holding company)
since October 2000. Co-Head of ABRY Mezzanine Partners,
L.P. (investment holding company) since December 2001.
Director of Muzak Holdings, LLC (provider of business
music programming) since March 1999.
R. Douglas Greene (C)(E)(N) 1999 52 Director and Chief Executive Officer of New Hope Group,
LLC (investment holding company) since May 1999. Investor
in joint venture business interests in media and
entertainment companies and international businesses in
the publishing and forest products industries. Chairman
and Chief Executive Officer of New Hope Communications
Inc. from February 1981 to May 1999.
Hannah Stone 2002 36 Managing Director of Sandler Capital Management
(investment holding company) since 1993. Director of
Millbrook Press (publisher of non-fiction children's
books) since 1997.
DIRECTORS CONTINUING IN OFFICE UNTIL 2003:
DIRECTOR PRINCIPAL OCCUPATION
NAME SINCE AGE AND DIRECTORSHIPS
---- ----- --- -----------------
Paul W. Brown (A)(C) 2000 49 General Partner, Bedrock Capital Partners (venture capital
firm) since January 1998, Managing Director, Prudential
Volpe Technology Group (investment banking) from May 1989
to November 2000. Chairman, Artemis Medical Technologies,
Inc. (surgical products manufacturer) since July 1999.
John J. Meehan 1998 54 Executive Vice President of Donohue Meehan Publishing
Company (a business publishing company and a subsidiary of
Penton) since January 1987.
David B. Nussbaum 2000 44 Executive Vice President of Penton and President of the
Technology Media division of Penton since September 1998.
President of Internet World Media, Inc. (a business trade
show and publishing company and a subsidiary of Penton)
since December 1998. Senior Vice President from 1995 to
August 1998 and Vice President from 1994 to 1995 of Miller
Freeman Inc. (business magazine publisher and exhibition
manager).
Daniel J. Ramella (E) 1990 50 President and Chief Operating Officer of Penton since
1990.
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DIRECTORS CONTINUING IN OFFICE UNTIL 2004:
DIRECTOR PRINCIPAL OCCUPATION
NAME SINCE AGE AND DIRECTORSHIPS
---- ----- --- -----------------
King Harris (C)(E)(N) 1987 58 Vice Chairman of the Board since March 2001. Non-executive
Chairman of the Board from May 1998 to March 2001.
Chairman, Harris Holdings, Inc. since November 2000. Chief
Executive Officer of Pittway Corporation (manufacturer and
distributor of alarm and other security products and,
since February 2000, a subsidiary of Honeywell
International Inc.) from May 1987 to October 2000.
Non-executive Chairman of the Board and Director, Aptar
Group, Inc. (specialty packaging components manufacturer).
Thomas L. Kemp (E)(N) 1996 50 Chairman of the Board since March 2001. Chief Executive
Officer of Penton since September 1996; Chairman of the
Board of Penton from September 1996 to May 1998.
Edward J. Schwartz (A)(I) 1998 60 President, Harris Holdings, Inc. since November 2000. Vice
President of the Security and Fire Solutions Business of
Honeywell International Inc.'s Home and Building Control
Group from February 2000 to January 2001. Vice President
of Pittway Corporation (manufacturer and distributor of
alarm and other security products and, since February
2000, a subsidiary of Honeywell International Inc.) from
1989 to February 2000.
William B. Summers (A)(I) 2000 51 Chairman of McDonald Investments, Inc. (an investment
banking and securities firm and a subsidiary of Key Corp)
since October 2000, Chairman and CEO of McDonald
Investments Inc. from August 1995 to October 2000.
Executive Vice President and a member of the Management
Committee of Key Corp. from November 1998 to December
2000. Director, the New York Stock Exchange since March
1998. Director, Wilson Greatbatch Technologies, Inc. since
2001.
(A) Member of Audit Review Committee
(C) Member of Compensation Committee
(E) Member of Executive Committee
(I) Member of Investment Committee
(N) Member of Nominating Committee
The holders of the preferred stock are entitled to appoint three members to our
Board of Directors. Pursuant to the agreement by which Penton sold its preferred
stock and related warrants to a group of investors led by ABRY Mezzanine
Partners, L.P., Mr. Budde, Ms. Garber and Ms. Stone were appointed by the Board
of Directors of Penton to serve as directors of Penton.
In addition, upon the occurrence of certain events described in the discussion
entitled "Board Representation" in Proposal 3 below, the holders of the
preferred stock are entitled to appoint up to a majority of the Board of
Directors. Certain of our current Board members have agreed to resign in such
event.
At such time as the holders of preferred stock cease to hold shares of preferred
stock having an aggregate liquidation preference of at least $25 million, they
will only be entitled to appoint two directors to our Board. If the holders of
the preferred stock cease to hold shares of preferred stock having an aggregate
liquidation preference of at least $10 million and such holders' beneficial
ownership of our preferred stock and common stock constitutes less than 5% of
the aggregate voting power of our voting securities, the holders of the
preferred stock will no longer have the right to appoint
9
any directors to our Board. Each of the directors appointed by the holders of
the preferred stock have agreed to resign from the Board should either of those
conditions be met.
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors of Penton met eight times during 2001. All of the
directors attended at least seventy-five percent of the total meetings held by
the Board of Directors.
COMMITTEES OF THE BOARD OF DIRECTORS AND COMMITTEE MEETINGS
Penton's Board of Directors has an Audit Review Committee, a Compensation
Committee, an Executive Committee, an Investment Committee and a Nominating
Committee. All of the directors attended at least seventy-five percent of the
total meetings held by the committees on which they served in 2001.
Executive Committee. The Executive Committee consists of Mr. Harris as Chairman
and Messrs. Kemp, Ramella, and Greene. When the Board is not in session, the
Executive Committee may exercise all the powers and authority of the Board
except as limited by law and Penton's Restated Certificate of Incorporation.
The Executive Committee held four meetings in fiscal 2001.
Audit Review Committee. The Audit Review Committee consists of Mr. Schwartz as
Chairman and Messrs. Brown and Summers. Mr. Schultz resigned as a director
effective as of March 19, 2002 and was replaced on the committee by Mr. Summers.
The Audit Review Committee reviews, as it deems appropriate, and approves
internal accounting and financial controls for Penton and auditing practices and
procedures to be employed in the preparation and review of Penton's financial
statements. The Audit Review Committee makes recommendations to the full Board
concerning the engagement of independent public accountants to audit Penton's
annual financial statements and arranges with such accountants the scope of the
audit to be undertaken by such accountants. The Audit Review Committee held five
meetings in fiscal 2001.
Compensation Committee. The Compensation Committee consists of Mr. Harris as
Chairman and Messrs. Brown and Greene. Mr. Swank is not standing for re-election
as a director and has not yet been replaced. The Compensation Committee reviews
and determines the compensation of executive officers, reviews and makes
recommendations to the Board with respect to salaries, bonuses, and deferred
compensation of other officers and executives, compensation of directors and
management succession, and makes such determinations and performs such other
duties as are expressly delegated to it pursuant to the terms of any employee
benefit plan of Penton. The Compensation Committee held five meetings in fiscal
2001.
Investment Committee. The Investment Committee consists of Mr. Summers as
Chairman and Mr. Schwartz. Messrs. Friend and Schultz resigned as directors
effective as of March 19, 2002 and have not yet been replaced. The Investment
Committee provides objectives and guidelines for the investment of funds held in
trust under Penton's pension plan, acts as the investment committee for purposes
of Penton's 401(k) plan, and reviews the performance of investment managers
charged with investing Penton pension plan funds. The Investment Committee held
four meetings in fiscal 2001.
Nominating Committee. The Nominating Committee consists of Mr. Greene as
Chairman and Messrs. Harris and Kemp. The Nominating Committee, as it deems
appropriate, makes recommendations to the full Board with respect to the size
and composition of the Board and its committees and with respect to nominees for
election as directors. The Nominating Committee held one meeting in fiscal 2001.
The Nominating Committee considers suggestions regarding candidates for election
to the Board submitted by stockholders in writing to Penton's Secretary. With
regard to the 2003 annual meeting of stockholders, any such suggestion must be
received by the Secretary no later than the date by which stockholder proposals
for such annual meeting must be received as described below under the heading
"Stockholder Proposals for the 2003 Annual Meeting."
EXECUTIVE OFFICERS
All officers of Penton are elected each year by the Board of Directors at its
annual organization meeting. In addition to Messrs. Kemp, Ramella, and Nussbaum,
information with respect to whom is set forth above, the executive officers of
Penton include the following:
Jocelyn A. Bradford, 44, Vice President and Controller since January 2000.
Before joining Penton, Ms. Bradford spent three years at Century Business
Services, Inc. as Controller from December 1996 through April 1998 and as
Treasurer from April 1998 through January 2000.
10
Darrell C. Denny, 43, Executive Vice President of Penton and President of
the Lifestyle Media division of Penton since October 2000. Executive Vice
President/Group President and Operating Chair from August 1998 to September
2000, Senior Vice President from 1995 to August 1998 and Vice President
from 1994 to 1995 of Miller Freeman, Inc. (business trade show producer and
magazine publisher).
William C. Donohue, 57, Executive Vice President of Penton and President of
the Retail Media division of Penton since February 2001. President of
Donohue Meehan Publishing Company (business publishing company and a
subsidiary of Penton) since January 1987.
Joseph G. NeCastro, 45, Chief Financial Officer and Treasurer of Penton
since June 1998. Before joining Penton, Mr. NeCastro spent five years with
Reader's Digest Association, Inc. Mr. NeCastro was Vice President, Finance
for Reader's Digest USA from 1995 until 1998 and Corporate Controller in
1994 and 1995.
Preston L. Vice, 53, Senior Vice President and Secretary of Penton since
July 1998, Senior Vice President prior to 1997.
James W. Zaremba, 61, Executive Vice President of Penton and President of
the Industry Media division of Penton since 1999, and Group President of
Penton prior to 1997.
COMPENSATION
BOARD COMPENSATION
Compensation of non-employee directors consists of an annual retainer of
$20,000, plus $3,000 for each Board meeting attended in person, $1,000 for each
Board meeting attended by telephone and $1,000 for each committee meeting
attended, except that $500 is paid for attending a committee meeting held on the
same day as a Board meeting. The Chairman of the Audit Review Committee is paid
an additional $2,000 and the Chairman of the Compensation Committee is paid an
additional $5,000 per year. Ms. Garber, Mr. Budde, Ms. Stone and employee
directors are not compensated for serving as directors.
Each director of Penton will be reimbursed by Penton for out-of-pocket expenses
incurred in attending Board and Board committee meetings.
Penton has adopted the Penton Media, Inc. 1998 Director Stock Option Plan (As
Amended and Restated Effective as of March 15, 2001) for non-employee directors.
The plan was approved by the stockholders at the 1999 annual meeting. Pursuant
to the plan, and subject to certain limitations contained in it, the Board may
grant non-qualified options to purchase common stock, at an exercise price not
less than fair market value on the date of grant, to directors of Penton who at
the time of grant are not employees of Penton or any of its subsidiaries. In
addition, the Board may authorize the grant of restricted stock or deferred
shares to non-employee directors under the plan. The plan also provides that the
Board may permit non-employee directors to elect to receive non-qualified
options, restricted stock or deferred shares in lieu of all or a portion of such
non-employee director's compensation otherwise payable in cash. On February 7,
2001 and November 16, 2001, seven non-employee directors were each awarded an
option to purchase 2,500 shares and 4,000 shares of common stock respectively,
which will vest at the rate of 33 1/3% per year.
11
SUMMARY COMPENSATION TABLE
The following table sets forth compensation information for the Chief Executive
Officer of Penton (who served as such throughout 2001), for each of Penton's
four most highly compensated other executive officers during 2001 who were
serving at the end of 2001.
Long-Term
Compensation
Awards Payouts
------------------------- --------
Annual Restricted Securities All Other
Compensation Stock Underlying LTIP Compen-
Salary Bonus Award(s) Options Payouts sation
Name and Principal Position Year ($) ($) ($) (#) ($) ($)
--------------------------- ------ -------- -------- ------- ------- ------- -------
Thomas L. Kemp, Chief 2001 $600,000 $ 50,000 778,750(1) 150,000 0 $17,800(6)
Executive Officer 2000 550,000 $592,375 0 46,000 0 13,742
1999 470,000 276,680 100,000(2) 37,000 0 9,512
Daniel J. Ramella, President and Chief 2001 $450,000 $ 35,000 510,860(1) 105,000 0 9,933(7)
Operating Officer 2000 400,000 447,375 0 30,000 0 9,494
1999 365,000 195,010 75,000(2) 25,000 0 6,639
David B. Nussbaum, Executive Vice 2001 $410,000 $ 26,500 211,820(1) 75,000 0 7,784(8)
President and Division President 2000 375,000 504,590 0 20,000 450,000(5) 5,266
1999 345,000 322,320 0 13,500 0 2,826
Darrell C. Denny, 2001 $325,000 $107,300 52,955(1) 35,000 0 4,074(9)
Executive Vice President and 2000 67,708 100,000(4) 20,000 0
Division President (3)
Joseph G. NeCastro, Chief Financial 2001 $300,000 $ 30,000 218,050(1) 60,000 0 8,541(10)
Officer 2000 280,000 177,950 0 15,000 0 7,846
1999 259,992 76,000 0 12,000 0 4,800
(1) Deferred shares awarded: Mr. Kemp, 125,000, Mr. Ramella, 82,000, Mr.
Nussbaum, 34,000, Mr. Denny, 8,500, and Mr. NeCastro, 35,000, each having a
one-year deferral period; provided, however, that each such award of
deferred shares will become nonforfeitable with respect to 25% of the award
on each three-month anniversary of the date of grant. Deferral periods are
subject to acceleration in the event of death, permanent disability,
retirement upon reaching age sixty-five, termination without cause,
termination for good reason or upon a change of control of Penton. These
numbers are based on the value of Penton's common stock as of the date of
grant. As of December 31, 2001 the value of the deferred shares awards to
Messrs. Kemp, Ramella, Nussbaum, Denny and NeCastro in 2001 were $782,500,
$513,320, $212,840, $53,210, $219,100, respectively. The deferred shares do
not provide for dividend equivalents or voting rights.
(2) Deferred shares awarded in lieu of bonuses that would otherwise have been
paid in cash: Mr. Kemp, 4,969 shares and Mr. Ramella, 3,727 shares, each
having five-year deferral periods. Deferral periods are subject to
acceleration in the event of death, permanent disability, retirement upon
or after reaching age sixty-five or upon a change of control of Penton.
These numbers are based on the value of Penton's common stock as of the
date of grant. As of December 31, 2001, the value of the deferred shares
awards to Messrs. Kemp and Ramella in 1999 were $31,106 and $23,331,
respectively. The deferred shares do not provide for dividend equivalents
or voting rights.
(3) Mr. Denny joined Penton in October 2000.
(4) In accordance with the terms of his employment agreement, Mr. Denny was
awarded 3,538 Deferred Shares having a one-year deferral period, in lieu of
a signing bonus that would otherwise have been paid in cash. This number is
based on the value of Penton's common stock as of the date of grant. As of
December 31, 2001, the value of the award was $22,148. These Deferred
Shares did not provide for dividend equivalents or voting rights.
(5) In accordance with the terms of his employment agreement, Mr. Nussbaum
received a one-time payment equal to $450,000. This payment was made to Mr.
Nussbaum upon the achievement of specified performance goals based on the
overall growth of the Technology Media division of Penton over the period
from 1998 through 2000.
(6) Consists of $5,099 annual matching contributions during the year to
Penton's salary reduction plan and $12,701 for term life and long-term
disability insurance provided by Penton during the year.
(7) Consists of $5,100 annual matching contributions during the year to
Penton's salary reduction plan and $4,833 for term life and long-term
disability insurance provided by Penton during the year.
(8) Consists of $5,100 annual matching contributions during the year to
Penton's salary reduction plan and $2,684 for term life and long-term
disability insurance provided by Penton during the year.
(9) Consists of $4,074 for term life and long-term disability insurance
provided by Penton during the year.
12
(10) Consists of $5,094 annual matching contributions during the year to
Penton's salary reduction plan and $3,447 for term life and long-term
disability insurance provided by Penton during the year.
STOCK OPTION GRANTS DURING YEAR
The following table sets forth information with respect to stock options granted
during 2001 to executive officers named in the Summary Compensation Table.
Option Grants in Last Fiscal Year
INDIVIDUAL GRANT POTENTIAL REALIZABLE
---------------------------------- -------------------------
NUMBER OF % OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO PRICE APPRECIATION
OPTION/S EMPLOYEES IN EXERCISE OR BASE EXPIRATION FOR OPTION TERM(1)
NAME GRANTED(#)(2) FISCAL YEAR PRICE ($/SH) DATE 5%($) 10%($)
---- ------------- ----------- ------------ ---- ----- ------
Thomas L. Kemp 100,000 9.7 $6.89 11/16/11 $433,000 $1,098,000
50,000 9.3 24.10 2/06/11 757,500 1,162,500
Daniel J. Ramella 70,000 6.8 6.89 11/16/11 303,100 768,600
35,000 6.5 24.10 2/06/11 530,600 813,750
David B. Nussbaum 50,000 4.9 6.89 11/16/11 216,500 549,000
25,000 4.6 24.10 2/06/11 379,000 581,250
Darrell C. Denny 25,000 2.4 6.89 11/16/11 108,250 274,500
10,000 1.9 24.10 2/06/11 151,600 232,500
Joseph G. NeCastro 40,000 3.9 6.89 11/16/11 173,200 439,200
20,000 3.7 24.10 2/06/11 303,200 465,000
(1) The assumed annual rates of appreciation in the price of common stock are
in accordance with rules of the Securities and Exchange Commission and are
not predictions of future market prices of the common stock nor of the
actual values the named executive officers will realize. In order for such
annual rates of appreciation to be realized over the 10-year term of the
options, the market price of the common stock would have to increase to
$11.22/share (5%) or $17.87/share (10%) during the 10-year period in the
case of options expiring on November 16, 2011 and $39.26/share (5%) or
$62.51/share (10%) during the 10-year period in the case of options
expiring on February 6, 2011. In such event, and assuming corresponding
annual rates of increase for the market price of common stock, the market
value of all currently outstanding shares of common stock would have
increased by approximately $138,171,707 (5%) or $350,375,368 (10%) during
the 10-year period in the case of options expiring November 16, 2011 and
$483,760,527 (5%) or $741,915,056 (10%) during the 10-year period in the
case of options expiring on February 6, 2011.
(2) Consists of non-qualified options to purchase common stock granted under
the Equity Incentive Plan at an exercise price equal to the closing price
of the common stock on the date of grant, February 6, 2001 and November 16,
2001. Each option becomes fully exercisable on the third anniversary of the
date of grant, subject to full or partial acceleration in the event of
earlier termination of employment (full acceleration if earlier termination
is on account of death, permanent disability, retirement upon or after
reaching age sixty-five or upon a change of control of Penton; partial
acceleration in increments of 33 1/3% each year commencing one year after
the date of grant if termination is for any other reason other than for
"cause").
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth information with respect to exercises of options
during 2001 by the executive officers named in the Summary Compensation Table
and the values of unexercised options held by them as of December 31, 2001.
AGGREGATED OPTION EXERCISES IN 2001 AND YEAR-END OPTION VALUES
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED ON UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
EXERCISE VALUE OPTIONS AT YEAR-END (#) AT YEAR-END ($)
NAME (#) REALIZED ($) EXERCISABLE UNEXERCISABLE UNEXERCISABLE EXERCISABLE
---- --- ------------ ----------- ------------- ------------- -----------
Thomas L. Kemp 0 0 107,655 233,000 0 0
Daniel J. Ramella 0 0 46,000 160,000 0 0
David B. Nussbaum 0 0 25,000 108,500 0 0
Darrell C. Denny 0 0 0 55,000 0 0
Joseph G. NeCastro 0 0 25,000 87,000 0 0
13
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
The following table sets forth information relating to the long-term
incentive awards that were made on February 6, 2001 under the Equity and
Performance Incentive Plan for the following named executive officers.
NUMBER OF PERFORMANCE ESTIMATED FUTURE PAYOUTS
SHARES, UNITS OR OTHER UNDER NON-STOCK PRICE-BASED PLANS (1)
OR OTHER PERIOD UNTIL (NUMBER OF SHARES)
NAME RIGHTS MATURATION OR PAYOUT THRESHOLD TARGET MAXIMUM
---- ------ -------------------- --------- ------ -------
Thomas L. Kemp 41,493 1/1/01 - 12/31/03 0 41,493 62,239
Daniel J. Ramella 22,497 1/1/01 - 12/31/03 0 22,497 33,745
David B. Nussbaum 22,497 1/1/01 - 12/31/03 0 22,497 33,745
Joseph G. NeCastro 14,998 1/1/01 - 12/31/03 0 14,998 22,497
(1) Estimated payout if certain performance levels are achieved. No payout
occurs unless a specified minimum performance is achieved.
The above table presents information about performance shares granted during the
year pursuant to Penton's Equity and Performance Incentive Plan. Each
performance share, if earned, entitles the executive officer to receive one
share of Penton's common stock. The earning of the performance shares awarded is
subject to the achievement of specified performance goals, based on Penton's
after tax cash flow per share over the three year period from January 1, 2001
through December 31, 2003.
The total target number of shares which each of Messrs. Kemp, Ramella, Nussbaum
and NeCastro may earn are 41,493; 22,497; 22,497; and 14,998, respectively (the
"Target ATCF Shares").
None of the Target ATCF Shares will be earned unless a specified minimum
performance is achieved. A portion (50% to 90%) of the Target ATCF Shares may be
earned if the after tax cash flow per share is below the specified target level
but above the minimum performance level. If the after tax cash flow per share
meets the specified target level, all of the Target ATCF Shares will be earned.
If the after tax cash flow per share exceeds the specified target level, up to
150% of the Target ATCF Shares may be earned.
EMPLOYMENT AGREEMENTS
The Compensation Committee approved restated employment agreements with each of
Messrs. Kemp and Ramella in 1999 and approved initial employment agreements with
each of Messrs. Nussbaum, NeCastro and Denny in 1998, 1999 and 2000,
respectively. Each of these employment agreements was amended on December 11,
2001. The agreements are for terms currently expiring December 31, 2002 in the
case of Messrs. Kemp and Ramella, September 8, 2002 in the case of Mr. Nussbaum,
August 24, 2002 in the case of Mr. NeCastro and October 15, 2002 in the case of
Mr. Denny, and will renew automatically for an additional year after such
expiration dates (or until age 65, if earlier) unless either party thereto
elects otherwise, but may be terminated by the executive with 120 days notice.
The agreements for Messrs. Kemp, Ramella, NeCastro and Denny provide for
participation in Penton's Supplemental Executive Retirement Plan. The agreements
also provide for supplementary life insurance for Messrs. Kemp, Ramella,
Nussbaum, NeCastro and Denny in an amount equal to one and one-half times each
executive's salary and supplementary long-term disability coverage that provides
for a maximum monthly benefit (when combined with Penton's base long-term
disability plan) of $18,333 per month in the case of Messrs. Kemp, Ramella,
Nussbaum and Denny and $15,000 per month in the case of Mr. NeCastro.
In addition, the agreements provide for additional supplementary life and
long-term disability insurance coverage for Messrs. Kemp, Ramella, Nussbaum,
NeCastro and Denny that would provide benefits, in the event of the executive's
covered death or disability, in the amount of $4,000,000, $2,610,000,
$1,070,000, $1,130,000 and $270,000, respectively, payable in a single lump sum.
In the event the life or long-term disability insurance coverage described in
the preceding sentence cannot be procured or maintained, Penton will pay the
benefit from its own funds.
Each employment agreement provides for a payment to each executive in an amount
equal to the total of all income taxes imposed on the executive as a result of
(a) the provision of the life insurance and the long-term disability coverage,
(b) imputed income to the executive with respect to the Senior Executive Loan
Program and (c) such payment.
14
Each employment agreement also provides for a payment to each executive in an
amount equal to the total of all income taxes imposed on the executive as a
result of (a)(i) the issuance to the executive of the deferred shares granted to
the executive on December 11, 2001 on an accelerated basis following a change of
control, the executive's death or permanent disability, a termination without
cause, a termination by executive for good reason or involuntary retirement or
(ii) any other issuance of the deferred shares if a change of control occurs
prior to the payment in full of amounts due under the Senior Executive Loan
Program and (b) such payment.
Each employment agreement further entitles the executive to receive a payment in
the event that the excise tax under Section 4999 of the Internal Revenue Code
applies to the issuance of the deferred shares or the payment described in the
preceding paragraph and the sum of (a) the value of the deferred shares (reduced
by such excise tax) plus (b) the value of the shares purchased by the executive
pursuant to the Senior Executive Loan Program plus (c) the proceeds of any life
insurance or long-term disability coverage ((a), (b) and (c), the "Loan
Payments") is less than the amount due and owing under the Senior Executive Loan
Program at the time of the change of control (the "Change of Control Loan
Balance"). In that event, the payment referred to in the preceding sentence will
be in an amount equal to the sum of (x) the lesser of (1) the difference between
the Change of Control Loan Balance and the Loan Payments or (2) 20% of the sum
of the value of the deferred shares at the time of the change of control plus
such payment plus (y) an amount, such that after payment of all taxes (including
any excise tax under Code Section 4999) imposed on such payment, the executives
retain an amount equal to the Code Section 4999 excise tax imposed upon such
payment.
The agreements also provide that in the event the executive's employment is
terminated by Penton (other than for "cause" (as defined in the agreements) or
by reason of his death, disability or retirement) or by the executive for "good
reason" (as defined in the agreements and as described below), the executive
will be entitled to receive certain severance benefits.
In the case of Messrs. Kemp and Ramella, upon the occurrence of the events
described in the preceding paragraph, each such executive is entitled to receive
(a) any accrued but unpaid salary and expense reimbursement and (b) salary (as
in effect at the time of termination or, if higher, as in effect as of the most
recent extension of the employment period) for a period of three years following
the date of his termination of employment. In addition, in the event that the
employment of Messrs. Kemp or Ramella is terminated by Penton other than for
cause or by the executive for good reason with the two year period following a
"change of control," each such executive will be entitled to receive a payment
(payable, at the executive's option, in a lump sum) equal to (i) the executive's
target bonus for the year in which the termination occurs or, if higher, the
executive's target bonus for the preceding year or the year in which the change
of control occurs and (ii) if the executive's employment is terminated after
July 1 of the then-current year, a pro-rated portion of the executive's target
bonus for the year in which the termination occurs or, if higher, a pro-rated
portion of the executive's target bonus for the preceding year or the year in
which the change of control occurs.
In the case of Messrs. NeCastro, Nussbaum and Denny, each such executive is
entitled to receive (a) any accrued but unpaid salary and expense reimbursement
and (b) his salary (as in effect at the time of termination or, if higher, as in
effect as of the most recent extension of the employment period) for a period of
two years following the date of his termination of employment. In addition, in
the event that the employment of Messrs. NeCastro, Nussbaum or Denny is
terminated by Penton other than for cause or by the executive for good reason
within the two year period following a "change of control," each such executive
will be entitled to receive a payment (payable, at the executive's option, in a
lump sum) equal to his target bonus for the year in which the termination occurs
or, if higher, the executive's target bonus for the preceding year or the year
in which the change of control occurs. All executives party to such agreements
are also entitled to the continuation of certain additional benefits (e.g.,
medical insurance).
Payments and benefits under the employment agreements are subject to reduction
in order to avoid the application of the excise tax on "excess parachute
payments" under the Internal Revenue Code, but only if the reduction would
increase the net after-tax amount received by the executive.
The transactions that are deemed to result in a change of control for the
purposes of these agreements include: (a) any person (with certain exceptions as
described in the agreements) becoming the beneficial owner of 40% or more of the
voting stock of Penton (or, with respect to Mr. Nussbaum, the filing of a
Schedule 13D or Schedule 14D that discloses that any person has become the
beneficial owner of 20% or more of the voting stock of Penton); (b) individuals
who, as of the date of the agreements, constitute the board of directors (the
"Incumbent Board") cease for any reason (other than death or disability) to
constitute at least a majority of the board of directors (provided that any
individual who becomes a director subsequent to the date of the agreements whose
appointment or election is approved by a majority of the Incumbent Board is
considered to be a member of the Incumbent Board); (c) a merger or consolidation
with, or sale of all of or substantially all of Penton's assets to another
entity, as a result of which less than a majority of the voting shares of the
surviving entity are owned by former shareholders of Penton; and (d) approval by
the shareholders of Penton of a complete liquidation or dissolution of Penton.
"Good reason" for termination of employment by the executive includes
15
reduction in salary, the failure by Penton to extend the executive's employment
under the agreement or a breach by Penton of the terms of the agreement and, in
the case of Mr. Nussbaum, a change of control.
Each agreement includes non-competition, non-solicitation and confidentiality
obligations on the part of the executive, which survive its termination.
PLANS AND ARRANGEMENTS
Retirement Plan
Participants in the Penton Media, Inc. Retirement Plan consist of a majority of
the full-time employees of Penton and its subsidiaries in the United States,
including the executive officers. The plan is fully paid for by Penton, and
employees become fully vested after five years of service. The annual benefit
payable to an employee under the plan upon retirement, computed as a straight
life annuity amount, equals the sum of the separate amounts the employee accrues
for each of his years of service under the plan. Such separate amounts are
determined as follows: for each year through 1988, 1.2% of such year's
compensation up to the Social Security wage base for such year and 1.85% (2.0%
for years after 1986) of such year's compensation above such wage base; for each
year after 1988 through the year in which the employee reaches thirty-five years
of service, 1.2% of such year's "covered compensation" and 1.85% of such year's
compensation above such "covered compensation;" and for each year thereafter,
1.2% of such year's compensation. Years of service and compensation with Pittway
Corporation prior to Penton's spinoff from Pittway in August of 1998 are taken
into account under the plan. The employee's compensation under the plan for any
year includes all salary (before any election under Pittway's or Penton's salary
reduction plan or cafeteria plan), commissions and overtime pay and, beginning
in 1989, bonuses, subject to such year's limit applicable to tax-qualified
retirement plans ($160,000 for 1999, $170,000 for 2000 and 2001, and $200,000
each year thereafter). The employee's "covered compensation" under the plan for
any year is generally the average, computed as of such year, of the Social
Security wage bases for each of the thirty-five years preceding the employee's
Social Security retirement age, assuming that such year's Social Security wage
base will not change in the future. Normal retirement age under the plan is age
65, and reduced benefits are available as early as age 55. Benefits are not
subject to reduction for Social Security benefits or other offset amounts.
Estimated annual benefits payable under the plan upon retirement at normal
retirement age for the following persons (assuming 1999 compensation at
$160,000, 2000 and 2001 compensation at $170,000 and future compensation at the
$200,000 limit currently applicable, and that covered compensation remains
constant) are: Mr. Kemp, $60,437; Mr. Ramella, $95,129; Mr. Nussbaum, $74,647;
Mr. Denny, $72,136; and Mr. NeCastro, $72,259.
Supplemental Executive Retirement Plan
Messrs. Kemp, Ramella, Denny, Nussbaum and NeCastro participate in Penton's
Supplemental Executive Retirement Plan, which is not tax-qualified. The annual
benefit payable to a participant under the plan at age 65, computed as a
straight life annuity amount, equals the sum of the separate amounts the
participant accrues for each of his years of service after September 3, 1996 for
Mr. Kemp, July 1, 1977 for Mr. Ramella, September 8, 1998 for Mr. Nussbaum,
October 16, 2000 for Mr. Denny and June 15, 1998 for Mr. NeCastro. Years of
service and compensation with Pittway are taken into account. The separate
amount for each such year is 1.85% of that portion of the participant's salary
and annual discretionary cash bonus, if any, for such year (before any election
under Pittway's or Penton's salary reduction plan, and including any portion of
such bonus taken in the form of Deferred Shares Awards) in excess of the limit
applicable that year to compensation that may be taken into account under
tax-qualified retirement plans ($160,000 in 1999, $170,000 in 2000 and 2001, and
$200,000 in 2002) but less than $500,000. Benefits are not subject to reduction
for Social Security benefits or other offset amounts. Accrued benefits are
subject to forfeiture in certain events. Estimated annual benefits payable under
the plan upon retirement at age 65 for the following persons (assuming 2002 and
future annual salary and discretionary cash bonus of not more than $500,000 for
each of them and that the $200,000 limit currently applicable remains constant)
are: Mr. Kemp, $111,511; Mr. Ramella, $125,278; Mr. Nussbaum, $133,834; Mr.
Denny, $52,937; and Mr. NeCastro $100,628.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the individuals who served as members of the Compensation Committee in
2001 was or has been an officer or employee of Penton or engaged in transactions
with Penton (other than in his capacity as director). None of Penton's executive
officers serves as a director or member of the compensation committee of another
entity, one of whose executive officers serves as a member of the Compensation
Committee or a director of Penton.
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This Compensation Committee Report on Executive Compensation shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any other Penton filing under the Securities Act of
1933 or under the Securities Exchange Act of 1934, except to the extent that
Penton specifically incorporates this report by reference therein, and shall not
otherwise be deemed filed under those Acts.
The Compensation Committee of the Board of Directors is responsible for
establishing and administering an executive compensation program for Penton,
determining the compensation of the Chief Executive Officer of Penton and
approving the compensation proposed by the Chief Executive Officer for all other
executive officers of Penton listed in the Summary Compensation Table. Actions
regarding compensation for 2001 were approved by the Compensation Committee.
Penton's Compensation Committee intends to follow the compensation policies
discussed below.
The Compensation Committee, comprised of three non-employee directors, has
prepared this report to summarize Penton's policies and practices with regard to
executive compensation.
OBJECTIVES
Penton's basic objectives for executive compensation are to recruit and keep top
quality executive leadership focused on attaining long-term corporate goals and
increasing stockholder value.
ELEMENTS OF COMPENSATION
Total compensation has three components: (1) base salary; (2) short-term
incentive (generally cash bonus); and (3) long-term incentive (generally stock
options and performance shares).
BASE SALARY
Base salaries for executive officers are set within ranges that are reasonable,
considering comparable positions in companies similar to Penton in industry and
region. Base salaries are also intended to be equitable and high enough to keep
qualified executives from being overdependent on cash bonuses.
SHORT-TERM INCENTIVES
Annual cash bonuses are based on Penton's attainment of its earnings objectives.
Generally, all cash bonuses are tied to individual and group performance based
on goals established at the start of the year, consistent with the Senior
Executive Bonus Plan, and are available in proportionately greater amounts to
those who can most influence corporate earnings. In addition, certain employees
may use all or a portion of their cash bonuses to increase their ownership of
common stock under the Penton Media, Inc. Management Stock Purchase Plan.
LONG-TERM INCENTIVES
Long-term incentives consisting of stock options and performance shares are
intended to motivate executives to make and execute plans that improve
stockholders' value over the long-term.
CHIEF EXECUTIVE OFFICER COMPENSATION
At the start of the 2001 fiscal year, the Compensation Committee increased Mr.
Kemp's salary to $600,000. Mr. Kemp also was awarded an option to purchase
50,000 shares of common stock on February 6, 2001 at an exercise price of $24.10
per share and an option to purchase 100,000 shares of common stock on November
16, 2001 at an exercise price of $6.89 per share. One-third of such options will
vest per year and become exercisable after three years of service, subject to
full or partial acceleration of exercisability in the event of earlier
termination of employment (full acceleration if earlier termination is on
account of death, permanent disability, retirement upon or after reaching age
sixty-five or upon a change of control of Penton). In addition, Mr. Kemp
received 41,493 performance shares which vest subject to the achievement of
specified performance goals. The shares vest upon the attainment of performance
goals based on Penton's after tax cash flow per share over the three year period
from January 1, 2001 through December 31, 2003.
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This report is submitted on behalf of the Compensation Committee:
Richard B. Swank, Chairman
Paul W. Brown
R. Douglas Greene
King Harris
PERFORMANCE GRAPH
The following graph reflects a comparison of the cumulative total stockholder
return on the common stock with the Russell 2000 Market Index and an index of
peer companies, respectively, for the period commencing August 10, 1998 (the
initial trading date for the common stock) through December 31, 2001. The peer
group consists of Elsevier NV, Meredith Corporation, Inc., Playboy Enterprises,
Inc. (Class B), Primedia, Inc., Reader's Digest Association, Inc., Reed
International Plc, Scholastic Corporation, United News & Media Plc and
Ziff-Davis, Inc. The peer group has been revised to exclude CMP Media, Inc.,
which was included in the peer group for 1998, because it was sold to Miller
Freeman, Inc. in 1999. CMP's removal did not significantly affect the peer
group's 1998 performance. The graph assumes that the value of the investment in
the common stock and each index was $100 at August 10, 1998, and all dividends
were reinvested. The comparisons in this graph are required by the Securities
and Exchange Commission and, therefore, are not intended to forecast or be
necessarily indicative of the actual future return on the common stock.
[Graph]
August 10, 1998 December 31, 1998 December 31, 1999 December 31, 2000 December 31, 2001
Penton Media $100.00 $125.12 $149.29 $167.90 $ 39.23
Russell 2000 Index 100.00 100.79 120.54 115.34 116.51
Peer Group 100.00 93.79 100.56 116.80 83.55
REPORT OF THE AUDIT REVIEW COMMITTEE
This Report of the Audit Review Committee does not constitute soliciting
material and shall not be deemed filed or incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any other
Penton filing under the Securities Act of 1933 or the Securities Exchange Act of
1934, except to the extent Penton specifically incorporates this report by
reference therein, and shall not otherwise be deemed filed under those Acts.
All members of the Audit Review Committee are independent as defined in Sections
303.01(B)(2)(a) and (3) of the New York Stock Exchange's listing standards.
During 2001, the Audit Review Committee of the Board of Directors developed a
charter for the Committee, which was approved by the full Board.
As set forth in more detail in the charter, The Audit Review Committee's primary
responsibilities fall into three broad categories:
- first, the Committee is charged with monitoring the preparation of
quarterly and annual financial reports by Penton's management,
including discussions with management and Penton's outside auditors
about draft annual financial statements and key accounting and
reporting matters;
- second, the Committee is responsible for matters concerning the
relationship between Penton and its outside auditors, including
recommending their appointment or removal; reviewing the scope of
their audit services and related fees, as well as any other services
being provided to Penton; and determining whether the outside auditors
are independent (based in part on the annual letter provided to Penton
pursuant to Independence Standards Board Standard No. 1); and
- third, the Committee oversees management's implementation of effective
systems of internal controls, including review of policies relating to
legal and regulatory compliance, ethics and conflicts of interests.
The Committee has implemented procedures to ensure that during the course of
each fiscal year it devotes the attention that it deems necessary or appropriate
to each of the matters assigned to it under the Committee's charter. To carry
out its responsibilities, the Committee met five times during 2001.
In monitoring the preparation of Penton's financial statements, the Committee
met with both management and Penton's outside auditors to review and discuss
results of operations prior to quarterly and year-end announcements and the
annual financial statements prior to their issuance and to discuss significant
accounting issues. Management advised the
18
Committee that all financial statements were prepared in accordance with
generally accepted accounting principles, and the Committee discussed the
statements with both management and the outside auditors. The Committee's review
included discussion with the outside auditors of matters required to be
discussed pursuant to Statement on Auditing Standards No. 61 (Communications
with Audit Committees).
With respect to Penton's outside auditors, the Committee, among other things,
discussed with PricewaterhouseCoopers LLP matters relating to its independence,
including the disclosures made to the Committee as required by the Independence
Standards Board Standard No. 1 (Independence Discussions with Audit Committees).
The Committee has also considered whether the provision of non-audit services to
Penton by PricewaterhouseCoopers LLP is compatible with maintaining its
independence.
Finally, the Committee reviewed proposals for adequate staffing and to
strengthen internal procedures and controls where appropriate.
On the basis of these reviews and discussions, the Committee recommended to the
Board of Directors that the Board approve the inclusion of Penton's audited
financial statements in Penton's Annual Report on Form 10-K for the fiscal year
ended December 31, 2001, for filing with the Securities and Exchange commission.
Members of the Audit Review Committee
Edward J. Schwartz, Chairman
Paul W. Brown
Don E. Schultz (retired)
CERTAIN TRANSACTIONS
In connection with the acquisition by Penton of the assets of New Hope
Communications, Inc., Mr. Greene had certain contingent rights to additional
cash and shares of common stock. In 2001, Mr. Greene earned $1,933,620 in
contingent payments, twenty percent of which will be paid in cash and the
balance of which will be paid in shares of common stock. In addition, Penton,
through its wholly owned subsidiary, Healthwell.com Inc., leased office space
from Hew Hope Group LLC, a Colorado limited liability company, which is owned by
Mr. Greene. The lease, from which New Hope Group received $155,000 in 2001,
ended in December 31, 2001. Penton believes that the terms of this lease were no
less favorable to Penton than those obtainable in an arm's-length transaction
with an independent third party.
Donohue Meehan Publishing Company leases equipment from Donohue Meehan Equipment
Leasing, an Illinois partnership, which is owned by Messrs. Donohue and Meehan.
The total balances on these leases as of December 31, 2001, was approximately
$67,601. Penton believes that the lease terms are no less favorable to Donohue
Meehan Publishing Company than those obtainable in an arm's-length transaction
with an independent third party.
Key Corp provides cash management and merchant banking services to Penton, for
which it received fees totaling $82,299 in 2001. William B. Summers, a director
of Penton, is Chairman of McDonald Investments, Inc., a subsidiary of Key Corp.
In 2000, Penton adopted the Senior Executive Loan Program pursuant to which
certain executives received loans from Penton to purchase common stock. The
maximum amount of indebtedness that was outstanding under this loan program
since January 1, 2001, for each of Messrs. Kemp, Ramella, Nussbaum, Zaremba,
NeCastro, and Vice was $3,985,635, $2,600,158, $1,062,623, $894,196, $1,120,187
and $895,902, respectively. The amounts also represent the outstanding balances
as of March 22, 2002.
Pursuant to the Senior Executive Loan Program, Mr. Denny purchased shares of
Penton's common stock on each of December 5, 2000, January 9, 2001, February 14,
2001 and April 1, 2001. Pursuant to a Stock Purchase and Note Rescission
Agreement between Penton and Mr. Denny, Penton and Mr. Denny rescinded the stock
purchases and the loans covering such purchases made in 2001, and thereby placed
the parties for all purposes in the same position as they would have been had
the stock purchases and loans never occurred. To effect the rescission, Penton
cancelled the loans and Mr. Denny tendered to the Company the shares issued in
connection with the stock purchases and all dividends on the shares received by
Denny. The maximum amount of indebtedness that was outstanding under the loan
program since January 1, 2001 for Mr. Denny was $1,046,572 and following the
rescission, the maximum amount of indebtedness that was outstanding under the
loan program for Mr. Denny was $264,958. This amount also represents the
outstanding balance as of March 22, 2002, in connection with the shares
purchased on December 5, 2000.
The following amendments were made to the Senior Executive Loan Program during
2001:
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- Each promissory note issued to an executive pursuant to the program
was amended to extend the maturity date for a period of 5 years.
- Each promissory note was amended to provide that no further interest
shall accrue on the balance of the promissory note while the holder
remains an employee of Penton.
- Under the original terms of each promissory note, the note would
become immediately due and payable 120 days following termination of
the executive's employment for any reason. As amended, the promissory
notes will become immediately due and payable 120 days following
termination of employment unless such termination was due to (a) death
or permanent disability, (b) a termination without cause, (c) a
termination by executive for good reason, or (d) involuntary
retirement. In the event of such termination of employment, the
promissory notes will become due and payable on its maturity date.
In connection with the closing of the sale of our preferred stock and related
warrants, we paid the purchasers a fee of $750,000, or 1.5% of the purchase
price. Mr. Budde, Ms. Garber and Ms. Stone are affiliated with the purchasers.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on a review of reports of ownership, reports of changes of
ownership and written representations under Section 16(a) of the Securities
Exchange Act of 1934 which were furnished to Penton during or with respect to
2001 by persons who were, at any time during 2001, directors or officers of
Penton or beneficial owners of more than 10% of the outstanding shares of common
stock, no such person failed to file on a timely basis any report required by
such section during 2001.
PROPOSAL TO RATIFY THE APPOINTMENT OF THE INDEPENDENT CERTIFIED ACCOUNTANTS OF
PENTON FOR THE FISCAL YEAR ENDING DECEMBER 31, 2002 (PROPOSAL 2)
WHAT ARE WE ASKING YOU TO APPROVE?
PricewaterhouseCoopers LLP, who served as auditors for the year ended December
31, 2001, has been selected by the Board, upon recommendation of the Audit
Review Committee, to audit the consolidated financial statements of Penton for
the year ending December 31, 2002. We are asking you to ratify this engagement.
It is expected that one or more representatives of PricewaterhouseCoopers LLP
will attend the annual meeting, with the opportunity to make a statement if they
should so desire and will be available to respond to appropriate questions.
WHAT DOES THE BOARD OF DIRECTORS RECOMMEND WITH RESPECT TO PROPOSAL 2?
THE BOARD RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF THE
INDEPENDENT CERTIFIED ACCOUNTANTS.
WHAT VOTE IS REQUIRED FOR THIS PROPOSAL?
A majority of the votes of the shares of common stock and preferred stock
present in person or represented by proxy and entitled to vote on the proposal
is required for approval. An abstention is counted as a vote against and a
broker "non-vote" is not counted for purposes of ratifying this appointment.
WHAT FEES HAVE BEEN PAID TO ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31,
2001?
AUDIT FEES
PricewaterhouseCoopers LLP has billed Penton $452,735, in the aggregate, for
professional services rendered by PricewaterhouseCoopers LLP for the audit of
Penton's annual financial statements for the fiscal year ended December 31,
2001, and the reviews of the interim financial statements included in Penton's
Forms 10-Q filed during the fiscal year ended December 31, 2001.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
PricewaterhouseCoopers LLP did not render any services to Penton during the
fiscal year ended December 31, 2001, related to financial information systems
design and implementation.
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ALL OTHER FEES
PricewaterhouseCoopers LLP has billed Penton $566,928, in the aggregate, for
services rendered by PricewaterhouseCoopers LLP for all services (other than
those covered above under "Audit Fees" and "Financial Information Systems Design
and Implementation Fees") during the fiscal year ended December 31, 2001. These
services principally consisted of: (1) audits of employee benefits plans and
regulatory filings, $222,408, and (2) tax consulting and business acquisition
diligence, $344,520.
GENERAL DISCUSSION OF PROPOSALS 3 THROUGH 6
WHAT IS THE BACKGROUND AND REASONS FOR ISSUING THE PREFERRED STOCK AND WARRANTS
TO PURCHASE COMMON STOCK?
As a result of softening economic conditions in 2001 and the impact of these
conditions on the financial performance of our business, we believed that we
would be in breach of certain financial ratio covenants contained in our senior
secured credit facility when we reported our results for fiscal year 2001. These
results would be reported when we filed our Annual Report on Form 10-K for the
fiscal year ended December 31, 2001, which we filed on March 21, 2002. After the
September 11th terrorist attacks and the resulting impact on the world financial
markets, and specifically the business-to-business media industry, our financial
condition deteriorated even further.
A breach of any of the covenants or other provisions in our debt instruments
could have resulted in a default thereunder. Upon the occurrence of an event of
default under our credit facility, the lenders could have elected to declare all
amounts outstanding thereunder to be immediately due and payable and terminated
all commitments to extend further credit, which would adversely affect our
ability to fund our operations. An acceleration of the amounts due under our
credit facility would also have caused us to be in default under the indenture
governing our 10 3/8% senior subordinated notes, enabling acceleration of
amounts outstanding. If we are unable to repay any accelerated amounts under the
credit facility, the respective lenders could have proceeded against the
collateral granted to them to secure that indebtedness. If the lenders under our
credit facility had accelerated the repayment of borrowings, we may not have had
sufficient assets to repay all of our indebtedness. Consequently, if these
defaults were to have occurred, we may have had to file for bankruptcy
protection.
Consequently, we approached the lenders under the credit facility to obtain an
amendment to the credit agreement to provide more flexibility and to waive any
potential defaults. The lenders responded that they would be willing to meet
this request if we were able to pay down a portion of the outstanding
indebtedness under the credit facility. Specifically, the lenders requested that
we raise additional equity capital to pay down the debt.
In November 2001, we retained Credit Suisse First Boston to assist us in raising
the capital necessary to secure the amendment to the credit facility. After
considering a number of alternatives in consultation with our financial and
legal advisors and approaching several potential investors, our Board of
Directors determined that it was in the best interests of Penton and our
stockholders to raise the necessary capital by consummating the following
transactions:
- On March 19, 2002, we sold 40,000 shares of preferred stock and warrants to
purchase 1,280,000 shares of our common stock to a group of investors led
by ABRY Mezzanine Partners, L.P. for $40 million. The net proceeds of this
sale, together with the net proceeds of the sale of our equity interest in
INT Media Group, Inc. and a portion of the proceeds from our tax refund for
2001 were used to pay down $48 million of indebtedness under the credit
facility, after which an amendment that provided significant covenant
relief and reduced the revolving credit facility to a maximum availability
of $40 million became effective.
- On March 28, 2002, we sold $157.5 million worth of 11 7/8% senior secured
notes due 2007. The net proceeds of this sale were used to (1) repay all of
the outstanding indebtedness under the term loan portion of our credit
facility, which resulted in additional significant covenant relief under
the credit agreement and (2) buy back for approximately $8.4 million, $10
million in face value of our 10 3/8% senior subordinated notes.
- On March 28, 2002, we sold an additional 10,000 shares of preferred stock
and warrants to purchase 320,000 shares of common stock for $10 million.
The net proceeds of this sale will be used for general corporate purposes.
We believe, after considering other alternatives and consulting with our
financial advisors, that these transactions were the least costly financing
alternatives available to us in the limited time period available before we
would have been in default under the credit agreement. In addition, these
transactions resulted in significant covenant relief under the credit agreement,
thus providing us with greater flexibility in managing our business in the
current weak economic climate.
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WHY IS STOCKHOLDER APPROVAL BEING SOUGHT FOR THE ISSUANCE OF THE COMMON STOCK
ISSUABLE UPON CONVERSION OF THE PREFERRED STOCK AND THE EXERCISE OF THE
WARRANTS?
Because our common stock is listed on the New York Stock Exchange, we must
comply with certain rules of the NYSE. Under Rule 312.03 of the NYSE, we must
obtain stockholder approval prior to issuing our common stock or securities that
are convertible into, or exercisable for, our common stock in one transaction or
a series of related transactions if:
- the common stock has, or will have upon issuance, voting power
equal to or in excess of 20% of the voting power outstanding
before the issuance of such stock or securities convertible
into or exercisable for common stock; or
- the number of shares of common stock to be issued, is or will
be upon issuance, equal to or in excess of 20% of the number
of shares of common stock outstanding before the issuance of
the common stock or of securities convertible into or
exercisable for common stock.
Due to the limited time available to consummate the financing transactions
described above, we did not have sufficient time to hold a special meeting of
stockholders to obtain the prior approval of the terms and issuance of the
preferred stock and warrants. As a result, to comply with NYSE rules and to
obtain the amendment to our credit agreement before we defaulted under it, we
issued the preferred stock and warrants and, subject to receiving stockholder
approval, limited their conversion and exercise, respectively, into an aggregate
of 19.99% of our common stock outstanding prior to such issuance, and agreed to
an initial dividend rate of 7% (rather than 5%) until such stockholder approval
was obtained. In addition, until stockholder approval is obtained, the voting
rights of the preferred stock are limited to the difference between (1) 19.99%
of the voting power outstanding prior to issuance of the preferred stock and
warrants less (2) the voting rights of any common stock owned by the preferred
stock holders.
We agreed with the holders of the preferred stock to seek stockholder approval
of the issuance of our common stock upon conversion of the preferred stock and
exercise of the warrants at our next annual meeting of stockholders.
Accordingly, we are submitting this matter for stockholder approval at the
upcoming annual meeting. Under the terms of the preferred stock and warrants, we
cannot issue shares of common stock upon conversion of the preferred stock or
exercise of the warrants in excess of the 19.99% threshold until we receive the
stockholder approval contemplated by these proposals. As more fully described in
the following discussion, if we fail to receive stockholder approval, however,
the conversion price of the preferred stock will be reduced and the dividend
rate will remain at 7% until such time as we receive stockholder approval.
ARE THERE ANY NEGATIVE CONSEQUENCES IF YOU DO NOT APPROVE PROPOSAL 3 AND
PROPOSAL 4?
Yes. If you do not approve Proposal 3 and Proposal 4, the following negative
consequences will result:
- The dividend rate will remain at 7% per annum. If stockholders
approve Proposal 3 and Proposal 4 by September 19, 2002, then
the dividend rate on the preferred stock will decrease to 5%
per annum retroactively to the date of issuance of the
preferred stock to the extent of any preferred stock not then
converted. If stockholders approve Proposal 3 and Proposal 4
after September 19, 2002, the dividend rate will decrease to
5% per annum from the date such approval is obtained.
- The conversion price of the preferred stock and the exercise
price of the warrants will decrease. If stockholders fail to
approve Proposal 3 and Proposal 4 by June 28, 2002, the
conversion price of the preferred stock and the exercise price
of the warrants will be reduced by 20% from that date forward,
and will reduce an additional 20% for every 90-day period
thereafter, up to a maximum reduction of 50% of the conversion
price or exercise price that would have been in effect absent
such adjustments, until stockholder approval is obtained.
Thus, assuming no other adjustments, the conversion price and
exercise price will reduce to approximately $6.09 on June 28,
2002, to approximately $4.87 on the 90th day after that date,
to approximately $3.90 on the 180th day after that date, and
to approximately $3.81 on the 270th day after that date, in
each case until stockholder approval is obtained. If
stockholders subsequently approve Proposal 3 and Proposal 4,
the conversion price and exercise will be readjusted to that
which would have been in effect had we received stockholder
approval on June 28, 2002.
- The number of shares of common stock into which the warrants
are exercisable will increase proportionally with any decrease
in the exercise price. For example, if the exercise price of
the warrants drops in half, the number of shares into which
the warrants are exercisable will double. If stockholders
22
subsequently approve Proposal 3 and Proposal 4, the number of
shares of common stock issuable upon exercise of the warrant
will be proportionally readjusted.
- The liquidation preference of the preferred stock will
increase significantly more on the sixth anniversary of its
issuance. If any shares of preferred stock are still
outstanding on March 19, 2008, the sixth anniversary of their
issuance, the liquidation value of each share of preferred
stock, including any accrued and unpaid dividends, will
increase to $4,570 if stockholders have approved Proposal 3
and Proposal 4, or $9,140 if stockholders have not approved
Proposal 3 and Proposal 4 by that date.
- We will not be able to force the holders of preferred stock to
convert their preferred stock into common stock. We may
require the holders of preferred stock to convert their
preferred stock into common stock provided that certain
conditions are met, including receiving stockholder approval
of Proposal 3 and Proposal 4. See the discussion entitled
"Conversion" in the discussion of Proposal 3. This ability to
force conversion gives us the opportunity, should all of the
conditions to forced conversion be met, to reduce the number
of shares of preferred stock that would be outstanding on
March 19, 2008. This reduction would result in fewer shares of
preferred stock having an increased liquidation preference as
discussed in the immediately preceding bullet point.
- You will receive less money upon a sale, change in control or
liquidation of the company. Upon the happening of any of these
events, the holders of the preferred stock are entitled to
elect between receiving the liquidation preference of their
preferred stock plus accrued dividends or having their
preferred stock redeemed. A higher liquidation preference and
a higher dividend rate will result in a larger payment being
made to the holders of the preferred stock should they elect
to receive the liquidation preference plus accrued dividends.
If the holders of preferred stock elect to have their
preferred stock redeemed, they would be entitled to a payment
equal to the number of shares of common stock into which the
preferred stock is convertible times the applicable share
minimum price. See the discussion entitled "Redemption" in
Proposal 3 below. A higher liquidation preference, a higher
dividend rate and a lower conversion price will result in the
holders of preferred stock being entitled to convert into a
larger number of shares of common stock, which would also
result in a higher payment being made to the holders of
preferred stock should they elect to have their preferred
stock redeemed. In each case, a higher payment being made to
the preferred stock holders would result in a lower payment
being made to the common stock holders in these events.
HOW WILL THE APPROVAL OF PROPOSAL 3 AND PROPOSAL 4 IMPACT PENTON'S
CAPITALIZATION?
In considering the dilutive effect of the issuance of the common stock upon
conversion of the preferred stock and exercise of the warrants discussed below,
you should keep in mind that the actual number of shares of common stock that
the holders of the preferred stock and related warrants are entitled to receive
upon conversion of their shares of preferred stock and exercise of their
warrants is currently limited by the listing requirements of the New York Stock
Exchange to 6,378,874, or 19.99% of the number of shares of our common stock
outstanding on March 18, 2002 (the day before the issuance of the preferred
stock and warrants). These listing requirements also limit the voting power of
the preferred stock to 19.99% of the voting power outstanding on March 18, 2002.
Additionally, the terms of the preferred stock limited the voting rights of the
holders of the preferred stock to (1) 35% of the aggregate votes of our
aggregate voting equity interests (as defined in the indentures governing our 10
3/8% senior subordinated notes and our 11 7/8% senior secured notes) less (2)
the voting rights of any common stock owned by such preferred stock holder.
As a result of the issuance of our common stock upon conversion of the preferred
stock and the exercise of the warrants, the holders of common stock will
experience dilution. As of the date of this proxy statement, the conversion of
the 50,000 shares of preferred stock and the exercise of the 1,600,000 warrants
would result in the issuance of an aggregate of approximately 8,170,302 shares
of our common stock, equal to approximately 20.4% of our outstanding equity,
including shares of common stock issuable upon conversion of the preferred stock
and exercise of the warrants. The number of shares of common stock into which
each share of preferred stock is convertible is calculated by dividing the
liquidation preference of the preferred stock, currently $1,000 per share, plus
accrued and unpaid dividends, by the conversion price, currently $7.61. By
contrast, as of the date of this proxy statement, the holders of our common
stock own approximately 79.6% of our outstanding equity, including shares of
common stock issuable upon conversion of the preferred stock and exercise of the
warrants.
In addition, unless paid in cash, dividends will accumulate and, therefore, will
result in an increase in the number of shares of common stock into which the
preferred stock is convertible. Currently, the preferred stock pays a 7% per
annum dividend, which accrues daily and is payable semi-annually in arrears. The
dividend rate will decrease to 5% per annum if Proposal 3 and Proposal 4 are
approved. The dividend is payable in cash only if declared by the Board of
Directors and
23
approved by the holders of no less than 75% of the preferred stock then
outstanding. Currently, we have no intention to pay cash dividends.
If stockholders approve Proposal 3 and Proposal 4 by September 19, 2002, and
assuming there have been no conversions or antidilution adjustments to the
conversion price, approximately $17.8 million of dividends will have accrued on
the preferred stock by March 18, 2008, which dividends would be convertible into
approximately 2,335,523 shares of common stock. If stockholders do not approve
Proposal 3 and Proposal 4 by March 18, 2008, and assuming no antidilution
adjustments and no conversions, approximately $26.5 million of dividends will
have accrued on the preferred stock by that date, which dividends would be
convertible in approximately 6,975,043 shares of common stock.
The following table illustrates the dilution that will occur to the holders of
the common stock on March 18, 2008, as a result of the issuance of the preferred
stock and warrants if stockholders approve Proposal 3 and Proposal 4 and if
stockholders do not approve Proposal 3 and Proposal 4 by such date:
Common Stockholders Preferred Stockholders
Shares of
Common
Shares of Percent Stock on
Common of an as Percent
Stock Voting Converted of Voting
Outstanding Power Basis Power Total
----------- -------- ---------- ---------- -----
With stockholder approval of
Proposal 3 and Proposal 4 31,910,325 75.2% 10,505,825 24.8% 42,416,150
Without stockholder approval of
Proposal 3 and Proposal 4 31,910,325 57.8% 23,315,647 42.2% 55,225,972
The foregoing table assumes (i) no defaults under the preferred stock have
occurred, (ii) the warrants are fully exercised, (iii) there have been no
antidilution adjustments to the initial $7.61 conversion price, (iv) no
preferred stock has been converted or redeemed, (v) no cash dividends have been
paid, (vi) no additional shares of common stock or securities convertible into
or exercisable for common stock have been issued and (vii) no sale of the
company or change of control has occurred.
If any shares of preferred stock are still outstanding on March 19, 2008, the
sixth anniversary of their issuance, the liquidation value of each share of
preferred stock, which includes any accrued and unpaid dividends, will increase
to $4,570 if stockholders have approved Proposal 3 and Proposal 4, or $9,140 if
stockholders have not approved Proposal 3 and Proposal 4 by that date. In
addition, from and after March 19, 2008, the conversion price of the preferred
stock will be the lesser of (1) the conversion price then in effect, as it may
be further adjusted and (2) the greater of (x) 90% of the market price of the
common stock on the date the preferred stock is converted and (y) $4.50, as it
may be adjusted to reflect stock splits, stock dividends and other similar
transactions. This conversion price is also subject to adjustment as described
above if stockholder approval of Proposal 3 and Proposal 4 has not been obtained
by such date. Finally, from and after March 19, 2008, the dividend rate will
increase to 15% per annum, regardless of whether stockholder approval is
obtained. Thus, from March 19, 2008, until the redemption date of March 19,
2012, the preferred stock will accrue approximately $191.3 million of dividends
if stockholder approval of Proposal 3 and Proposal 4 has been obtained, or
approximately $382.6 million of dividends if stockholder approval of Proposal 3
and Proposal 4 has not been obtained. Such dividends, if not paid in cash, will
result in a significant increase in the number of shares of common stock
issuable upon conversion of the preferred stock.
As a result of these adjustments to the liquidation value, the conversion price
and the dividend rate, the holders of common stock will experience additional
dilution to their ownership interest in our common stock. The following table
illustrates the dilution that will occur to the holders of the common stock at
the maturity date of the preferred stock if stockholders approve Proposal 3 and
Proposal 4 and if stockholders do not approve Proposal 3 and Proposal 4 by such
date:
24
Common Stockholders Preferred Stockholders
Shares of
Common
Shares of Percent Stock on
Common of an as Percent
Stock Voting Converted of Voting
Outstanding Power Basis Power Total
----------- --------- ---------- ---------- -----
With stockholder approval of
Proposal 3 and Proposal 4
90% of market price greater than $7.61 31,910,325 36.0% 56,762,322 64.0% 88,672,647
90% of market price less than $4.50 31,910,325 25.2% 94,885,617 74.8% 126,795,942
Without stockholder approval of
Proposal 3 and Proposal 4
90% of market price greater than $7.61 31,910,325 12.5% 223,849,290 87.5% 255,759,615
90% of market price less than $4.50 31,910,325 7.8% 376,342,466 92.2% 408,252,791
The foregoing table assumes (i) no defaults under the preferred stock have
occurred, (ii) the warrants are fully exercised, (iii) there have been no
antidilution adjustments to the initial $7.61 conversion price, (iv) no
preferred stock has been converted or redeemed, (v) no cash dividends have been
paid, (vi) no additional shares of common stock or securities convertible into
or exercisable for common stock have been issued and (vii) no sale of the
company or change of control has occurred.
IS THE EFFECTIVENESS OF ANY PROPOSAL CONTINGENT UPON THE APPROVAL OF ANOTHER
PROPOSAL?
No. None of the proposals contained in this proxy statement is contingent upon
the approval of another proposal. However, if Proposal 3 is not approved, the
number of shares sought to be authorized by Proposal 4 will be 435 million; but
if Proposal 3 is approved, the number of shares sought to be authorized by
Proposal 4 will only be 155 million. In addition, as discussed above, the
dividend rate and the conversion price of the preferred stock and the exercise
price of the warrants depend on whether both Proposal 3 and Proposal 4 are
approved. If stockholder approval of Proposal 3 and Proposal 4 is not obtained
at the annual meeting, we intend to resubmit these proposals at the every
subsequent annual meeting of stockholders until both proposals are approved.
ARE THERE ANY LIMITS ON THE CONVERSION RIGHTS OF THE PREFERRED STOCK AND
EXERCISE RIGHTS OF THE WARRANTS?
Yes. So long as our common stock is listed on the NYSE, until we receive
stockholder approval of Proposal 3, no holder of preferred stock may convert any
shares of preferred stock and no warrant holder may exercise any warrants to the
extent that, after giving effect to such conversion or exercise, the aggregate
number of shares of common stock issued upon conversion of the preferred stock
and exercise of the warrants since March 19, 2002, would exceed 6,378,874 shares
of common stock (adjusted for stock splits and similar transactions), which is
equal to 19.99% of the number of shares of common stock outstanding on March 18,
2002 (the day before the issuance of the preferred stock and warrants). In
addition, so long as any of our 10 3/8% senior subordinated notes or our 11 7/8%
senior secured notes are outstanding, no holder or group of holders of preferred
stock may convert shares of preferred stock and no warrant holder or group of
holders may exercise any warrants to the extent that, after giving effect to
such conversion or exercise, any such holder or group of holders would be
entitled to direct the votes with respect to in excess of 35% of the aggregate
votes of our aggregate voting equity interests (as defined in the indentures
governing such notes).
ARE THERE ANY LIMITS ON THE VOTING RIGHTS OF THE PREFERRED STOCK?
Yes. Each share of preferred stock is entitled to one vote for each share of
common stock issuable upon conversion of the preferred stock. Thus, if a share
of preferred stock were convertible into 150 shares of common stock, that share
of preferred stock would be entitled to 150 votes. But for the limitation
described below, the preferred stock would currently be entitled to cast
6,570,302 votes. However, so long as our common stock is listed on the NYSE,
until we receive stockholder approval of Proposal 3, the holders of preferred
stock may only cast a total of up to 6,378,874 votes (adjusted for stock splits
and similar transactions), which is 19.99% of the number of shares of our common
stock outstanding on March 18, 2002 (the day before the issuance of the
preferred stock and warrants). In addition, so long as any of our 10 3/8% senior
subordinated notes or our 11 7/8% senior secured notes are outstanding, the
aggregate number of votes that any holder of preferred stock is entitled to vote
with respect to their preferred stock may not exceed (1) 35% of the
25
aggregate votes of our aggregate voting equity interests (as defined in the
indentures governing such notes) less (2) the voting rights of any common stock
owned by such preferred stock holder. The warrants do not have voting rights.
PROPOSAL TO APPROVE THE ISSUANCE OF OUR COMMON STOCK UPON CONVERSION OF THE
PREFERRED STOCK AND EXERCISE OF THE WARRANTS (PROPOSAL 3)
WHAT ARE WE ASKING YOU TO APPROVE?
We are asking you to approve the issuance of our common stock upon conversion of
the preferred stock and the exercise of the warrants without the 19.99%
limitation described above. As described above, but for this limitation, the
conversion of the 50,000 shares of preferred stock and the exercise of the
1,600,000 warrants would currently result in the issuance of an aggregate of
approximately 8,170,302 shares of our common stock, equal to approximately 25.6%
of our common stock outstanding on March 18, 2002, the day before the preferred
stock and warrants were issued. Stockholder approval of Proposal 3 is required
by the New York Stock Exchange listing rules to remove this limitation. In
addition, stockholder approval of Proposal 3 will remove the 19.99% limitation
on the voting rights of the holders of preferred stock.
WHAT ARE THE PRINCIPAL TERMS OF THE PREFERRED STOCK?
LIQUIDATION PREFERENCE.
Upon our liquidation, dissolution or winding up, each holder of preferred stock
will be entitled to be paid in cash, before any distribution or payment is made
on our common stock, an amount per share equal to the greater of:
- the liquidation value of such share, as described below, plus
accrued and unpaid dividends,
- the amount that the holder would be entitled to receive in
connection with a liquidation event had such holder converted
the preferred stock, without regard to the 19.99% and 35%
conversion limits described above, into shares of our common
stock immediately prior to such liquidation event, and
- the product of the number of shares of common stock into which
such share is convertible, without regard to the 19.99% and
35% conversion limits described above, immediately prior to
the liquidation event and the applicable minimum share price,
as described in "Redemption" below, as of the date of such
liquidation event.
The initial liquidation value per share of the preferred stock is $1,000. If the
preferred stock is not converted or redeemed prior to March 19, 2008, the
liquidation value per share will increase to $4,570 if stockholder approval of
Proposal 3 and Proposal 4 has been obtained as of such date or $9,140 if such
approval has not been obtained. In the event of a sale of the company or a
change of control of the company (as defined in our bond indentures), unless a
holder of the preferred stock requires us to redeem its shares as described
below, such holder may require us to pay it the full liquidation preference of
its preferred stock, subject to our satisfaction of our obligations under the
indentures governing our 10 3/8% senior subordinated notes and 11 7/8% senior
secured notes.
DIVIDENDS.
From the date of issuance until March 19, 2008, the dividends on the preferred
stock will accrue daily on the sum of the then applicable liquidation value of
the preferred stock and the accrued dividends thereon at an annual rate of 7%
per annum unless, at any time during such period, stockholder approval of
Proposal 3 and Proposal 4 has been obtained. The dividend rate will decrease to
5% per annum upon receipt of such stockholder approval. The dividend rate will
decrease to 5% per annum retroactive to the date of issuance of the preferred
stock, to the extent of any preferred stock still outstanding, if we obtain
stockholder approval of these proposals by September 19, 2002. Otherwise, the
reduced dividend will only apply from and after the date such approval is
obtained. From and after March 18, 2008, the dividends will accrue at a rate of
15% per annum.
Dividends are payable semi-annually in cash only if declared by our board of
directors and approved by the holders of no less than 75% of the preferred stock
then outstanding. The provisions of our debt instruments limit our ability to
pay dividends in cash, and we have no present intention to pay cash dividends on
the preferred stock.
Upon the occurrence of certain triggering events, the dividend rate increases by
one percentage point, with further one percentage point increases per quarter up
to a maximum increase of five percentage points if any such event is continuing.
The triggering events include:
26
- failure to pay the liquidation preference or any cash
dividends, to the extent declared, when due;
- failure to comply with specified covenants and obligations
contained in the preferred stock certificate of designations
or purchase agreement;
- failure to comply with the other covenants and obligations
contained in the preferred stock certificate of designations
or purchase agreement and such failure is not cured within 90
days;
- any representation or warranty in the preferred stock purchase
agreement is proven to be false or incorrect in any material
respect;
- any default that results in the acceleration of indebtedness,
where the principal amount of such indebtedness, when added to
the principal amount of all other indebtedness then in
default, exceeds $5.0 million or final judgments for the
payment of money aggregating more than $1.0 million (net of
insurance proceeds) are entered against us and are not
discharged, dismissed, or stayed pending appeal within 90 days
after entry; and
- we initiate or consent to proceedings under any applicable
bankruptcy, insolvency, composition, or other similar laws or
make a conveyance or assignment for the benefit of our
creditors generally or any holders of any lien takes
possession of, or a receiver, administrator, or other similar
officer is appointed for, all or substantially all of our
properties, assets or revenues and is not discharged within 90
days.
CONVERSION.
Each share of preferred stock is convertible at any time at the holder's option
into a number of shares of our common stock computed by multiplying the number
of shares of preferred stock to be converted by the liquidation value of such
shares (currently $1,000), plus accrued but unpaid dividends thereon, divided by
the conversion price. The conversion price for the preferred stock initially is
$7.61, subject to certain anti-dilution adjustments described in the immediately
following paragraph.
Adjustments will be made to the conversion price if dilutive events specified in
the certificate of designations for the preferred stock occur before the
conversion of the preferred stock. These events include stock splits, stock
dividends and sales of common stock or securities convertible into common stock
at prices lower than either the conversion price of the preferred stock or the
volume weighted average closing share price of our common stock for the
preceding 30 trading days. If any of these events occur, the maximum number of
shares of common stock issuable upon conversion of the preferred stock would
increase, subject to the limitations described herein.
The conversion price of the preferred stock will not be adjusted for an issuance
of common stock, regardless of the sales price, in the following circumstances:
- subject to certain limits, related to the granting of common
stock or options to purchase common stock to our employees
pursuant to our stock option plans or the exercise of
currently outstanding options;
- upon conversion of the preferred stock;
- upon exercise of the warrants;
- in certain situations, for consideration other than cash;
- subject to certain limits, to a bank or similar financial
institution in connection with a loan or other indebtedness
for borrowed money; or
- pursuant to an underwritten offering but only if the sale
price is greater than the conversion price then in effect.
If we do not obtain stockholder approval of Proposal 3 and Proposal 4 on or
prior to June 28, 2002, the conversion price will be automatically reduced by
20%. Thereafter, until we obtain such approval, every 90 days the conversion
price will be reduced by 20% of the conversion price then in effect. In no event
will the conversion price reduction related to the failure to timely obtain
these stockholder approvals exceed 50% of the conversion price that would have
been in effect had we not failed to obtain these stockholder approvals. Upon our
receipt of stockholder approval of these proposals, the conversion price will be
readjusted as if no adjustments for failure to timely obtain such stockholder
approval had occurred.
27
In addition, if we fail to comply with specific covenants contained in the
agreement pursuant to which we sold the preferred stock and warrants, the
conversion price of the preferred stock will be reduced by $0.76 (adjusted for
stock splits and similar transactions). The conversion price will readjust to
what it would have been absent such breach (to the extent of any shares of
preferred stock still outstanding) once the breach is cured. In addition, no
such reduction to the conversion price will be made at any time that
representatives of the holders of preferred stock constitute a majority of the
Board of Directors. We currently intend to appoint representatives of the
holders of preferred stock to a majority of the board seats to avoid this
reduction in the conversion price.
Finally, if our leverage ratio exceeds 7.5 to 1.0 for any quarterly period
beginning with the quarterly period ending on December 31, 2002, and such
leverage ratio remains in excess of 7.5 to 1.0 for a period of 90 days, the
conversion price of the preferred stock will be reduced by $0.76 (adjusted for
stock splits and similar transactions). The leverage ratio means the ratio of
(1) consolidated senior securities, defined as debt less cash balances in excess
of $5.0 million plus the accreted value of the preferred stock, to (2) earnings
before interest, taxes, depreciation and amortization, or EBITDA. Thereafter,
until the leverage ratio reduces below 7.5 to 1.0, every 90 days the conversion
price will be reduced by another $0.76 (adjusted for stock splits and similar
transactions), subject to a maximum reduction not to exceed $3.80 (adjusted for
stock splits and similar transactions). The conversion price will readjust to
what it would have been absent such event (to the extent of any shares of
preferred stock still outstanding) once the leverage ratio reduces below 7.5 to
1.0. In addition, no such reduction to the conversion price will be made at any
time that representatives of the holders of preferred stock constitute a
majority of the Board of Directors. We currently intend to appoint
representatives of the holders of preferred stock to a majority of the board
seats to avoid this reduction in the conversion price.
We may require the holders to convert the preferred stock into common stock at
any time provided that:
- no triggering event, as described in "Dividends" above or
"Registration Rights" below, has occurred and is continuing,
and stockholder approval of Proposal 3 and Proposal 4 has been
obtained;
- the proposed conversion would not occur within 30 days of any
period during which trading by our officers or directors is
restricted by our policies or within 90 days of another
conversion at our option;
- the volume weighted average closing share price of our common
stock for the preceding 30 trading days is equal to or greater
than the applicable minimum share price, as set forth in
"Redemption" below;
- the aggregate number of shares of our common stock issued upon
conversion of the preferred stock at our election during any
period of 12 consecutive weeks does not exceed 15% of the
aggregate volume of our shares traded on the New York Stock
Exchange during the 12 week period ended on the Saturday
immediately preceding the notice date; and
- the aggregate number of shares of preferred stock converted at
any one time does not exceed 12,500 shares (adjusted for stock
splits and similar transactions).
REDEMPTION.
We may redeem the preferred stock at any time, in whole or in part, provided
that the redemption price is equal to the amount the holders of preferred stock
would receive on an as-converted basis assuming a common stock share price equal
to the greater of the volume weighted average closing share price of our common
stock for the preceding 30 trading days and the applicable minimum share price
derived from the following schedule:
If being redeemed prior to the third anniversary $15.18
If being redeemed after the third, but before the fourth anniversary $17.51
If being redeemed after the fourth, but before the fifth anniversary $19.31
If being redeemed after the fifth, but before the sixth anniversary $23.26
In the event of a sale of the company or a change of control of the company (as
defined in our bond indentures), any holder of preferred stock may require us to
pay it the full redemption price as determined above for its preferred stock,
subject to our satisfaction of our obligations under the indentures governing
our 10 3/8% senior subordinated notes and 11 7/8% senior secured notes.
28
WHAT OTHER RIGHTS OR LIMITATIONS DO HOLDERS OF PREFERRED STOCK HAVE?
BOARD REPRESENTATION.
The preferred stock entitles the holders thereof initially to three board seats.
On March 19, 2008, the holders of a majority of the preferred stock then
outstanding, if any, will be entitled to appoint one less than a minimum
majority of the board of directors. However, at such time as the holders of
preferred stock cease to hold shares of preferred stock having an aggregate
liquidation preference of at least $25 million, they will lose the right to
appoint the director for one of these three board seats. At such time as the
holders of preferred stock cease to hold shares of preferred stock having an
aggregate liquidation preference of at least $10 million, and such holders'
beneficial ownership of our preferred stock and common stock constitutes less
than 5% of the aggregate voting power of our voting securities, the holders of
preferred stock will no longer have the right to appoint any directors to the
Board of Directors.
In addition, upon the occurrence of the triggering event described in the sixth
bullet point in "Dividends" above, the holders of a majority of the preferred
stock may appoint a minimum majority of our board of directors. Upon the
occurrence of the triggering events described in the first and second bullet
points in "Dividends" above, the holders of a majority of the preferred stock
may appoint one less than a minimum majority of the Board of Directors. Upon the
occurrence of the triggering events described in the third, fourth and fifth
bullet points in "Dividends" above, the holders of a majority of the preferred
stock may nominate two additional members to our board of directors and, if such
triggering events have not been cured or waived prior to the end of the next
succeeding quarter, may appoint one less than a minimum majority of our board of
directors. At such time as the holders of preferred stock cease to hold shares
of preferred stock having an aggregate liquidation preference of at least $10
million, and such holders' beneficial ownership of our preferred stock and
common stock constitutes less than 5% of the aggregate voting power of our
voting securities, the holders of preferred stock will no longer have the right
to appoint additional directors upon these events.
We have also granted the holders of the preferred stock the right to have
representatives attend meetings of the Board of Directors until such time as
they no longer own any preferred stock, warrants or shares of common stock
issued upon conversion of the preferred stock and exercise of the warrants.
VOTING RIGHTS.
Subject to the 19.99% and 35% voting limitations described above, the holders of
the preferred stock are entitled to vote on all matters submitted to the vote of
our stockholders, voting as a single class with the common stockholders on an
as-converted basis. In addition, we may not, without the affirmative vote of the
holders of not less than 75% of the preferred stock then outstanding:
- amend, modify, restate, or repeal our certificate of
incorporation or bylaws in any way that would alter the rights
of the preferred stock or create any new class of capital
stock having rights senior to or on parity with the preferred
stock;
- authorize or issue any new or existing class of capital stock
or any security convertible into or exchangeable for, or
having rights to purchase, any shares of our stock having any
preference or priority senior to or on parity with the
preferred stock;
- increase or decrease the authorized number of shares of
preferred stock;
- reclassify our capital stock into shares having any preference
or priority senior to or on parity with any preference or
priority of the preferred stock;
- pay or declare any dividend on any shares of our capital stock
(other than dividends on our common stock payable in
additional shares of our common stock) or apply any of our
assets to the redemption, retirement, purchase, or
acquisition, directly or indirectly, of any shares of our
capital stock, other than redemptions of the preferred stock
and certain repurchases of shares of common stock from our
current or former employees pursuant to contractual rights; or
- increase the size of our board of directors to more than 12
directors, other than as may be required to satisfy the rights
of the preferred stock described above. (The holders of the
preferred stock have waived this limit until the upcoming
annual meeting of stockholders.)
COVENANTS.
29
Without the prior approval of the holders of a majority of the shares of
preferred stock then outstanding we may not:
- use the proceeds from the sale of the preferred stock and
warrants other than to refinance our credit facility and for
general corporate purposes;
- make any restricted payment or restricted investment unless
our leverage ratio is less than 6.0 to 1.0 and such restricted
payment or restricted investment would otherwise be permitted
under the indenture governing the 10 3/8% senior subordinated
notes after the application of a deemed restricted payment in
an amount equal to the aggregate liquidation value of the
preferred stock then outstanding;
- enter into any agreement (or amend or modify the terms of any
existing agreement), other than our credit facility, the
indentures governing the 10 3/8% senior subordinated notes and
11 7/8% senior secured notes, or any refinancing thereof to
the extent the terms of such refinancing are not more
restrictive than the credit facility or indentures, as
applicable, which by its terms would restrict our ability to
comply with the agreements related to the preferred stock;
- prior to the sixth anniversary of the issuance date, sell any
of our assets, including the capital stock of our
subsidiaries, unless such sale is in the ordinary course of
business, does not exceed 5% of our total assets or EBITDA or,
in the case of a sale of the capital stock of our
subsidiaries, is between us or any of our wholly owned
subsidiaries and another of our wholly owned subsidiaries;
- prior to the sixth anniversary of the issuance date, enter
into any agreement with any affiliate (other than certain
permitted affiliate transactions), unless such affiliate
transaction is determined by a majority of our board of
directors to be fair, reasonable and no less favorable to us
than could have been obtained in an arm's length transaction
with a non-affiliate and is approved by a majority of the
disinterested members of our board of directors;
- materially alter our principal line of business or engage in
any business unless such business is reasonably related to our
principal line of business;
- grant any options to purchase our common stock or securities
convertible into or exchangeable for shares of our common
stock, other than options or securities granted pursuant to a
stock option plan having an exercise price equal to or greater
than the market value of our common stock on the date of such
grant and accounting for, either individually or in the
aggregate, not more than 15% of our outstanding common stock
determined as of the day before the closing on a fully
diluted, as-converted basis; or
- from and after the annual meeting of stockholders, increase
the size of our board of directors (other than as may be
required to satisfy the rights of the preferred stock
described above) to greater than 12 directors.
From and after the sixth anniversary of the issuance date, in addition to any of
the actions described in the first, second, third, sixth, seventh and eighth
bullet points above, we may not, without the prior approval of the holders of a
majority of the shares of preferred stock then outstanding:
- sell any of our assets, including the capital stock of our
subsidiaries;
- enter into any agreement with any affiliate;
- incur or permit to exist any indebtedness other than
indebtedness existing as of such date and indebtedness
incurred thereafter under the revolving credit facility in the
ordinary course of business to provide for our working capital
needs;
- acquire (by merging or consolidating with, or by purchasing an
equity interest in or a portion of the assets of) any
business, corporation, other business organization, or
division thereof or otherwise acquire any material assets
(other than inventory or other assets to be sold in the
ordinary course of business); and
- hire or terminate any of our executive officers or modify or
alter in any way the employment terms relating to any of our
executive officers.
In addition, the terms of the preferred stock require that we maintain a ratio
of consolidated senior securities, defined as debt less cash balances in excess
of $5.0 million plus the accreted value of the preferred stock, to EBITDA of 7.5
to 1.0 for
30
the twelve month period ending on the last day of December, March, June, and
September of each year beginning with the twelve month period ending on December
31, 2002.
SALES RIGHTS.
If, beginning with the quarterly period ending on December 31, 2002, our
leverage ratio, as described above, exceeds 7.5 to 1.0 for four consecutive
fiscal quarters, then the holders of a majority of the preferred stock have the
right to cause us to seek a buyer for all of our assets or all of our issued and
outstanding capital stock. The holders of preferred stock will not have this
right if their representatives constitute a majority of the Board of Directors.
We currently intend to appoint representatives of the holders of preferred stock
to a majority of the board seats to avoid their having this right.
PREEMPTIVE RIGHTS.
Subject to specified limitations, the holders of the preferred stock may
participate in our future issuances of equity securities, options or rights to
acquire equity securities, or any securities convertible or exchangeable for
equity securities.
REGISTRATION RIGHTS.
The agreements regarding the preferred stock provide that we will file a shelf
registration statement with the SEC covering the common stock issued or issuable
upon conversion of the preferred stock and exercise of the warrants on May 3,
2002 and use our reasonable best efforts to have the registration statement
declared effective by the SEC as soon as possible, but in any event not later
than June 10, 2002. If the registration statement is not filed on or before May
3, 2002, is not declared effective by June 10, 2002, or ceases to be effective
at any time prior to the sale of all of the common stock covered by that
registration statement, the dividend rate will increase by one percentage point.
INDEMNIFICATION RIGHTS.
We have agreed to indemnify the holders of the preferred stock for any losses
suffered by them as a result of a breach of a warranty, representation, promise,
agreement or covenant relating to their purchase of the preferred stock and
warrants or the execution, delivery, performance or enforcement of the documents
relating to such purchase.
LIMITATIONS ON THE RIGHTS OF THE HOLDERS TO CONVERT, EXERCISE, VOTE OR
SELL.
The rights of each holder of preferred stock and the related warrants to convert
its shares of preferred stock, exercise its warrants, or sell shares of its
common stock acquired pursuant to any conversion or exercise are subject to
certain limitations, including:
- Until the stockholder approval of Proposal 3 and Proposal 4 is
obtained and so long as our common stock is listed on the New
York Stock Exchange, the holders of preferred stock and
warrants may not convert their preferred stock or exercise
their warrants, into more than an aggregate of 19.99% of our
common stock outstanding as of March 18, 2002 (the day before
the issuance of the preferred stock and warrants), or
6,378,874 shares of common stock (adjusted for stock splits
and similar transactions). The holders of the preferred stock
or warrants are similarly limited to an aggregate of 19.99% of
the voting power outstanding as of March 18, 2002 (the day
before the issuance of the preferred stock and warrants) with
respect to such preferred stock or warrants.
- So long as any of our 10 3/8% senior subordinated notes or
11 7/8% senior secured notes are outstanding, no holder of
preferred stock or warrants may convert its preferred stock or
exercise its warrants to the extent that, after giving effect
to such conversion or exercise, such holder of preferred
stock, individually or collectively with all other holders of
preferred stock are entitled to direct the votes with respect
to an excess of 35% of the aggregate voting equity interests.
Collectively, the holders of the preferred stock and warrants
are similarly limited to 35% of the aggregate voting power
outstanding.
- Until the stockholder approval of Proposal 3 and Proposal 4 is
obtained, if any holder of preferred stock or warrants intends
to convert its preferred stock or exercise its warrants, the
holder must notify the other holders of preferred stock or
warrants of such intention. The other holders may then elect
to participate on a pro rata basis in such conversion or
exercise, based on the number of shares of preferred stock or
warrants held by the holder electing to participate in such
conversion or exercise.
- If any holder of preferred stock or warrants intends to
convert its preferred stock, intends to exercise its warrants
or intends to sell in a public sale any shares of common stock
acquired through such conversion or exercise to one or more
third parties when the market price of the common stock is
below the
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applicable prices listed on the schedule set forth under
"Redemption" above, the holder must notify each of the other
holders of preferred stock or warrants of such intention. The
other holders may then elect to participate, on a pro rata
basis, in such conversion, exercise or sale based on the
number of shares of common stock held by the holders electing
to participate in such conversion, exercise or sale.
- The purchasers of the preferred stock have agreed among
themselves that if they intend to sell more than 10,000 shares
of preferred stock (adjusted for stock splits and similar
transactions) to one or more third parties, the party
intending such a sale must notify the other holders of
preferred stock of such intention. Upon receipt of such
notice, the other holders may then elect to participate, on
identical terms and on a pro rata basis, in such sale based on
the number of shares of preferred stock held by the holders
electing to participate in such sale.
WHO ARE THE HOLDERS OF THE SERIES B PREFERRED STOCK?
ABRY Mezzanine Partners L.P., ABACUS Master Fund, Ltd., Sandler Capital Partners
V, L.P., Sandler Capital Partners V FTE, L.P., and Sandler Capital Partners V
Germany, L.P. The principal business of each of the holders of the preferred
stock is to make investments in common and preferred stock and other interests
in business organizations, domestic or foreign, with the principal objective of
appreciation of capital invested.
ARE THERE ANY MATERIAL TAX CONSEQUENCES TO PENTON OF THE PREFERRED STOCK
CONVERSION?
No. Because the conversion of the preferred stock into our common stock is not
deemed a taxable event to us, the conversion of preferred stock into common
stock will not result in any material adverse tax consequences to us.
DO THE TERMS OF THE PREFERRED STOCK HAVE ANTI-TAKEOVER IMPLICATIONS?
The holders of preferred stock have the right to elect three directors to our
Board of Directors. In addition, as described above, upon the happening of
certain events, the holders of preferred stock have the right to designate up to
one less than a minimum majority of our Board of Directors. Finally, if we were
to file for bankruptcy protection, the holders of preferred stock would have the
right to designate a majority of the Board of Directors. In the event of a sale
of the company or a change of control of the company (as defined in our bond
indentures), the holders of preferred stock will have the right to require us to
purchase all of such holder's preferred stock for a cash purchase price equal to
the liquidation preference as described above, subject to our satisfaction of
our obligations under the indentures governing our 10 3/8% senior subordinated
notes and 11 7/8% senior secured notes. As a result of these provisions, as well
as the voting power of the holders of the preferred stock, it would be very
difficult for another party to successfully acquire Penton without the
concurrence of the holders of a majority of the shares of preferred stock then
outstanding.
WHAT ARE THE PRINCIPAL TERMS OF THE WARRANTS?
In connection with the sale of the preferred stock, we issued warrants to
purchase 1.6 million shares of our common stock at an initial exercise price of
$7.61 per share. The warrants are subject to anti-dilution and other adjustments
and restrictions on exercise that mirror those applicable to the preferred
stock. The warrants are immediately exercisable and expire 10 years after
issuance.
WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF VOTING FOR PROPOSAL 3?
The terms of the preferred stock are more advantageous to us upon receiving
stockholder approval of Proposal 3 and Proposal 4 for the following reasons:
- The dividend rate on the preferred stock will be fixed at 5%
per annum for the first six years rather than the higher
dividend rate of 7% per annum payable if stockholder approval
is not obtained. The lower dividend rate will result in less
cash being used to pay dividends and/or fewer shares of common
stock being issued upon conversion of the preferred stock,
which will result in less dilution to holders of common stock.
- The conversion price of the preferred stock and the exercise
price of the warrants will remain at the higher price and will
not be reduced as a result of the failure to receive
stockholder approval. A higher conversion price and exercise
price will result in fewer shares of common stock being issued
upon conversion of the preferred stock and exercise of the
warrants, which will result in less dilution to holders of
common stock.
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- If any preferred stock remains outstanding on March 19, 2008, the
liquidation value of the preferred stock will only increase to
$4,570 per share rather than $9,140 per share. A lower liquidation
value will result in fewer shares of common stock being issued upon
conversion of the preferred stock, which will result in less
dilution to the holders of common stock.
- We may require the holders of preferred stock to convert their
preferred stock into common stock provided that certain conditions
are met, including receiving stockholder approval of Proposal 3 and
Proposal 4. See "Conversion" above. This ability to force conversion
gives us the opportunity, should all of the conditions to forced
conversion be met, to reduce the number of shares of preferred stock
that would be outstanding on March 19, 2008. This reduction will
result in fewer shares of preferred stock having an increased
liquidation preference as discussed in the immediately preceding
bullet point, which will result in less dilution to the holders of
common stock.
- You will receive less money upon a sale, change in control or
liquidation of the company. Upon the happening of any of these
events, the holders of the preferred stock are entitled to elect
between receiving the liquidation preference of their preferred
stock plus accrued dividends or having their preferred stock
redeemed. A higher liquidation preference and a higher dividend rate
will result in a larger payment being made to the holders of the
preferred stock should they elect to receive the liquidation
preference plus accrued dividends. If the holders of preferred stock
elect to have their preferred stock redeemed, they would be entitled
to a payment equal to the number of shares of common stock into
which the preferred stock is convertible times the applicable share
minimum price. See the discussion entitled "Redemption" above. A
higher liquidation preference, a higher dividend rate and a lower
conversion price will result in the holders of preferred stock being
entitled to convert into a larger number of shares of common stock,
which would also result in a higher payment being made to the
holders of preferred stock should they elect to have their preferred
stock redeemed. In each case, a higher payment being made to the
preferred stock holders would result in a lower payment being made
to the common stock holders in these events.
If you approve Proposal 3, however, the current 6,378,874 limit on (1) the
number of shares issuable upon conversion of the preferred stock and exercise of
the warrants and (2) the number of votes to which the holders of preferred are
entitled will no longer apply. Currently, the holders of preferred stock and
warrants would be entitled to receive approximately 8,170,302 shares of common
stock upon conversion of the preferred stock and exercise of the warrants
without this cap. In addition, the holders of preferred stock would currently be
entitled to 6,570,302 votes without this cap.
WHAT DOES THE BOARD OF DIRECTORS RECOMMEND WITH RESPECT TO PROPOSAL 3?
THE BOARD OF DIRECTORS HAS APPROVED THE ISSUANCE OF THE COMMON STOCK UPON
CONVERSION OF THE PREFERRED STOCK AND EXERCISE OF THE WARRANTS. THE BOARD
BELIEVES THAT PROPOSAL 3 IS IN THE BEST INTERESTS OF PENTON AND ITS STOCKHOLDERS
AND RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF PROPOSAL 3.
WHAT VOTE IS REQUIRED TO APPROVE THIS PROPOSAL 3?
The affirmative vote by a majority of the votes cast on this Proposal 3 is
required to approve this Proposal 3. For this purpose, the holders of at least a
majority in interest of all our outstanding stock entitled to vote on this
Proposal 3 must vote on this Proposal 3. The holders of preferred stock are not
entitled to vote on this Proposal 3. Thus, at least a majority in interest of
all our outstanding common stock must vote on this Proposal 3.
Under applicable Delaware law, in determining whether this Proposal 3 has
received the requisite number of affirmative votes, abstentions will be counted
in tabulating the votes cast and, therefore, will have the same effect as a vote
against this Proposal 3. Broker non-votes will not be counted in tabulating
votes cast. Consequently, while broker non-votes do not have the effect of a
vote against this Proposal 3, they can negatively affect the vote on this
Proposal 3 if their failure to be counted results in less than a majority of all
our outstanding common stock being voted on this Proposal 3.
PROPOSAL TO ADOPT AN AMENDMENT TO PENTON'S RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK (PROPOSAL 4)
WHAT ARE WE ASKING YOU TO APPROVE?
You are being asked to adopt an amendment to our Restated Certificate of
Incorporation to increase the number of authorized shares of common stock from
60 million to 155 million, if you also approve Proposal 3, or 435 million if you
do
33
not also approve Proposal 3. If you also approve Proposal 3, this proposal to
increase our authorized common stock would be accomplished by amending Section
4.1 of our Restated Certificate of Incorporation as follows:
"4.1 Capital Stock. The total number of shares of stock which
the Corporation has authority to issue is One Hundred Fifty Seven
Million (157,000,000), consisting of Two Million (2,000,000) shares of
Preferred Stock, par value $.01 per share, and One Hundred Fifty Five
Million (155,000,000) shares of Common Stock, par value $.01 per
share."
If you do not approve Proposal 3, this proposal to increase our authorized
common stock would be accomplished by amending Section 4.1 of our Restated
Certificate of Incorporation as follows:
"4.1 Capital Stock. The total number of shares of stock which
the Corporation has authority to issue is Four Hundred Thirty Seven
Million (437,000,000), consisting of Two Million (2,000,000) shares of
Preferred Stock, par value $.01 per share, and Four Hundred Thirty Five
Million (435,000,000) shares of Common Stock, par value $.01 per
share."
WHY ARE WE ASKING FOR THIS AMENDMENT?
The holders of preferred stock have required that we reserve enough shares of
our common stock to issue upon conversion of the preferred stock and exercise of
the warrants as if the maximum number of shares of common stock that may be
issued pursuant to the terms of the preferred stock and warrants will be issued.
As discussed above, assuming (i) no anti-dilution adjustments, (ii) that all of
the preferred stock is still outstanding on the maturity date, (iii) that no
dividends have been paid in cash on the preferred stock, (iv) that the market
price of the common stock is less than $4.50 on the maturity date, (v) no
additional shares of common stock or securities convertible into or exercisable
for common stock have been issued and (vi) no sale of the company or change of
control has occurred, the maximum number of shares of common stock that may be
issued upon conversion of the preferred stock and exercise of the warrants if
stockholder approval of Proposal 3 and this Proposal 4 is obtained is
approximately 95 million shares, and approximately 376 million shares if such
stockholder approval is not obtained.
We currently have 31,910,325 shares of common stock outstanding, 5,916,872
shares of common stock reserved for issuance under our stock option plans and
39,430 shares of common stock are held in the treasury. Consequently, we only
have the ability to reserve 22,172,803 shares of common stock for issuance upon
conversion of the preferred stock and exercise of the warrants. Consequently, we
will need to authorize additional shares of our common stock in order to reserve
additional shares of common stock to satisfy our obligations under the terms of
the preferred stock and warrants.
If this Proposal 4 is approved, we would have approximately 20 million more
shares of common stock authorized than the maximum number we would need to issue
upon conversion of the preferred stock and exercise of the warrants. Other than
as described herein related to the issuance of common stock upon conversion of
the preferred stock and exercise of the warrants, however, we have no present
plan, understanding or agreement to issue or use the proposed additional shares
of common stock. However, we believe the proposed increase in the number of
available shares is important to provide needed flexibility to issue additional
shares of common stock without the expense and delay associated with calling a
special meeting of stockholders for such purpose. In addition to providing for
enough shares of common stock for conversion of the preferred stock and exercise
of the warrants, an increase in the authorized common stock will provide us with
additional shares for possible equity financings, acquisitions, executive and
employee stock plans and for other purposes.
WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF VOTING FOR PROPOSAL 4?
The terms of the preferred stock are more advantageous to us upon receiving
stockholder approval of Proposal 3 and Proposal 4 for the following reasons:
- The dividend rate on the preferred stock will be fixed at 5% per
annum for the first six years rather than the higher dividend rate
of 7% per annum payable if stockholder approval is not obtained. The
lower dividend rate will result in less cash being used to pay
dividends and/or fewer shares of common stock being issued upon
conversion of the preferred stock, which will result in less
dilution to holders of common stock.
- The conversion price of the preferred stock and the exercise price
of the warrants will remain at the higher price and will not be
reduced as a result of the failure to receive stockholder approval.
A higher conversion price and exercise price will result in fewer
shares of common stock being issued upon
34
conversion of the preferred stock and exercise of the warrants,
which will result in less dilution to holders of common stock.
- If any preferred stock remains outstanding on March 19, 2008, the
liquidation value of the preferred stock will only increase to
$4,570 per share rather than $9,140 per share. A lower liquidation
value will result in fewer shares of common stock being issued upon
conversion of the preferred stock, which will result in less
dilution to the holders of common stock.
- We may require the holders of preferred stock to convert their
preferred stock into common stock provided that certain conditions
are met, including receiving stockholder approval of Proposal 3 and
Proposal 4. See the discussion entitled "Conversion" in the
discussion of Proposal 3. This ability to force conversion gives us
the opportunity, should all of the conditions to forced conversion
be met, to reduce the number of shares of preferred stock that would
be outstanding on March 19, 2008. This reduction will result in
fewer shares of preferred stock having an increased liquidation
preference as discussed in the immediately preceding bullet point,
which will result in less dilution to the holders of common stock.
- You will receive less money upon a sale, change in control or
liquidation of the company. Upon the happening of any of these
events, the holders of the preferred stock are entitled to elect
between receiving the liquidation preference of their preferred
stock plus accrued dividends or having their preferred stock
redeemed. A higher liquidation preference and a higher dividend rate
will result in a larger payment being made to the holders of the
preferred stock should they elect to receive the liquidation
preference plus accrued dividends. If the holders of preferred stock
elect to have their preferred stock redeemed, they would be entitled
to a payment equal to the number of shares of common stock into
which the preferred stock is convertible times the applicable share
minimum price. See the discussion entitled "Redemption" in Proposal
3 above. A higher liquidation preference, a higher dividend rate and
a lower conversion price will result in the holders of preferred
stock being entitled to convert into a larger number of shares of
common stock, which would also result in a higher payment being made
to the holders of preferred stock should they elect to have their
preferred stock redeemed. In each case, a higher payment being made
to the preferred stock holders would result in a lower payment being
made to the common stock holders in these events.
One disadvantage in approving this Proposal 4 is that the issuance of additional
shares of common stock would decrease existing common stockholders relative
percentage ownership in our common stock. Authorized but unissued shares of our
common stock may be issued at such times, for such purposes and for such
consideration as the Board of Directors may determine to be appropriate. Such
action can be taken without further authorization from stockholders unless
required by applicable laws or rules of the NYSE or any other exchange on which
our common stock may be listed. If stockholders approve Proposal 3 and Proposal
4 and all shares of preferred stock are converted or redeemed on or prior to
March 18, 2008, the maximum number of shares of common stock issued upon
conversion of the preferred stock and exercise of the warrants would be
approximately 10.5 million shares. In that event, we could have 435 million
shares of common stock authorized, but as little as 43 million shares
outstanding.
In addition, while we are not aware of any current efforts to acquire control of
us, it is possible that the additional shares could be issued as a means of
preventing or discouraging an unsolicited change in control of us. The issuance
of additional shares could be used to dilute the ownership of anyone seeking to
gain control of us or could be placed with an entity opposed to a change in
control.
WHAT DOES THE BOARD OF DIRECTORS RECOMMEND WITH RESPECT TO PROPOSAL 4?
THE BOARD OF DIRECTORS HAS APPROVED THE ADOPTION OF THIS AMENDMENT TO PENTON'S
RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK. THE BOARD BELIEVES THAT PROPOSAL 4 IS IN THE BEST
INTERESTS OF PENTON AND ITS STOCKHOLDERS AND RECOMMENDS THAT YOU VOTE FOR THE
APPROVAL OF PROPOSAL 4.
WHAT VOTE IS REQUIRED TO APPROVE THIS PROPOSAL 4?
The affirmative vote of the holders of a majority of our outstanding stock
entitled to vote on this Proposal 4 is required to approve this Proposal 4. The
holders of both our outstanding common stock and preferred stock are entitled to
vote on this Proposal 4. Under applicable Delaware law, in determining whether
this Proposal 4 has received the requisite number of affirmative votes,
abstentions and broker non-votes will be counted and have the same effect as a
vote against the proposal.
35
PROPOSAL TO ADOPT AN AMENDMENT TO PENTON'S RESTATED CERTIFICATE OF INCORPORATION
TO REMOVE THE PROVISION LIMITING THE NUMBER OF DIRECTORS TO THIRTEEN (PROPOSAL
5)
WHAT ARE WE ASKING YOU TO APPROVE?
You are being asked to adopt an amendment to Penton's Restated Certificate of
Incorporation to remove the provision of Section 7.1 that limits the number of
directors to thirteen. Currently, Section 7.1 of our charter provides that
"under no circumstance shall the number of directors exceed thirteen (13)." This
proposal to remove this limit would be accomplished by amending Section 7.1 of
our Restated Certificate of Incorporation to delete this language.
WHY ARE WE SEEKING THIS AMENDMENT?
As discussed above, upon the happening of certain events, the holders of
preferred stock have the right to designate up to a majority of the members to
our Board of Directors. Currently, the only way they can exercise this right
should it arise is for current members of the Board of Directors to resign.
While four of our current directors have agreed to resign should the need arise
in order to honor this obligation, we may desire instead to increase the size of
the board beyond thirteen members subject to the approval of the holders of our
preferred stock.
In addition, the current limit is unusual for a publicly traded company. This
provision was placed in our charter when we were spun off from Pittway
Corporation in August 1998. At that time, approximately 24% of our outstanding
common stock was owned by a related group of investors, which group constituted
our single largest stockholder. This group also had representatives on our Board
of Directors that constituted five of our eleven directors at the time.
Since August 1998, this group of investors has sold almost all of their Penton
common stock. Currently, members of this group own less than 0.5% of our common
stock. In addition, only two directors, Messrs. Harris and Schwartz, remain on
our board from the original five members who were affiliated with this group of
stockholders. Consequently, we believe it is no longer appropriate to have this
limit in our charter.
WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF VOTING FOR PROPOSAL 5?
The advantage of approving this proposal is that it provides greater flexibility
to the Board of Directors in complying with its obligation to appoint additional
designees of the holders of preferred stock to the Board of Directors. If you do
not approve this proposal and the need should arise to appoint more designees of
the preferred stock holders to the Board of Directors, current members of the
Board of Directors would need to resign. Consequently, we would lose the
valuable experience and expertise of the resigning directors. In addition, this
amendment would bring our charter more in line with other publicly traded
companies.
We do not believe that there are any disadvantages to approving this proposal.
WHAT DOES THE BOARD OF DIRECTORS RECOMMEND WITH RESPECT TO PROPOSAL 5?
THE BOARD OF DIRECTORS HAS APPROVED THE ADOPTION OF THIS AMENDMENT TO PENTON'S
RESTATED CERTIFICATE OF INCORPORATION TO REMOVE THE PROVISION IN SECTION 7.1
LIMITING THE NUMBER OF DIRECTORS TO THIRTEEN. THE BOARD BELIEVES THAT PROPOSAL 5
IS IN THE BEST INTERESTS OF PENTON AND ITS STOCKHOLDERS AND RECOMMENDS THAT YOU
VOTE FOR THE APPROVAL OF PROPOSAL 5.
WHAT VOTE IS REQUIRED TO APPROVE THIS PROPOSAL 5?
Under our Restated Certificate of Incorporation, the affirmative vote of
two-thirds of the voting power of our outstanding shares of capital stock
entitled to vote on this Proposal 5 is required to approve this Proposal 5. The
holders of both our outstanding common stock and preferred stock are entitled to
vote on this Proposal 5. Under applicable Delaware law, in determining whether
this Proposal 5 has received the requisite number of affirmative votes,
abstentions and broker non-votes will be counted and have the same effect as a
vote against the proposal.
PROPOSAL TO ADOPT AN AMENDMENT TO PENTON'S RESTATED CERTIFICATE OF INCORPORATION
TO PERMIT THE HOLDERS OF PREFERRED STOCK TO (A) CALL SPECIAL MEETINGS OF THE
PREFERRED STOCK HOLDERS AND (B) ACT BY UNANIMOUS WRITTEN CONSENT (PROPOSAL 6)
36
WHAT ARE WE ASKING YOU TO APPROVE?
You are being asked to adopt an amendment to Penton's Restated Certificate of
Incorporation to allow the holders of our preferred stock to call special
meetings of the holders of preferred stock and to act by unanimous written
consent, in each case only with respect to matters over which the holders of
preferred stock are entitled to vote as a separate class.
Currently, Section 8.1 of our charter provides that "Special meetings of
stockholders of the Corporation may be called only by the Board of Directors."
Section 8.2 of our charter provides that "No action required to be taken which
may be taken at any annual or special meeting of stockholders of the Corporation
may be taken without a meeting." These provisions prevent the preferred stock
holders from taking these actions as well.
This Proposal 6 would be accomplished by amending Section 8.1 of our Restated
Certificate of Incorporation as follows:
"8.1 Special Meetings of Stockholders. Subject to any rights
of the holders of Preferred Stock or any series thereof to call special
meetings of the holders of Preferred Stock or any series thereof with
respect to any matter to be considered by such holders as a class
separate from the holders of Common Stock, special meetings of
stockholders of the Corporation may be called only by the Board of
Directors."
and by amending Section 8.2 of our Restated Certificate of Incorporation as
follows:
"8.2 No Stockholder Action by Consent. Subject to any rights
of the holders of Preferred Stock or any series thereof to take any
action without a meeting of the holders of Preferred Stock or any
series thereof with respect to any matter to be considered by such
holders as a class separate from the holders of Common Stock, no action
required to be taken or which may be taken at any annual or special
meeting of stockholders of the Corporation may be taken without a
meeting."
WHY ARE WE SEEKING THIS AMENDMENT?
The holders of preferred stock currently have the right to vote as a separate
group with respect to certain matters. For example, they currently have the
right to elect three members to our Board of Directors. In addition, we are
prohibited from taking certain actions without the approval of the holders of
preferred stock.
We may not, without the affirmative vote of the holders of not less than 75% of
the preferred stock then outstanding:
- amend, modify, restate, or repeal our certificate of incorporation
or bylaws in any way that would alter the rights of the preferred
stock or create any new class of capital stock having rights senior
to or on parity with the preferred stock;
- authorize or issue any new or existing class of capital stock or any
security convertible into or exchangeable for, or having rights to
purchase, any shares of our stock having any preference or priority
senior to or on parity with the preferred stock;
- increase or decrease the authorized number of shares of preferred
stock;
- reclassify our capital stock into shares having any preference or
priority senior to or on parity with any preference or priority of
the preferred stock;
- pay or declare any dividend on any shares of our capital stock
(other than dividends on our common stock payable in additional
shares of our common stock) or apply any of our assets to the
redemption, retirement, purchase, or acquisition, directly or
indirectly, of any shares of our capital stock, other than
redemptions of the preferred stock and certain repurchases of shares
of common stock from our current or former employees pursuant to
contractual rights; or
- increase the size of our board of directors to more than 12
directors, other than as may be required to satisfy the rights of
the preferred stock described above.
We may not, without the prior approval of the holders of a majority of the
shares of preferred stock then outstanding:
- use the proceeds from the sale of the preferred stock and warrants
other than to refinance our credit facility and for general
corporate purposes;
37
- make any restricted payment or restricted investment unless our
leverage ratio is less than 6.0 to 1.0 and such restricted payment
or restricted investment would otherwise be permitted under the
indenture governing the 10 3/8% senior subordinated notes after the
application of a deemed restricted payment in an amount equal to the
aggregate liquidation value of the preferred stock then outstanding;
- enter into any agreement (or amend or modify the terms of any
existing agreement), other than our credit facility, the indentures
governing the 10 3/8% senior subordinated notes and the 11 7/8%
senior secured notes, or any refinancing thereof to the extent the
terms of such refinancing are not more restrictive than the credit
facility or indentures, as applicable, which by its terms would
restrict our ability to comply with the agreements related to the
preferred stock;
- prior to the sixth anniversary of the issuance date, sell any of our
assets, including the capital stock of our subsidiaries, unless such
sale is in the ordinary course of business, does not exceed 5% of
our total assets or EBITDA or, in the case of a sale of the capital
stock of our subsidiaries, is between us or any of our wholly owned
subsidiaries and another of our wholly owned subsidiaries;
- prior to the sixth anniversary of the issuance date, enter into any
agreement with any affiliate (other than certain permitted affiliate
transactions), unless such affiliate transaction is determined by a
majority of our board of directors to be fair, reasonable and no
less favorable to us than could have been obtained in an arm's
length transaction with a non-affiliate and is approved by a
majority of the disinterested members of our board of directors;
- materially alter our principal line of business or engage in any
business unless such business is reasonably related to our principal
line of business;
- grant any options to purchase our common stock or securities
convertible into or exchangeable for shares of our common stock,
other than options or securities granted pursuant to a stock option
plan having an exercise price equal to or greater than the market
value of our common stock on the date of such grant and accounting
for, either individually or in the aggregate, not more than 15% of
our outstanding common stock determined as of the day before the
closing on a fully diluted, as-converted basis; or
- from and after the annual meeting of stockholders, increase the size
of our board of directors (other than as may be required to satisfy
the rights of the preferred stock described above) to greater than
12 directors.
The preferred stockholders may wish to remove or replace their representatives
to the Board of Directors. Or, we may need to seek the approval of the holders
of preferred stock to take an action enumerated above. In either case, it may
not be convenient or efficient for the Board of Directors to call a special
meeting of the holders of preferred stock to take such action and therefore,
action by written consent would be beneficial to us.
WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF VOTING FOR PROPOSAL 6?
This amendment will allow the preferred stock holders to quickly and efficiently
replace their representatives to the Board of Directors or allow us to quickly
and efficiently seek the preferred stock holders approval on the matters
enumerated above without the time and expense of calling special meetings.
Because the preferred stockholders will have the ability to act without a
meeting or call special meetings only with respect to matters they may act on as
a class separate from common stockholders, we do not believe that there are any
disadvantages to approving this proposal.
WHAT DOES THE BOARD OF DIRECTORS RECOMMEND WITH RESPECT TO PROPOSAL 6?
THE BOARD OF DIRECTORS HAS APPROVED THE ADOPTION OF THIS AMENDMENT TO PERMIT THE
HOLDERS OF THE PREFERRED STOCK TO (A) CALL SPECIAL MEETINGS OF THE PREFERRED
STOCK HOLDERS AND (B) ACT BY UNANIMOUS WRITTEN CONSENT. THE BOARD BELIEVES THAT
PROPOSAL 6 IS IN THE BEST INTERESTS OF PENTON AND ITS STOCKHOLDERS AND
RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF PROPOSAL 6.
WHAT VOTE IS REQUIRED TO APPROVE THIS PROPOSAL 6?
The affirmative vote of the holders of a majority of our outstanding stock
entitled to vote on this Proposal 6 is required to approve this Proposal 6. The
holders of both our outstanding common stock and preferred stock are entitled to
vote on this Proposal 6. Under applicable Delaware law, in determining whether
this Proposal 6 has received the requisite number
38
of affirmative votes, abstentions and broker non-votes will be counted and have
the same effect as a vote against the proposal.
PROPOSAL TO PERMIT EMPLOYEES TO SURRENDER OUTSTANDING STOCK OPTIONS FOR NEW
STOCK OPTIONS (PROPOSAL 7)
WHAT ARE WE ASKING YOU TO APPROVE?
The Board of Directors is asking you to approve a program that would allow us to
exchange certain outstanding stock options for new stock options (the "Option
Exchange"). Under the Option Exchange, our employees will be given a one-time
opportunity to surrender their current stock options in exchange for
proportionately fewer options at a new exercise price.
WHY ARE WE SEEKING THIS APPROVAL?
The Equity and Performance Incentive Plan currently provides that Penton may
not, without the further approval of its stockholders, reprice any outstanding
stock option or cancel any outstanding stock option and replace it with a stock
option that has a lower exercise price. In order to continue to use stock
options as a critical component of our compensation arrangements for employees,
encourage our employees to act as owners (which helps to align their interests
with those of the stockholders), motivate and reward our employees for
profitable growth and encourage them to continue their employment with us, we
are asking stockholders to approve the Option Exchange.
HOW MANY STOCK OPTIONS WILL BE ELIGIBLE FOR THE OPTION EXCHANGE?
As of the record date, stock options to purchase approximately 1,112,100 shares
of common stock are eligible for exchange under the Option Exchange. Each of
these stock options has an exercise price greater than or equal to $16.225 per
share. Approximately 223 employees hold stock options that will be eligible for
the Option Exchange. All of these stock options were granted under the Equity
and Performance Incentive Plan. The new options will be granted under the plan
and will be nonqualified stock options for U.S. federal income tax purposes.
WHAT ARE THE DESIGN FEATURES OF THE OPTION EXCHANGE?
Grant of New Options. Under the Option Exchange, our eligible employees may make
a one-time election to surrender all of their existing stock options with an
exercise price greater than or equal to $16.225 per share and exchange them for
new options. Surrendered stock options will be cancelled. The new options will
be issued on the first business day that is at least six months and one day
after the cancellation of the old options. Participation in the program is
voluntary. To participate in the program, however, an employee must elect to
cancel all of his or her eligible options. In other words, an employee may not
elect to exchange some of his or her current options and retain others.
Eligibility. The program is open to all of our employees and the employees of
our participating subsidiaries, both in the U.S. and in various foreign
countries, who have outstanding stock options with an exercise price greater
than or equal to $16.225 per share. Our five named executive officers are not,
however, eligible to participate in the program. The program is also not
available to our directors or any retirees or other former employees.
Exchange Ratio. The exchange ratio for the program (i.e., how many current
options an employee must surrender in order to receive one new option), is
two-for-one, which is less favorable to option holders than the ratio that would
be derived from the Black-Scholes option valuation model (a recognized and
accepted method used to determine the value of a stock option). If we had used
the Black-Scholes model, an option holder would receive nearly one new option
for each surrendered option. Our two-for-one ratio minimizes the potential for
dilution of our existing stockholders' ownership.
Exercise Price of New Options. All new options will be granted with an exercise
price equal to the fair market value of Penton's common stock on the date of
grant.
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Vesting of New Options. All of the new options will have the same vesting terms
as the surrendered options they replace. Consequently, any surrendered options
that will have vested prior to the new grant date will be replaced with new
options that are vested.
Term of New Options. Each new option will have a term equal to the remaining
term of the surrendered options it replaces.
Other Terms and Conditions of New Options. If an option holder's employment is
terminated for any reason prior to the grant of new options, the holder will not
receive new options. All of the other terms and conditions of the new options
will generally be identical to the surrendered options they replace.
HOW WILL THE OPTION EXCHANGE BE IMPLEMENTED?
The Board of Directors authorized the Option Exchange on March 7, 2002, subject
to the approval of the stockholders. If the Option Exchange is approved by
stockholders, as soon as practicable after the annual meeting of stockholders,
eligible employees will be offered the opportunity to participate in the program
under an Offer of Exchange filed with the Securities and Exchange Commission and
distributed to all eligible employees. Employees will be given a short election
period in which to accept the offer of the new options in exchange for the
surrender of all their existing options. For those employees who choose to
participate in the program, all of their current options will be cancelled on
the last day of this election period. The new options will be granted on the
first business day that is at least six months and one day after the
cancellation of the old options.
WILL THERE BE ANY NEGATIVE ACCOUNTING OR TAX IMPLICATIONS FOR PENTON?
We have structured the program to comply with Financial Standards Accounting
Board guidelines so that Penton will receive the same accounting treatment for
the new options as it does for its current options. In other words, the program
has been designed so that we will avoid any variable accounting compensation
charges against our earnings.
No income for U.S. federal income tax purposes should be recognized by the
employees or Penton upon the surrender of existing options or grant of the new
options.
WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF VOTING FOR THE OPTION EXCHANGE?
Due to Penton's undervalued stock price and the softening economic conditions in
2001, many of our outstanding stock options have exercise prices that are
substantially higher than the current trading price of our common stock. These
stock options do not provide the motivation and incentive intended under the
Equity and Performance Incentive Plan. The Option Exchange provides Penton a
fresh start to motivate and reward our employees for their role in achieving
future growth. By realigning the exercise prices of previously granted stock
options with the current market price of Penton's common stock, the Option
Exchange increases our employees' opportunity to realize value from their stock
options.
Penton has structured the Option Exchange to strike a balance between the
interests of stockholders and those of our employees. This is most evident by
the manner in which the stock options will be exchanged. Using the approach
described above, employees participating in the program will receive new options
for a lesser number of shares then they surrender. This approach is designed to
limit dilution in your ownership.
We are not able to predict with any degree of certainty the impact the program
will have on your rights as a shareholder because we are unable to predict how
many option holders will exchange their options or what the future market price
of our common stock will be. There is a risk that employees will not see the
Option Exchange as a sufficient incentive to motivate and retain them as Penton
employees. Also, if the price of Penton's stock rises after the new options are
granted, then option holders will be more likely to exercise the new options
than the current options and the exercises are likely to occur earlier. As
additional shares of our common stock are issued upon option exercises, existing
shareholders will be proportionately diluted.
WHAT DOES THE BOARD OF DIRECTORS RECOMMEND WITH RESPECT TO PROPOSAL 7?
THE BOARD OF DIRECTORS HAS APPROVED THE OPTION EXCHANGE. THE BOARD OF DIRECTORS
BELIEVES THAT PROPOSAL 7 IS IN THE BEST INTERESTS OF PENTON AND ITS STOCKHOLDERS
AND RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF PROPOSAL 7.
40
WHAT VOTE IS REQUIRED TO APPROVE THIS PROPOSAL 7?
A majority of the votes of the shares of common stock and preferred stock
present in person or represented by proxy and entitled to vote on the proposal
is required for approval. An abstention is counted as a vote against and a
broker "non-vote" is not counted for purposes of this proposal.
PROPOSAL BY GAMCO INVESTORS, INC. (PROPOSAL 8)
WHAT IS GAMCO INVESTORS, INC. ASKING YOU TO APPROVE?
GAMCO Investors, Inc., One Corporate Center, Rye, New York 10580-1434, which
claims beneficial ownership of 4,438,367 shares of Penton's common stock (as
shown in an amendment filed with the Securities and Exchange Commission on
November 2, 2001, with respect to its earlier Schedule 13D), has submitted the
following proposal:
"RESOLVED, that the shareholders of Penton Media, Inc. hereby request
that the Board of Directors redeem the Rights issued pursuant to the
Shareholder Rights Agreement, dated as of June 9, 2000, unless the
holders of a majority of the outstanding shares approve the issuance at
a meeting of the shareholders held as soon as practical.
SUPPORTING STATEMENT
"On June 9, 2000, the Board of Directors adopted a Shareholder Rights
Agreement. The Rights represent a corporate anti-takeover device,
commonly known as a 'poison pill.' Absent Board intervention, the
Rights are exercisable when a person or group acquires a beneficial
interest in 20% or more of the common stock of the Company. Once
exercisable, the Rights may entitle holders to buy shares in an
acquiring entity, or the Board may exchange the rights for additional
common shares. The issuance of the Rights can vastly increase the cost
to a potential bidder of effecting any merger or tender offer that is
not approved by the Board of Directors. The Company may redeem the
Rights for $.01 per Right.
"As a consequence of the poison pill potential bidders for the
Company's stock must negotiate with management, and cannot take an
offer directly to the shareholders. We believe that shareholders can
and should judge whether an offer for their shares is adequate.
Furthermore, erecting this barrier to potential acquirers may deter
offers without materially improving the value that shareholders
ultimately receive if the Board does negotiate with the acquirer.
Accordingly, we urge shareholders to vote in favor of this proposal.
"The Board, in an effort to improve shareholder value, should redeem
the Rights or put the decision whether to continue to use a poison pill
to a shareholder vote as soon as practical."
GAMCO Investors, Inc. urges shareholders to vote for this resolution.
WHAT DOES THE BOARD OF DIRECTORS RECOMMEND WITH RESPECT TO PROPOSAL 8?
Your Board of Directors believes that this stockholder proposal is not in the
best interests of Penton or its stockholders and recommends that you vote
against it.
The Board of Directors adopted the Shareholder Rights Agreement (the "Plan") to
enhance the ability of the Board, in a manner consistent with its fiduciary
duties, to preserve and protect stockholder value in the event of certain
unsolicited takeover attempts. Before making its decision to adopt the Plan, the
Board of Directors reviewed the arguments for and against adopting such a plan
and approved the Plan because the Board of Directors believed that the Plan
would enable it to better represent the interests of its stockholders in the
event of an unsolicited takeover bid. The Board believes that the adoption of
the Plan is appropriately within its scope of responsibilities acting on behalf
of the stockholders. The Board further believes that a requirement that
stockholders approve the Plan or any new rights plan undermines the Board's
power to fulfill its legal responsibilities and duties to advance stockholders'
interests.
The Plan is designed to provide the Board of Directors with the ability to take
what it believes are the most effective steps to protect and maximize the value
of the stockholders' investment in Penton. It is designed to encourage potential
acquirers to negotiate directly with the Board of Directors, which strengthens
your Board's bargaining position with the bidder. The Board believes that it is
in the best position to negotiate on behalf of all stockholders, evaluate the
adequacy of any potential offer, and protect stockholders against potential
abuses during the takeover process, such as one which would not treat all
stockholders fairly and equally.
41
The Board of Director's duty to Penton and its stockholders is to consider and
evaluate any legitimate acquisition proposal and to determine whether any offer
would deliver full value to stockholders. The Plan provides a means for the
Board to fulfill this duty and to maximize value for, and protect the interests
of, all stockholders. The Plan is not intended to, and will not, prevent any
takeover proposal that the Board of Directors believes is in the best interests
of Penton and its stockholders.
According to the Investor Responsibility Research Center, rights plans have been
adopted by over 2,200 U.S. companies, consistent with an increasing number of
studies demonstrating the economic benefits that rights plans provide for
stockholders. A study released in November 1997 by Georgeson & Company, a
nationally recognized proxy solicitation and investor relations firm, found
that, from 1992 to 1996, companies with rights plans received an additional $13
billion in takeover premiums than companies without rights plans. The report
also noted that the presence of a rights plan at a target company did not
increase the likelihood of the withdrawal of a friendly takeover bid nor the
defeat of a hostile one. In addition, a study released by J.P. Morgan in May
2001 found that the median acquisition premium was four percentage points higher
for companies with rights plans versus companies without rights plans. The
acquisition premium was 7.5 percentage points higher at non-technology
companies. The 2001 study confirmed the results of similar studies conducted by
J.P. Morgan in 1995 and 1997.
The Board of Directors believes that the proper time to consider redemption of
the Rights is if and when a specific offer is made to acquire Penton's stock.
Redemption of the Rights prior to that time would be premature and would remove
any incentive for a potential acquirer to negotiate with the Board of Directors
to assure that the stockholders are treated fairly.
WHAT VOTE IS REQUIRED FOR THIS PROPOSAL?
The affirmative vote of the stockholders of a majority of the shares of common
stock of Penton represented in person or by proxy at the annual meeting is
required to approve this proposal. An abstention is counted as a vote against
and a broker "non-vote" is not counted for purposes of this proposal. Because
this stockholder proposal is a request that the Board take the actions stated in
the proposal, approval of this stockholder proposal may not result in the
requested action being taken. If no voting instructions are given, the
accompanying proxy will be voted against this proposal. Under New York Stock
Exchange rules, brokers who hold street name shares cannot vote in their
discretion on this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE AGAINST
THIS STOCKHOLDER PROPOSAL.
STOCKHOLDER PROPOSALS FOR THE 2003 ANNUAL MEETING
Stockholders who intend to have a proposal considered for inclusion in Penton's
proxy materials for presentation at the 2003 annual stockholders meeting must
submit the proposal to Penton no later than December 5, 2002. Stockholders who
intend to present a proposal at the 2003 annual meeting without inclusion of
such proposal in Penton's proxy materials are required to provide notice of such
proposal to Penton in accordance with the advance notice procedures for
stockholder proposals set forth in Penton's Bylaws and summarized below. Penton
reserves the right to reject, rule out of order, or take other appropriate
action with respect to any proposal that does not comply with these and other
applicable requirements.
The Bylaws establish an advance notice procedure for stockholder proposals to be
brought before an annual or special meeting of stockholders of Penton, including
proposed nominations of persons for election to the Board of Directors.
Stockholders at an annual or special meeting may only consider proposals or
nominations brought before the meeting by Penton, by or at the direction of the
Board of Directors or by a stockholder who was a stockholder of record on the
record date for the meeting, who is entitled to vote at the meeting and who has
given to Penton's Secretary timely written notice, in proper form, of the
stockholder's intention to bring that business before the meeting.
To be timely, notice by stockholders of nominations or proposals to be brought
before any special meeting of stockholders must be delivered to the Secretary of
Penton not earlier than the 90th day prior to such meeting and not later than
the 60th day prior to such meeting or the 10th day following the day on which
public announcement of the date of such meeting is first made. Notice by
stockholders of nominations or proposals to be brought before any annual meeting
must be received by the Secretary not less than 60 days nor more than 90 days
prior to the first anniversary of the preceding year's annual meeting of
stockholders or, if the date of the annual meeting is more than 30 days prior to
or more than 60 days after the preceding anniversary date, notice by the
stockholder will be timely if received not earlier than the 90th day prior to
such annual meeting and not later than the close of business on the later of (i)
the 60th day prior to such annual meeting or (ii) the 10th day following public
announcement of such meeting.
Each notice by stockholders must set forth (i) the name and address of the
stockholder who intends to make the nomination or proposal and of any beneficial
owner on whose behalf the nomination or proposal is made and (ii) the class and
number of shares of common stock that are owned beneficially and of record by
such stockholder and beneficial
42
owner, if any. In the case of a stockholder proposal, the notice must also set
forth a brief description of the business desired to be brought before the
meeting, the reasons for conducting such business at the meeting and any
material interest of such stockholder or beneficial owner, if any, in that
proposed business. In the case of nomination of any person for election as a
director, the notice must also set forth any information regarding the nominee
proposed by the stockholder that would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission and the consent, if so required, of the nominee to be named in a
proxy statement as a candidate for election and to serve as a director of Penton
if elected.
OTHER MATTERS
The management of Penton does not intend to present, and does not have any
reason to believe that others will present, any item of business at the annual
meeting other than those specifically set forth in the notice of the meeting.
However, if other matters are properly presented for a vote, the proxies will be
voted for such matters in accordance with the judgment of the persons acting
under the proxies.
ANNUAL REPORT
Penton's annual report for the year ended December 31, 2001, is enclosed with
this proxy statement. Stockholders are referred to the report for financial and
other information about Penton.
BY ORDER OF THE BOARD OF DIRECTORS
PRESTON L. VICE
Secretary
Cleveland, Ohio
April [ ] , 2002
43
PENTON MEDIA, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON MAY __, 2002
Thomas L. Kemp, Joseph G. NeCastro and Preston L. Vice (each with full
power of substitution) are hereby authorized to vote all the shares of Common
Stock which the undersigned would be entitled to vote if personally present at
the annual meeting of stockholders of Penton Media, Inc. to be held on May __,
2002, and at any adjournment thereof, as follows on the reverse side and below.
These shares represented by this proxy will be voted as directed on the reverse
side, but if no direction is given, the shares will be voted FOR the election as
directors of the named nominees, FOR each of items 2-7, inclusive, and AGAINST
item 8.
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN AND DATE THIS PROXY ON THE REVERSE SIDE AND
RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE.
(Continued and to be signed on reverse side.)
SEE REVERSE
SIDE
----------------------------------------------------------
- FOLD AND DETACH HERE -
PENTON MEDIA, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
FOR WITHHOLD FOR ALL FOR AGAINST ABSTAIN
ALL ALL EXCEPT
1. Election of Directors -- 2. Approve the appointment of
independent accountants for
Nominees: 01-R. Douglas Greene [ ] [ ] [ ] fiscal year 2001. [ ] [ ] [ ]
(Except nominee(s) written above) 3. Approve the issuance of
common stock upon conversion
of preferred stock and
exercise of warrants. [ ] [ ] [ ]
4. Approve an amendment to
Penton's Restated
Certificate of Incorporation
to increase the number of
authorized shares of common
stock. [ ] [ ] [ ]
5. Approve an amendment to
Penton's Restated
Certificate of Incorporation
to remove the provision
limiting the number of
directors to thirteen. [ ] [ ] [ ]
6. Approve an amendment to
Penton's Restated
Certificate of Incorporation
to permit holders of
preferred stock to (a) call
special meetings of the
holders of preferred stock
and (b) act by unanimous
written consent. [ ] [ ] [ ]
7. Approve a proposal to
permit employees to
surrender outstanding stock
options for new stock
options. [ ] [ ] [ ]
8. Approve a proposal by GAMCO
Investors, Inc. [ ] [ ] [ ]
The undersigned acknowledges receipt of
the Notice of Annual Meeting of
Stockholders and the Proxy Statement.
Date: , 2002
----------------------- --------------------------------
--------------------------------
Signature(s)
NOTE: Please sign exactly as your name
appears. Joint owners should each sign
personally. Where applicable, indicate
your official position or representative
capacity.
--------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
YOUR VOTE IS IMPORTANT!
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY FORM PROMPTLY
USING THE ENCLOSED ENVELOPE.