SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): March 10, 2002
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Penton Media, Inc.
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(Exact Name of Registrant as Specified in Charter)
Delaware 1-14337 36-2875386
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
1300 East Ninth Street, Cleveland, Ohio 44114
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (216) 696-7000
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ITEM 5. OTHER EVENTS.
On March 10, 2002, Penton Media, Inc. ("Penton") entered into an agreement
to sell an aggregate of 50,000 shares of its Series B Convertible Preferred
Stock, par value $.01 per share (the "convertible preferred stock"), and
warrants (the "warrants") to purchase 1,600,000 shares of Penton's common
stock, par value $.01 per share (the "common stock"), for $50 million in a
private placement to two institutional investors and certain of their affiliated
entities (collectively the "investors"). The net proceeds from the sale of the
convertible preferred stock and warrants will be used to repay indebtedness. The
closing of the sale of the convertible preferred stock and warrants is subject
to the absence of a material adverse change in Penton's business or in the
financial markets, confirmation from the New York Stock Exchange that the
issuance of the convertible convertible preferred stock and warrants comply with
NYSE listing requirements, and certain other customary conditions. Penton
currently expects that it will sell the first $40 million of convertible
preferred stock and warrants by March 15, 2002. The remaining $10 million will
be sold upon the earlier to occur of one month from the first closing or the
closing of the recently announced notes offering. The press release issued by
Penton announcing the signing is attached hereto as Exhibit 99.1
At a meeting of the Penton Board of Directors held on March 7, 2002, the
Board of Directors unanimously determined that the issuance of the convertible
preferred stock to the investors was in the best interests of the stockholders
and the company and unanimously approved the issuance. At the same meeting, the
Board of Directors also unanimously approved an agreement to amend the terms of
Penton's existing senior secured credit facility. The effectiveness of this
amendment to the credit facility is conditioned upon receipt of the proceeds of
the sale of the first $40 million of convertible preferred stock and warrants.
This amendment to the credit facility will provide significant covenant relief
and will reduce its revolving credit facility to a maximum availability of $40
million.
Stockholders will be asked to approve the issuance of common stock upon
conversion of the convertible preferred stock and exercise of the warrants at
Penton's next annual meeting of stockholders. Stockholder approval is required
to the extent that the number of shares of common stock that would be issued
upon such conversion or exercise equal or exceed 20% of the number of shares of
common stock outstanding at the time this transaction closes. Stockholders are
urged to read the proxy statement that will be mailed to them in connection with
the upcoming annual meeting when it becomes available for a more complete
description of the reasons why the Board of Directors has determined that the
issuance of the convertible preferred stock and warrants is in the best
interests of the stockholders and the company.
PREFERRED STOCK
The following is a description of the material terms of the convertible
preferred stock:
Dividends. From the date of issuance until the sixth anniversary thereof,
the dividends on the convertible preferred stock will accrue daily on the sum of
the then applicable liquidation value and the accrued dividends thereon at an
annual rate of 7% unless, at any time during such period, stockholder approval
of several matters related to the convertible preferred stock issuance has been
obtained. The annual rate will decrease to 5% upon receipt of stockholder
approval. The annual rate will decrease to 5% retroactive to the date of
issuance of the convertible preferred stock with respect to convertible
preferred stock not then converted if we obtain stockholder approval within
six months of the issuance date. After the sixth anniversary of the issuance
date, the dividends will accrue at an annual rate of 15%. The dividends are
payable semi-annually in cash only if declared by our board of directors and
approved by no less than 75% of the convertible 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
convertible preferred stock. Upon the occurrence of certain triggering events,
the dividend rate increases by one percentage point per quarter, with further
quarterly increases up to a maximum increase of five percentage points. The
triggering events include:
- 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 convertible preferred stock certificate of designations or purchase
agreement;
- failure to comply with the other covenants and obligations contained in
the convertible preferred stock certificate of designations or purchase
agreement and such failure is not cured within 90 days;
- any representation or warranty in the convertible 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 the preferred stock will be convertible at any
time at each holder's option into a number of shares of our common stock
computed by multiplying the number of shares to be converted by the liquidation
value, plus accrued but unpaid dividends, divided by the conversion price. The
conversion price for the convertible preferred stock initially will be $7.61 and
is subject to certain anti-dilution adjustments that may result in the issuance
of additional shares of our common stock under certain circumstances. In
addition, if we do not obtain stockholder approval of several matters related to
the issuance of the convertible preferred stock 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 stockholder approval exceed
50% of the conversion price that would have been in effect had we not failed to
obtain stockholder approval, and upon our receipt of stockholder approval the
conversion price will be readjusted as if no adjustments for failure to timely
obtain stockholder approval had occurred with respect to convertible preferred
stock not then converted. We may require the holders to convert the convertible
preferred stock into common stock at any time provided that:
- no triggering event, as described in "-- Dividends" above or
"-- Registration Rights" below, has occurred or is continuing;
- we have obtained stockholder approval of several matters related to the
convertible preferred stock issuance on or prior to June 28, 2002;
- the delivery of the shares 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 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 convertible preferred stock converted
at any one time does not exceed the sum of 10,000 plus 25% of the number
of shares of convertible preferred stock, if any, issued after the
original issuance date outstanding.
Redemption. We may redeem the convertible preferred stock at any time, in
whole or in part, provided that the redemption price is equivalent to the amount
the holders would receive on an as-converted basis assuming a common stock share
price equal to the greater of the average closing share price (on a volume
weighted average basis) for the preceding 30 trading day period 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 change of control, any holder of convertible preferred
stock may require us to redeem all of its convertible preferred stock at the
redemption price.
Liquidation Preference. Upon our liquidation, dissolution or winding up,
each holder of convertible 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 its share of
convertible preferred stock 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 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 convertible preferred stock will
be $1,000. If the preferred stock is not converted or redeemed prior to the
sixth anniversary of the date of issuance, the liquidation value per share will
increase to $4,570 if stockholder approval has been obtained as of such date or
$9,140 if such approval has not been so obtained. In the event of a change of
control, unless a holder of the convertible preferred stock requires us to
redeem its shares as described in "-- Redemption" below, such holder may require
us to make a payment on its convertible preferred stock at the liquidation
preference, subject to our satisfaction of our obligations under our credit
facility and the indentures governing the 10 3/8% senior subordinated notes and
the recently announced notes offering.
Board Representation. The preferred stock entitles the holders thereof
initially to three board seats. In addition, upon the occurrence of the
triggering events described in the first and fifth bullet points in
"--Dividends" above, the holders of a majority of the convertible preferred
stock may appoint a minimum majority of our board of directors plus one
additional board seat. Upon the occurrence of the triggering events described in
the second, third and fourth bullet points in "--Dividends" above, the holders
of a majority of the convertible 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 a
minimum majority of our board of directors plus one additional board seat. In
addition, after the sixth anniversary of the issuance date, the holders of a
majority of the convertible preferred stock will be entitled to appoint one less
than a minimum majority of the board of directors.
Voting Rights. The holders of the convertible 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 convertible 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 convertible
preferred stock or create any new class of capital stock having rights
senior to or on parity with the convertible 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 convertible preferred stock;
- increase or decrease the authorized number of shares of convertible
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
convertible 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 convertible 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 13 directors,
other than as may be required to satisfy the rights of the convertible
preferred stock described in "--Board Representation" above.
Registration Rights. The agreements regarding the convertible 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 within 45 days after closing of the issuance
and use our reasonable best efforts to have the registration statement declared
effective by the SEC as soon as possible, but in any event within 90 days after
closing. If the registration statement is not filed within 45 days after the
closing of the issuance, is not declared effective within 90 days of filing, 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.
Covenants. Without the prior approval of a majority of the holders of a
majority of the shares of convertible preferred stock then outstanding we may
not:
- use the proceeds from the sale of the convertible 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 the notes offered hereby, 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 convertible 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
- increase the size of our board of directors (other than as may be
required to satisfy the rights of the convertible preferred stock
described in "-- Board Representation" above) to greater than 12
directors prior to the effectiveness of an amendment to our certificate
of incorporation to remove the limit on the number of directors, and
greater than 13 directors from and after the effectiveness of such
amendment.
From and after the sixth anniversary of the issuance date, we may not,
without the prior approval of a majority of the holders of a majority of the
shares of convertible 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 convertible 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 convertible
preferred stock, to EBITDA of 7.5 to 1.0 for the twelve month period ending on
the last day of December, March, June, and September of each year beginning with
the period ending on December 31, 2002.
Preemptive Rights. Subject to specified limitations, the holders of the
convertible preferred stock may participate in all of our future issuances of
equity securities, options or rights to acquire equity securities, or any
securities convertible or exchangeable for equity securities.
WARRANTS
In connection with the sale of the convertible preferred stock, we will
issue 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 that mirror those applicable to the convertible preferred
stock. The warrants are immediately exercisable and expire 10 years after
issuance.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
Exhibits Description
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99.1 Press Release, dated March 11, 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Penton Media, Inc.
By: /s/ Joseph G. NeCastro
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Name: Joseph G. NeCastro
Title: Chief Financial Officer
Date: March 12, 2002
Exhibit Index
99.1 Press Release, dated March 11, 2002.