Tender-Offer Solicitation/Recommendation Statement — Schedule 14D-9
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SC 14D9 Tender-Offer Solicitation/Recommendation Statement 32 169K
2: EX-1 Underwriting Agreement 43 181K
3: EX-2 Plan of Acquisition, Reorganization, Arrangement, 17 57K
Liquidation or Succession
4: EX-3 Articles of Incorporation/Organization or By-Laws 11 25K
5: EX-4 Instrument Defining the Rights of Security Holders 9 24K
6: EX-5 Opinion re: Legality 3 11K
7: EX-6 Opinion re: Discount on Capital Shares 1 8K
8: EX-7 Opinion of Lazard Freres & Co. LLC 2 13K
9: EX-8 Opinion re: Tax Matters 1 6K
SC 14D9 — Tender-Offer Solicitation/Recommendation Statement
Document Table of Contents
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
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CMP MEDIA INC.
(Name of Subject Company)
CMP MEDIA INC.
(Name of Person(s) Filing Statement)
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CLASS A COMMON STOCK,
PAR VALUE $0.01 PER SHARE
(Title of Class of Securities)
------------------------------
125891101
(CUSIP Number of Class of Securities)
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ROBERT D. MARAFIOTI, ESQ.
EXECUTIVE VICE PRESIDENT,
SECRETARY AND GENERAL COUNSEL
CMP MEDIA INC.
600 COMMUNITY DRIVE
MANHASSET, NEW YORK 11030
(516) 562-5000
(Name, Address and Telephone Number of Person Authorized to
Receive Notice and Communications on Behalf of the Person(s) Filing Statement)
------------------------------
COPY TO:
EDWARD J. O'CONNELL, ESQ.
DOW LOHNES & ALBERTSON, PLLC
1200 NEW HAMPSHIRE AVENUE, N.W.
SUITE 800
WASHINGTON, DC 20036
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is CMP Media Inc., a Delaware corporation
(the "Company"), and the address of the principal executive offices of the
Company is 600 Community Drive, Manhasset, New York 11030. The title of the
class of equity securities to which this statement relates is the Class A Common
Stock, par value $0.01 per share, of the Company (the "Class A Common Stock").
ITEM 2. TENDER OFFER OF THE BIDDER
This statement relates to the cash tender offer (the "Offer") disclosed in
the Tender Offer Statement on Schedule 14D-1, dated May 6, 1999 (the "Schedule
14D-1"), and the Offer to Purchase filed as Exhibit (a)(1) thereto (the "Offer
to Purchase"), of MFW Acquisition Corp., a Delaware corporation ("Merger Sub")
and a wholly-owned subsidiary of MFW Acquisition Holdings Corp., a Delaware
corporation ("Parent"), which is a wholly-owned affiliate of Miller Freeman
Worldwide plc, an English public limited company ("MF Worldwide"), to purchase
all of the outstanding shares of the Company's Class A Common Stock and Class B
Common Stock, par value $0.01 per share (the "Class B Common Stock" and,
collectively with the Class A Common Stock, the "Company Common Stock") (the
"Shares") at a price of $39.00 per Share in cash, net to the seller (the "Offer
Price"), upon the terms and subject to the conditions set forth therein.
The Offer is being made by Merger Sub pursuant to the Agreement and Plan of
Merger, dated as of April 28, 1999 (the "Merger Agreement"), by and among the
Company, Merger Sub, MF Worldwide and United News & Media plc, an English public
limited company ("United") which is the parent company of MF Worldwide, Parent
and Merger Sub, and a copy of the Merger Agreement is filed as Exhibit 1 hereto
and incorporated herein by reference. Following satisfaction or waiver of
certain conditions and subject to certain terms set forth in the Merger
Agreement, Merger Sub will be merged with and into the Company (the "Merger"),
with the Company surviving the Merger (the "Surviving Corporation") as a
wholly-owned subsidiary of Parent. The Schedule 14D-1 states that the address of
the principal executive offices of Merger Sub and Parent is 32 Union Square
East, 5th Floor South, New York, New York 10003. A copy of the press release
issued jointly by United and the Company on April 29, 1999 is filed as Exhibit 8
hereto and incorporated herein by reference.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the person filing
this statement, are set forth in Item 1 above.
(b) Except as described or referred to below or in Annex A attached hereto,
which is incorporated herein by reference, to the knowledge of the Company,
there exists on the date hereof no material contract, agreement, arrangement or
understanding and no actual or potential conflict of interest between the
Company or its affiliates and (i) the Company, its executive officers, directors
or affiliates or (ii) Merger Sub or Parent, or the executive officers, directors
or affiliates of Merger Sub or Parent.
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement, which summary is
qualified in its entirety by reference to the Merger Agreement, a copy of which
is filed as Exhibit 1 hereto and incorporated herein by reference. (Capitalized
terms used but not defined herein have the same meanings as set forth in the
Merger Agreement.)
THE OFFER. The Merger Agreement provides that as promptly as reasonably
practicable after the date of execution of the Merger Agreement, but in no event
later than May 6, 1999, Merger Sub will commence the Offer for all of the
outstanding Shares at a price of not less than $39.00 per Share in cash, net to
the seller, subject to the satisfaction of conditions set forth below and,
subject only to the terms and conditions of the Offer, will pay, as promptly as
reasonably practicable, after expiration of the Offer for all Shares duly
tendered thereunder and not withdrawn. Merger Sub may waive any condition to the
Offer, increase
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the price per Share payable in the Offer and make any other changes in the terms
and conditions of the Offer. However, without the consent of the Company, no
change may be made which decreases the price per Share payable in the Offer or
changes the form of consideration payable in the Offer, which reduces the
maximum number of Shares to be purchased in the Offer or which imposes
conditions to the Offer other than those described below or which extends the
Offer (except as set forth in the following sentence). Notwithstanding the
foregoing, Merger Sub may, without the consent of the Company, (i) extend the
Offer beyond the scheduled expiration date (the initial scheduled expiration
date being 20 business days following the commencement of the Offer) if, at the
scheduled expiration date of the Offer, any of the conditions to Merger Sub's
obligation to accept for payment, and to pay for, the Shares shall not be
satisfied or waived, (ii) extend the Offer for an aggregate period of not more
than 10 business days if, immediately prior to the initial expiration date of
the Offer (as it may be extended), after giving effect to the automatic
conversion of all Class B Common Stock Shares validly tendered and not
withdrawn, the Class A Common Stock Shares validly tendered and not withdrawn
pursuant to the Offer equal less than 90% of the outstanding Class A Shares and
Merger Sub irrevocably expressly waives any condition (other than the Minimum
Condition (as defined below)) that subsequently may not be satisfied during such
extension of the Offer, or (iii) extend the Offer for any period required by any
rule, regulation or interpretation of the SEC or the staff thereof applicable to
the Offer.
CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of the
Merger Agreement, Merger Sub shall not be required to accept for payment or pay
for any Shares tendered, and may terminate or amend the Offer (subject to the
provisions of the Merger Agreement) and may postpone the acceptance of, and
payment for, subject to Rule 14e-1 (c) of the Exchange Act, any Shares tendered,
(A) unless the following conditions shall have been satisfied: (i) there shall
be validly tendered and not withdrawn prior to the expiration of the Offer a
number of Shares which represent on a fully diluted basis (including for
purposes of such calculation all Shares issuable upon exercise of all vested
stock options and warrants and conversion of convertible securities or other
rights to purchase or acquire shares and after giving effect to the conversion
of the Class B Common Stock Shares) at least 51% of the number and voting power
of the Shares then outstanding (the "Minimum Condition") and (ii) any applicable
waiting period under the HSR Act shall have expired or been terminated prior to
the expiration of the Offer or (B) if at any time after the date of this
Agreement and before the time of payment for any such Shares (whether or not any
Shares theretofore have been accepted for payment or paid for pursuant to the
Offer) any of the following conditions exists:
(a) there shall be in effect an injunction or other order, decree, judgment
or ruling by a court of competent jurisdiction or by a governmental, regulatory
or administrative agency or commission of competent jurisdiction or a statute,
rule, regulation, executive order or other action or proceeding shall have been
promulgated, enacted, taken, initiated or instituted by a government or a
governmental authority or a governmental, regulatory or administrative agency or
commission of competent jurisdiction which in any such case (i) seeks to
restrain or prohibit the making or consummation of the Offer or the consummation
of the Merger, (ii) seeks to prohibit or restrict in any material respect the
ownership or operation by Merger Sub (or any of its affiliates or subsidiaries)
of any material portion of the Company's business or assets, or seeks to compel
Merger Sub (or any of its affiliates or subsidiaries) to dispose of or hold
separate any material portion of the Company's business or assets, (iii) seeks
to impose material limitations on the ability of Merger Sub effectively to
acquire or to hold or to exercise full rights of ownership of the Company Common
Stock, including, without limitation, the right to vote the Company Common Stock
purchased by Merger Sub on all matters properly presented to the stockholders of
the Company, or (iv) seeks to impose any material limitations on the ability of
Merger Sub or any of its affiliates or subsidiaries effectively to control in
any material respect the business and operations of the Company; or
(b) the Merger Agreement shall have been terminated by the Company, Merger
Sub or MF Worldwide in accordance with its terms; or
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(c) there shall have occurred and be continuing (i) any general suspension
of, or limitation on prices for, trading in securities on any national
securities exchange or the over-the-counter market, (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (iii) any limitation (whether or not mandatory) by any government
or governmental entity of the United States on the extension of credit by banks
or other lending institutions, or (iv) in the case of any of the foregoing
existing at the time of the execution of the Merger Agreement, a material
acceleration or worsening thereof; or
(d) (i) the Board of Directors or any committee thereof shall have
withdrawn, materially modified or changed in a manner adverse to MF Worldwide or
Merger Sub the approval or recommendation of the Offer, the Merger or the Merger
Agreement, or approved or recommended any Acquisition Transaction (as defined
below) or any other acquisition of Company Common Stock other than the Offer or
the Merger, or (ii) the Board of Directors or any committee thereof shall have
resolved to do any of the foregoing; or
(e) the representations and warranties of the Company shall not be true and
correct as of the date of the Merger Agreement or as of the expiration of the
Offer except where failure to be so true and correct would not (in the aggregate
for all representations and warranties of the Company) have a Material Adverse
Effect (as defined below) (other than representations and warranties that are
already so qualified, which in each such case shall be true and correct as
written), and except for (i) changes specifically contemplated by the Merger
Agreement and (ii) those representations and warranties that address matters
only as of a particular date (which shall remain true and correct as of such
date); or
(f) the Company shall have failed to perform any obligation or to comply
with any agreement or covenant of the Company to be performed or complied with
by it under the Merger Agreement unless all such failures together in their
entirety, would not, individually or in the aggregate, have a Material Adverse
Effect; or
(g) the Company shall not have delivered to MF Worldwide binding agreements
signed by the holders of Options (as defined below) representing at least 95% of
the Shares issuable upon exercise of all of the outstanding Options, agreeing to
the cancellation of the Options of such holders on the terms described in
Section 3.1(d) of the Merger Agreement; or
(h) the Company shall not have delivered to MF Worldwide evidence of binding
agreements of the executive officers of the Company to make payment in full
within five business days after the closing of the Offer of all amounts of
principal and accrued interest, whether or not then due and owing, under all
credit, loan or similar agreements as to which the Company is a lender to or
guarantor of such executive officers; or
(i) there shall since March 31, 1999 have occurred any event that,
individually or when considered together with any other matter, has had or would
have a Material Adverse Effect; or
(j) Merger Sub and the Company shall have agreed that Merger Sub shall amend
the Offer to terminate the Offer or postpone the payment for Company Common
Stock pursuant thereto.
As used in the Merger Agreement, "Material Adverse Effect" means any change,
effect, event or occurrence that has, or would have, individually or in the
aggregate, a material adverse impact on the business, assets, liabilities,
results of operations or financial condition of such party and its subsidiaries
taken as a whole; provided, however, that "Material Adverse Effect" shall be
deemed to exclude (i) changes in general economic conditions or changes
affecting the industries generally in which such party operates, (ii) changes in
trading prices for such party's capital stock, (iii) stockholder litigation
arising from allegations of a breach of fiduciary duty relating to the Merger
Agreement and (iv) the impact of changes in GAAP.
The foregoing conditions are for the sole benefit of Merger Sub and may be
asserted by Merger Sub regardless of the circumstances giving rise to any such
condition or may be waived by Merger Sub in whole or in part at any time and
from time to time in its sole discretion, subject in each case to the terms of
the
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Merger Agreement. The failure by Merger Sub at any time to execute any of the
foregoing rights shall not be deemed a waiver of any such right with respect to
particular facts and other circumstances shall not be deemed a waiver with
respect to any other facts and circumstances; and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to time.
THE MERGER. The Merger Agreement provides that, subject to the terms and
conditions thereof, at the Effective Time, Merger Sub will be merged with and
into the Company and the separate corporate existence of Merger Sub will cease
(the "Merger"). At the Effective Time, by virtue of the Merger and without any
action on the part of Merger Sub, the Company or the holders of Shares, each
Share issued and outstanding immediately prior to the Effective Time (other than
Shares owned by Merger Sub, Shares owned by the Company (which shall not include
any Shares held by the trust established pursuant to the 1999 Leeds Family/CMP
Media Inc. Employee Benefit Trust Agreement) or any direct or indirect wholly-
owned subsidiary of the Company and Shares that are outstanding immediately
prior to the Effective Time and which are held by stockholders who shall have
not voted in favor of the Merger or consented thereto in writing and who shall
have demanded properly in writing appraisal for such Shares in accordance with
Section 262 of the Delaware General Corporation Law (the "DGCL")) will be
converted into the right to receive $39.00 per Share (the "Cash Price").
Pursuant to the Merger Agreement, each share of common stock, par value $.01 per
share, of Merger Sub issued and outstanding immediately prior to the Effective
Time will be converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.
CHARTER DOCUMENTS; INITIAL DIRECTORS AND OFFICERS. The Certificate of
Incorporation and By-laws of Merger Sub in effect at the Effective Time shall be
the Certificate of Incorporation of the Surviving Corporation, until duly
amended in accordance with the terms thereof and the DGCL, provided, that the
Certificate of Incorporation and By-laws of the Surviving Corporation will (i)
state that the name of the Surviving Corporation is "CMP Media Inc." and (ii)
for a period of at least six years after the Effective Time, include
indemnification and exculpation provisions which are at least as favorable to
the current officers and directors of the Company as those contained in the
Certificate of Incorporation and By-laws of the Company as of the date of the
Merger Agreement.
NO SOLICITATION. The Company will not, prior to the Effective Time,
directly or indirectly, solicit, initiate or encourage any inquiries or the
making of any proposal with respect to any merger, consolidation or other
business combination involving the Company or its subsidiaries or acquisition of
all or substantially all of the assets or capital stock of the Company and its
subsidiaries taken as a whole (an "Acquisition Transaction") or negotiate,
explore or otherwise engage in substantive discussions with any person (other
than MF Worldwide, Merger Sub or their respective directors, officers,
employees, agents and representatives) with respect to any Acquisition
Transaction or enter into any agreement, arrangement or understanding requiring
it to abandon, terminate or fail to consummate the Merger or any other
transactions contemplated by the Merger Agreement.
DIRECTORS. Promptly upon the purchase by Merger Sub of Shares pursuant to
the Offer, and from time to time thereafter as Shares are acquired by Merger
Sub, Merger Sub shall be entitled to designate such number of directors, rounded
up to the next whole number, on the Company's Board of Directors as will give
Merger Sub, subject to compliance with Section 14(f) of the Exchange Act,
representation on the Board of Directors equal to at least that number of
directors which equals the product of the total number of directors on the Board
of Directors (giving effect to the directors appointed or elected pursuant to
this sentence) multiplied by the percentage obtained by dividing (i) the
aggregate number of votes represented by the Shares beneficially owned by Merger
Sub or any affiliate of Merger Sub by (ii) the number of votes represented by
all Shares outstanding (excluding Shares held by the Company but not excluding
any Shares held by the trust established pursuant to the 1999 Leeds Family/CMP
Media Inc. Employee Benefit Trust Agreement). At such times, if requested by
Merger Sub, the Company will also cause each committee of the Board of Directors
to include persons designated by Merger Sub constituting the same percentage of
each such committee as Merger Sub's designees are of the Board of Directors. The
Company shall, upon
4
request by Merger Sub, promptly increase the size of the Board of Directors or
exercise its best efforts to secure the resignations of such number of directors
as is necessary to enable Merger Sub's designees to be elected to the Board of
Directors and shall cause Merger Sub's designees to be so elected; provided,
however, that prior to the Effective Time, the Company's Board of Directors
shall always have at least three members who are neither officers, directors,
stockholders or designees of MF Worldwide or Merger Sub or any of their
affiliates ("Outside Directors"). If the number of directors who are Outside
Directors is reduced below three for any reason prior to the Effective Time, the
remaining directors who are Outside Directors (or, if there is only one director
who is an Outside Director, such Outside Director) shall be entitled to
designate a person (or persons) to fill such vacancy (or vacancies) who is an
Outside Director and who shall be a director deemed to be an Outside Director
for all purposes of the Merger Agreement.
DIRECTORS' AND OFFICERS' INDEMNIFICATION. The Merger Agreement provides
that, from and after the Effective Time, MF Worldwide shall cause the Surviving
Corporation to fulfill and honor in all respects the obligations of the Company
pursuant to certain existing indemnification agreements of the Company in favor
of the directors and officers of the Company. Also pursuant to the Merger
Agreement, for a period of six years after the Effective Time, MF Worldwide
shall cause the Surviving Corporation to use its commercially reasonable efforts
to maintain in effect, if available, directors' and officers' liability
insurance and employed lawyers professional liability insurance covering those
persons who are currently or at the Effective Time covered by the Company's
policies for such insurance on terms comparable to those applicable to the
current policies for such insurance; provided, however, that in no event shall
MF Worldwide or the Surviving Corporation be required to expend in excess of
200% of the annual premium currently paid by the Company for such coverage (or
obtain coverage in excess of the coverage that is available for such 200% of
such annual premium).
COMPANY OPTIONS. The Merger Agreement provides that, with respect to all
outstanding options or warrants (referred to collectively as the "Options" and
individually as an "Option") to purchase to acquire Shares (except for any
vested or unvested Options held by Michael S. Leeds or Daniel H. Leeds, which
shall be canceled prior to the expiration date of the Offer without payment
therefor except as provided in their respective employment agreements), each
holder of an Option which is surrendered by the holder for cancellation shall be
entitled to receive from the Company, immediately prior to the closing of the
Offer, for each Share purchasable under each Option, an amount in cash in full
cancellation of such Option equal to the excess of the Cash Price over the per
share exercise price of such Option (or such greater amount as Merger Sub shall
agree in writing), as such amount may be reduced by any required withholding in
accordance with applicable tax laws. The Company agrees to use all commercially
reasonable efforts to obtain prior to the expiration date of the Offer written
agreements of all holders of Options legally binding such holders to
cancellation of such Options consistent with the foregoing.
MATERIAL TRANSACTIONS. The Merger Agreement provides that, prior to the
Merger, the Company will not (other than as required pursuant to the terms of
the Merger Agreement and the related documents) without first obtaining the
written consent of MF Worldwide, enter into any transactions outside of the
ordinary course of business of the Company or:
(a) encumber any asset or enter into any transaction or make any contract or
commitment relating to the properties, assets and business of the Company or any
subsidiary, other than in the ordinary course of business or as otherwise
disclosed in the Merger Agreement;
(b) enter into any employment contract which is not terminable at will or
upon notice of 30 days or less and without penalty to the Company or any
subsidiary except as provided in the Merger Agreement;
(c) issue or sell, or agree to issue or sell, any shares of capital stock or
other securities of the Company, except upon exercise of currently outstanding
stock options or warrants;
(d) except as set forth in the Merger Agreement or as may be required to
comply with applicable law, become obligated under any new pension plan, welfare
plan, multi-employer plan, employee benefit plan, severance plan, benefit
arrangement or similar plan or arrangement which is not in existence on the date
5
hereof, or amend any such plan or arrangement in existence on the date hereof if
such amendment would have the effect of materially increasing the costs thereof
to the Company or any of its affiliates;
(e) declare, set aside or pay any dividend or other distribution (whether in
cash, securities or property or any combination thereof) in respect of any class
or series of its capital stock other than between the Company and any of its
wholly-owned subsidiaries;
(f) split, combine, subdivide, reclassify or redeem, purchase or otherwise
acquire, or propose to redeem, purchase or otherwise acquire, any shares of its
capital stock, or any of its other securities;
(g) (i) incur, assume or pre-pay any long-term debt or incur or assume any
short-term debt, except that the Company and the Company Subsidiaries may incur,
assume or pre-pay debt in the ordinary course of business consistent with past
practice under existing lines of credit, (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person or entity except in the
ordinary course of business, or (iii) make any loans, advances or capital
contributions to, or investments in, any other person or entity except in the
ordinary course of business and except for loans, advances or capital
contributions to or investments in any wholly-owned subsidiary of the Company;
(h) issue any stock option under any Plan or any other options, warrants,
convertible securities or other capital stock, and (except as contemplated by
Section 3.1(d) of the Merger Agreement) will not accelerate the vesting or
otherwise modify the terms of any option outstanding under any Plan;
(i) take any action to institute any severance or termination pay practices
with respect to any directors, officers, or employees of the Company or any
subsidiaries other than those in effect on the date hereof, or to increase the
benefits payable under its severance or termination pay practices in effect on
the date hereof;
(j) adopt or amend, in any material respect, except as may be required by
applicable law or regulation, any collective bargaining, bonus, profit sharing,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment or other employee benefit plan, agreement, trust, fund,
plan or arrangement for the benefit or welfare of any directors, officers or
employees of the Company, or any subsidiaries, or make any increase in the
salaries, compensation or pay scales of any such directors, officers or
employees; or
(k) amend its certificate of incorporation or bylaws.
The Company will permit two designated representatives of MF Worldwide to be
present on a full-time basis at the principal offices of the Company to observe
the conduct of the business of the Company, and the Company will consult with
such representatives prior to taking any actions outside the ordinary course of
the Company's business in any material respect or any actions specified above.
CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The Merger Agreement provides
that the respective obligations of each party to consummate the Merger are
subject to the satisfaction of a number of conditions, including, but not
limited to, the following conditions (any of which may be waived in writing by
MF Worldwide and the Company):
(a) None of MF Worldwide, Merger Sub or the Company, nor any of their
respective subsidiaries, shall be subject to any order, decree or injunction by
a court of competent jurisdiction which (i) prevents or materially delays the
consummation of the Merger or (ii) would impose any material limitation on the
ability of MF Worldwide effectively to exercise full rights of ownership of the
common stock of the Surviving Corporation or any material portion of the assets
or business of the Company and its subsidiaries taken as a whole.
(b) No statute, rule, regulation, executive order, decree, injunction or
other order (whether temporary, preliminary or permanent) shall have been
enacted by the government (or any governmental agency) of the United States or
any other country, or any state, municipality or other political subdivision
thereof, that makes the consummation of the Merger and any other transaction
contemplated hereby illegal. All
6
waiting periods, if any, under the HSR Act relating to the transactions
contemplated hereby shall have expired or terminated early and all material
foreign antitrust approvals required to be obtained prior to the Merger in
connection with the transactions contemplated hereby shall have been obtained.
(c) The requisite holders of Shares shall have approved the adoption of the
Merger Agreement and any other matters submitted to them to the extent required
by, and in accordance with the provisions of, the Merger Agreement.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties of the parties thereto including, but
not limited to, representations by the Company as to corporate organization and
qualification, subsidiaries, capitalization, authority to enter into the Merger
Agreement, filings with the SEC and other governmental authorities, the absence
of certain changes or events, intellectual property, material contracts,
environmental matters, employee benefit matters, the opinion of the Company's
financial advisor, tax returns, audits, brokers and litigation.
GUARANTY BY UNITED. The Merger Agreement includes an unconditional and
irrevocable guaranty by United to the Company of the due and punctual payment
for all Shares in connection with the Offer and the Merger and any other
monetary obligations of MF Worldwide or Merger Sub and the due and punctual
performance of all other obligations of MF Worldwide or Merger Sub to the
Company, all in accordance with the terms of the Merger Agreement.
TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be terminated
and canceled, and the Offer and the Merger may be abandoned at any time prior to
the Effective Time:
(a) by mutual consent of Merger Sub and the Company;
(b) by either MF Worldwide or the Company if, upon a vote at a duly held
meeting of stockholders or any adjournment thereof, any required approval of the
holders of Shares shall not have been obtained;
(c) by either MF Worldwide or the Company if the Merger shall not have been
consummated on or before October 28, 1999, unless the failure to consummate the
Merger is the result of a willful and material breach of the Merger Agreement by
the party seeking to terminate the Merger Agreement;
(d) by either MF Worldwide or the Company if any court of competent
jurisdiction or other governmental entity shall have issued an order or ruling
or taken any other action permanently enjoining, restraining or otherwise
prohibiting the Merger, and such order, decree, ruling or other action shall
have become final and nonappealable;
(e) by either MF Worldwide or the Company in the event of a breach by the
other party of any representation, warranty, covenant or other agreement
contained in the Merger Agreement which (i) would give rise to the failure of a
condition set forth in the Merger Agreement and (ii) cannot be or has not been
cured within 30 days after the giving of written notice to the breaching party
of such breach (a "Material Breach"); provided that the terminating party is not
then in Material Breach of any representation, warranty, covenant or agreement
contained in the Merger Agreement;
(f) by either MF Worldwide or the Company if Merger Sub shall have
terminated the Offer in accordance with its terms and conditions, and otherwise
not in violation of the Merger Agreement, without purchasing any Shares pursuant
thereto;
(g) by either MF Worldwide or the Company in the event that (i) all of the
mutual conditions to the obligation of such party to effect the Merger set forth
in the Merger Agreement shall have been satisfied and (ii) any separate
condition to the obligation of such party to effect the Merger set forth in the
Merger Agreement is not capable of being satisfied prior to October 28, 1999; or
(h) by MF Worldwide, if the Company's Board of Directors shall have (i)
determined to withdraw its recommendation of the Offer or the Merger to the
holders of Shares or (ii) approved, recommended or endorsed any Acquisition
Transaction other than the Merger Agreement or (iii) resolved to do any of the
foregoing.
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EXPENSES. All expenses incurred in connection with the Merger Agreement and
the transactions contemplated by the Merger Agreement will be paid by the party
incurring such expenses, whether or not any transaction contemplated by the
Merger Agreement is consummated.
TENDER AND VOTING AGREEMENT
In connection with the execution of the Merger Agreement, Merger Sub entered
into a Tender and Voting Agreement, dated as of April 28, 1999 (the "Tender and
Voting Agreement"), with the holders of all of the outstanding Class B Common
Stock. Pursuant to the Tender and Voting Agreement, such holders have agreed,
among other things, to tender all such Shares pursuant to the Offer, and not
withdraw such Shares as long as the Tender and Voting Agreement remains in
effect, and to vote such Shares in favor of the adoption of the Merger Agreement
and the transactions contemplated therein, against any Acquisition Transaction
and against any action which would result in any of the conditions of the
Company's obligations under the Merger Agreement not being fulfilled. The Tender
and Voting Agreement also includes covenants by such stockholders to neither
dispose of their Shares, enter into a voting arrangement with respect to their
Shares, nor grant any proxy with respect to their Shares.
AMENDMENTS TO OPTION AGREEMENTS, STOCKHOLDERS' AGREEMENTS AND EMPLOYMENT
AGREEMENTS
Each of Michael S. Leeds, Daniel H. Leeds and Kenneth D. Cron entered into
an agreement with the Company as of April 23, 1999 (each, an "Amendment
Agreement") providing for certain amendments to his existing option agreement
and employment agreement with the Company (and, in the case of Michael Leeds and
Daniel Leeds, to their respective stockholders' agreements which govern their
restricted shares of Class A Common Stock). Under their respective Amendment
Agreements, each of Michael Leeds and Daniel Leeds agreed that his option
agreement would be terminated in the event that the Company consummated a
transaction resulting in a change of control of the Company on or before March
1, 2000, and that all options issuable to him under such option agreement would
thereupon be canceled. In consideration of the termination of the option
agreements of Michael Leeds and Daniel Leeds, the Company agreed, in the event
of a change of control, to terminate their respective stockholders' agreements
and to amend certain provisions of their respective employment agreements in
order to modify the scope of certain restrictive covenants and to eliminate the
Company's right to reduce its severance payments to each executive by 50% of
cash compensation earned by such executive from other employment after
termination of his employment with the Company. Under the Amendment Agreement
with Mr. Cron, his option agreement was amended to provide that, upon a change
of control of the Company, all of Mr. Cron's unvested options to purchase Class
A Common Stock would immediately vest and become exercisable. No changes were
made to Mr. Cron's stockholders' agreement or employment agreement with the
Company.
RETENTION BONUSES
The Company adopted the CMP Media Inc. Retention Bonus Plan (the "Retention
Plan") effective March 1, 1999, pursuant to which a committee appointed by the
Board of Directors of the Company has the discretion to award bonuses to
employees who remain employed with the Company through a period specified by the
committee (the "Retention Period"). The committee may define the amount of a
Retention Plan bonus as a fixed dollar amount or as a formula. If an employee
who receives a Retention Plan award is terminated by the Company for cause, as
defined in the Retention Plan, or resigns voluntarily without good reason, as
defined in the Retention Plan, prior to the expiration of his or her Retention
Period, he or she forfeits the Retention Plan bonus.
SEVERANCE PAY
The Company has adopted the CMP Media Inc. Severance Pay Plan (the
"Severance Plan"), which will become effective upon the closing of a transaction
resulting in a change of control of the Company.
8
The Severance Pay Plan provides benefits to every employee of the Company who is
not a party to a separate written agreement with the Company which provides
severance-type benefits (unless such agreement confirms that he or she is
eligible to receive benefits under the Severance Plan as well). If an eligible
employee is terminated by the Company without cause, as defined in the Severance
Plan, or resigns for good reason, as defined in the Severance Plan, within one
year after the closing date of such a transaction, he or she is entitled to two
weeks of pay for each full year of service with the Company, although a
committee appointed by the Board of Directors may award benefits in excess of
that amount. The minimum benefit is 8 weeks of pay and the maximum benefit is
104 weeks of pay. The Company is also required to pay a share of such employee's
COBRA premiums through the severance period (if the employee elects to receive
healthcare insurance coverage under COBRA) and to provide outplacement services
for the employee's benefit.
OTHER EXECUTIVE AGREEMENTS
The Company entered into agreements with five of its executive officers as
of March 1, 1999, which agreements provide that, in the event of a change of
control, the Company will pay each executive a bonus under the Retention Plan
(provided the executive remains with the Company through the change of control
and does not resign without good reason, as defined in such agreements, for 90
days thereafter) and all of the executive's unvested options to purchase Class A
Common Stock will immediately vest and become exercisable on the date of such
change of control. Such agreements also provide that, if the executive is
dismissed by the Company without cause (as defined in such agreements) or
resigns for good reason (as defined in such agreements) within eighteen months
after a change of control, the executive is entitled to extended severance
benefits under the Severance Plan provided that he or she does not compete with
the Company during the severance period. In addition, the Company has the right
to reduce its severance payments by 50% of any cash compensation that the
executive receives from other employment during that period.
The Company also entered into agreements with four of its other executive
officers as of March 1, 1999, which agreements required them to perform services
in connection with the Company's exploration of strategic alternatives as well
as their regular duties and, for a period of three years following a change of
control of the Company, to render services to the Company in their current
capacities and comply with certain restrictive covenants not to compete with the
Company, to solicit its employees, to interfere in its customer or supplier
relationships or to disclose its confidential information. Such agreements also
provide that, in the event of a change of control, the Company will pay each
executive a bonus (provided the executive remains with the Company through the
change of control and does not resign without good reason, as defined in such
agreement, for 90 days thereafter) and all of the executive's unvested options
to purchase Class A Common Stock will immediately vest and become exercisable on
the date of such change of control. The aggregate amount of the projected
bonuses to the nine executives who are parties to the above-described agreements
is approximately $17,375,000.
In the event the benefits received by any of the four above-mentioned
executives under such agreements are subject to an excise tax as an "excess
parachute payment", the Company will pay the executive a gross-up bonus to
offset the effect of such excise tax. If, following a change of control, any of
the four executives' employment is terminated by the Company without cause (as
defined in such agreement), or if an executive terminates employment with good
reason (as defined in such agreement), the executive remains subject to the
above-described restrictive covenants but is entitled to receive base salary and
incentive bonus compensation for the duration of the restricted period (reduced
by 50% of any cash compensation earned from other employment). The agreements
provide substantially similar benefits in the event the executive resigns,
without good reason, more than one year after the change of control. If an
executive resigns prior to the first anniversary of the change of control or is
terminated for cause, he is not entitled to any continued payments or benefits
under the agreements, but remains subject to the restrictive covenants.
9
OTHER ARRANGEMENTS
In addition, certain directors, officers and employees of the Company may be
deemed to have interests in the transactions contemplated by the Merger
Agreement that are in addition to their interests as stockholders of the Company
generally, including, as mentioned above, employment agreements for senior
management of the Company and the right to indemnification after the
consummation of the Merger and to receive officers' and directors' liability
insurance coverage, subject to the terms of the Merger Agreement as described
above under "The Merger Agreement--Directors' and Officers' Indemnification".
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) RECOMMENDATION. On April 28, 1999, the Board of Directors of the
Company unanimously approved the Merger Agreement, the Tender and Voting
Agreement and the transactions contemplated thereby and determined that the
terms of the Offer and the Merger as set forth in the Merger Agreement are fair
to, and in the best interests of, the Company's stockholders. For the reasons
set forth below, the Board of Directors unanimously recommends that stockholders
accept the Offer and tender their Shares pursuant to the Offer and, if a meeting
of the Company's stockholders is required to be called and held in accordance
with applicable law, recommends that the Company's stockholders approve the
Merger Agreement and the transactions contemplated thereby, including the
Merger.
(b) BACKGROUND OF AND REASONS FOR THE RECOMMENDATION. Beginning in December
1998, the Executive Committee of the Company's Board of Directors, in
consultation with other members of the Company's Board of Directors and senior
management of the Company, began the process of considering the exploration of
various strategic alternatives for the Company, including but not limited to a
sale or merger of the Company, in order to maximize stockholder value and expand
the Company's ability to provide new products and services to its customers. On
December 17, 1998, representatives of Lazard Freres & Co. LLC ("Lazard Freres"),
which previously had served as a financial advisor to the Company, made a
presentation to the Executive Committee and certain members of the Company's
senior management regarding strategic alternatives for the Company. At that
point, the range of possible transactions considered included the restructuring
of parts of the Company's businesses, an acquisition or joint venture with
respect to one or more of the Company's publication groups, or an outright
acquisition of the Company. On December 24, 1999, representatives of Lazard
Freres and the Company held a conference call in order to start gathering
information regarding the Company in connection with the possible exploration of
strategic alternatives.
On January 7, 1999, the members of the Executive Committee, together with
certain members of the Company's senior management, met with representatives of
Lazard Freres and Dow, Lohnes & Albertson, PLLC, the Company's legal counsel
("DL&A"), to discuss possible strategic alternatives and the process by which
the Company could solicit expressions of interest from potential strategic and
financial parties. Lazard Freres' engagement to act as financial advisor to the
Company in connection with this exploration of strategic alternatives, and to
conduct an organized marketing process in that connection, was formally
evidenced by an engagement agreement with the Company entered into as of January
25, 1999. At a meeting of the Board of Directors on February 9, 1999, the
Company's Board of Directors gave final approval to the Company's exploration of
strategic alternatives.
On February 10, 1999, the Company issued a press release announcing the
retention of Lazard Freres and the Company's decision to explore strategic
alternatives, including but not limited to a sale or merger. As part of the
process of exploring the Company's strategic options, the Company's senior
management had prepared in late January 1999 and early February 1999, in
conjunction with Lazard Freres, a collection of evaluation materials for
distribution on a confidential basis to potentially interested parties. Between
February 10, 1999 and March 3, 1999, Lazard Freres contacted a total of 75
parties, including strategic and financial buyers, that Lazard Freres and the
Company believed would be most likely to have a potential interest in the
Company. Of these parties, 37 requested additional information and were sent the
confidential evaluation materials concerning the Company. During this period,
representatives of Lazard
10
Freres and DL&A entered into negotiation of confidentiality agreements with
parties interested in receiving evaluation materials on the Company. As part of
this process, the Company and United entered into a confidentiality agreement on
February 19, 1999 with respect to the evaluation materials. The Company and
Lazard Freres also held a number of meetings in February 1999 and March 1999 in
order to prepare for management presentations and to gather data room
information that would be made available to the selected potential buyers.
On February 26, 1999, Lazard Freres sent a letter to interested parties
requiring non-binding preliminary indications of interest by March 16, 1999. Of
the parties that received the confidential evaluation materials, a number of
parties (including United) expressed interest in pursuing a transaction with the
Company and made non-binding preliminary indications of interest on March 16,
1999. On March 17, 1999, after consultation with the Company, representatives of
Lazard Freres contacted certain of these parties (including United) in order to
inform them that they were invited to proceed with due diligence and to schedule
a time for management presentations by the Company. Arrangements were also made
for the selected parties to obtain access to the Company's data room for their
review of due diligence materials.
From March 23, 1999 to April 2, 1999, the selected parties (including
United) were given presentations by the Company's management and visited the
data room. A number of follow up meetings and conference calls were organized
between representatives of the Company and the interested parties in order to
enable the selected parties to complete their due diligence. On April 12, 1999,
Lazard Freres informed the selected parties that final and binding "last and
best" offers for the Company were due by April 26, 1999.
After the delivery of proposals by the remaining interested parties on April
26, 1999, the Executive Committee consulted with its financial and legal
advisors on April 26, 1999 regarding the status and terms of the proposals
delivered and determined, with the knowledge and approval of the other members
of the Board of Directors, to commence negotiations with representatives of
United and MF Worldwide, which had proposed to make a cash tender offer for all
shares of the Company's Common Stock at $39.00 per share, to be followed by a
merger of Merger Sub and the Company. The Company's financial and legal advisors
met with the financial and legal advisors to United and MF Worldwide on April
27, 1999 to discuss various aspects of the MF Worldwide proposal and issues
relating thereto under the proposed form of Merger Agreement. Among other issues
discussed was the requirement by MF Worldwide that the holders of the Company's
Class B Common Stock (comprised of members of the Leeds Family and certain
controlled trusts and private foundations) enter into the Tender and Voting
Agreement.
All of the members of the Board of Directors of the Company met on April 27,
1999 to discuss the proposals received from the interested parties and, in
particular, the proposal of United and MF Worldwide. DL&A, the Company's legal
advisors, made a presentation to the Board of Directors regarding the terms of
the Merger Agreement and the Tender and Voting Agreement and the Board of
Directors' fiduciary duties in evaluating the transaction. Thereafter, Lazard
Freres made a presentation to the Board of Directors reviewing the process that
led to the proposed offer from United and MF Worldwide, an overview of the
financial terms of such proposed offer and the offers received from other
parties, a summary of the recent performance of the Company and a valuation
summary relating to the Company. On the basis of the material presented, Lazard
Freres indicated that it was prepared to deliver an opinion to the Board of
Directors to the effect that, based upon and subject to the assumptions and
other matters set forth therein, the $39.00 per share cash consideration
proposed to be paid to the Company's stockholders in connection with the Offer
and the Merger was fair to the stockholders of the Company from a financial
point of view (which was subsequently confirmed by Lazard Freres' delivery of a
written opinion dated April 28, 1999 to the Board of Directors). After
discussing the matters referred to above, the members of the Board of Directors
resolved to recess their meeting and to take up the discussion of these matters
the following day.
At the subsequent resumption of the meeting of all of the members of the
Board of Directors on April 28, 1999, the Board of Directors continued its
consideration of the Offer and the Merger. After
11
discussion, the independent members of the Board of Directors (Richard W.
Anderson and Sharon Lee Patrick) indicated that they approved the forms of the
Merger Agreement and the Tender and Voting Agreement and the consummation of the
transactions contemplated thereby. Thereafter, the full Board of Directors
unanimously (i) determined that the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Tender and Voting Agreement,
are fair to, and in the best interests of, the Company and its stockholders,
(ii) approved the Merger Agreement and the Tender and Voting Agreement and the
transactions contemplated thereby (and exempted Merger Sub from the application
of Section 203 of the DGCL), and (iii) resolved to recommend that the Company's
stockholders accept the Offer and tender their Shares into the Offer and approve
and adopt the Merger Agreement and the transactions contemplated thereby.
The Merger Agreement and Tender and Voting Agreement were executed as of
April 28, 1999, and the Company and United issued a joint press release on April
29, 1999 announcing the execution of the agreements.
In reaching its conclusion to approve the Merger Agreement and the
transactions contemplated thereby (including the Offer and the Merger), and to
recommend that the stockholders tender their Shares pursuant to the Offer, the
Board of Directors reviewed in detail the Merger Agreement, the Offer and the
Merger, together with various alternative transactions reviewed by management
and the Company's financial advisors, and deliberated extensively with its legal
and financial advisors regarding the foregoing. In reaching its unanimous
determination that the Merger Agreement, the Offer and the Merger are fair to,
and in the best interests of, the Company and its stockholders, the Board of
Directors took into consideration a number of factors including, among other
things, the following:
1. The familiarity of the Board of Directors with the Company's business,
financial condition, results of operations, properties and prospects as
an independent entity, the nature of the industry in which it operates
and presentations relating thereto by the Company's management.
2. The results of the process undertaken by Lazard Freres to identify and
solicit third party indications of interest in the Company and the nature
of contacts and proposals received from other parties.
3. The belief of the Board of Directors, based on the advice and analysis
of Lazard Freres presented to the Board at its meetings beginning on
April 27, 1999, that alternative transactions were not likely to provide
values to the stockholders of the Company superior to the terms of the
Offer and the Merger.
4. The presentations of Lazard Freres as to various financial matters and
the opinion of Lazard Freres to the effect that, as of April 28, 1999 and
based upon and subject to the assumptions and other matters set forth in
the opinion, the consideration to be received by the stockholders of the
Company in the Offer and the Merger is fair, from a financial point of
view, to such stockholders. The full text of the opinion of Lazard Freres
is attached hereto as Annex B and is incorporated herein by reference.
STOCKHOLDERS ARE URGED TO CAREFULLY READ THE OPINION OF LAZARD FRERES IN
ITS ENTIRETY.
5. The terms and conditions of the Merger Agreement, including, among other
things, the structural features of the Offer, which provide for a prompt
cash tender offer for all outstanding Shares to be followed, if certain
conditions are satisfied, by the Merger (thereby enabling the
stockholders to obtain the benefits of the transaction at the earliest
possible time). See "Item 3. The Merger Agreement."
6. The terms and conditions of the Tender and Voting Agreement. See "Item
3. The Tender and Voting Agreement."
7. The belief of the Board of Directors, based on the advice and analysis
of counsel to the Company, that the terms of the Offer and the Merger
were less likely to result in antitrust regulatory delays than
alternative transactions.
12
8. The historical trading prices of the Shares and the premium represented
by the offer price of $39.00 per share.
In light of the number and variety of factors that the Board of Directors
considered in connection with its evaluation of the Offer and the Merger, the
Board of Directors did not find it practicable to quantify or otherwise assign
relative weights to any of the foregoing factors and, accordingly, the Board of
Directors did not do so, although individual members of the Board of Directors
may have given different weights to different factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Company retained Lazard Freres on an exclusive basis to act as financial
advisor to the Company in connection with exploring potential strategic
alternatives and the implementation thereof, including, without limitation, a
recapitalization, acquisition, joint venture, divestiture, sale of all or a
substantial portion of the stock or assets of the Company (a "Transaction"). As
set forth in an engagement agreement, dated as of January 25, 1999, between
Lazard Freres and the Company, the Company agreed to pay Lazard Freres, in
consideration of its services, (i) a retainer fee of $250,000 (which fee was
paid) and (ii) a fee equal to approximately $19.3 million (against which the
Company would receive full credit for the retainer fee paid pursuant to clause
(i) above), which fee will be payable on the earlier of the acquisition by a
buyer of beneficial ownership of a majority of the Company's stock and
consummation of a Transaction. The Company also agreed to reimburse Lazard
Freres for reasonable travel and other out-of-pocket expenses, including the
reasonable fees and disbursements of its legal counsel, and to indemnify Lazard
Freres and certain related parties against certain liabilities arising out of
Lazard Freres' retention by the Company. In addition, Lazard Freres has in the
past provided financial advisory services to the Company and has received usual
and customary compensation for such services.
Neither the Company nor any person acting on its behalf has employed,
retained or compensated any other person to make solicitations or
recommendations to stockholders on its behalf concerning the Offer or the
Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) Other than the execution and delivery of the Tender and Voting Agreement
as described above pursuant to which certain stockholders of the Company have
agreed to take or to refrain from taking certain actions, including without
limitation, to tender such stockholders' Shares and not to withdraw any Shares
so tendered and to vote in favor of the Merger Agreement (see "Item 3. Identity
and Background" above), during the past sixty (60) days, no transactions in the
Shares have been effected by the Company or, to the best of the Company's
knowledge, by any executive officer, director, affiliate or subsidiary of the
Company, except for the following:
1. Between April 2, 1999 and April 27, 1999, the Gerard G. Leeds Lifetime
Trust, the Liselotte J. Leeds Lifetime Trust, Michael S. Leeds, Richard
A. Leeds, Daniel H. Leeds, Greg Jobin-Leeds and Jennifer Leeds gave the
following respective numbers of shares of Class A Common Stock to certain
charitable entities and private foundations (after causing certain of
such shares of Class A Common Stock to be converted from Class B Common
Stock): 1,667,230, 1,672,230, 130,000, 392,000, 256,000, 357,000 and
398,554.
2. On April 28, 1999, the Gerard G. Leeds Lifetime Trust, the Liselotte J.
Leeds Lifetime Trust, Michael S. Leeds, Richard A. Leeds, Daniel H.
Leeds, Greg Jobin-Leeds and Jennifer Leeds contributed an aggregate of
1,282,052 shares of Class A Common Stock to the Company (after causing
certain of such shares of Class A Common Stock to be converted from Class
B Common Stock) pursuant to an agreement with the Company that it would
put such shares in the 1999 Leeds Family/CMP Media Inc. Employee Benefit
Trust for the benefit of substantially all employees of the Company.
13
3. On April 29, 1999, Steven Weitzner, a Vice President of the Company,
sold 250 shares of Class A Common Stock in a brokerage transaction.
(b) To the best of the Company's knowledge, all of its executive officers,
directors, affiliates or subsidiaries currently intend to tender all Shares
which are held of record or beneficially owned by such persons pursuant to the
Offer, other than Shares, if any, held by such persons which, if tendered, could
cause such person to incur liability under the provisions of Section 16(b) of
the Securities Exchange Act of 1934, as amended.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Prior to entering into the Merger Agreement, the Company had contacts
with other entities that had expressed interest in the Company, as described in
Item 4(b). Upon execution of the Merger Agreement, the Company ceased contacts
with such other entities. No discussions are underway or are being undertaken by
the Company in response to the Offer that relate to or would result in (1) an
extraordinary transaction, such as a merger or reorganization, involving the
Company or any of its subsidiaries; (2) a purchase, sale or transfer of a
material amount of assets by the Company or any of its subsidiaries; (3) a
tender offer for or other acquisition of securities by or of the Company; or (4)
any material change in the present capitalization or dividend policy of the
Company.
(b) There is no transaction, board resolution, agreement in principle or
signed contract in response to the Offer other than as disclosed in Item 3(b)
and Item 4(b) of this statement, that relates to or would result in (1) an
extraordinary transaction, such as a merger or reorganization, involving the
Company or any of its subsidiaries; (2) a purchase, sale or transfer of a
material amount of assets by the Company or any of its subsidiaries; (3) a
tender offer for or other acquisition of securities by or of the Company; or (4)
any material change in the present capitalization or dividend policy of the
Company.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
The Information Statement attached as Annex A hereto is being furnished in
connection with the possible designation by Merger Sub, pursuant to the Merger
Agreement, of certain persons to be appointed to the Company's Board of
Directors other than at a meeting of the Company's stockholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
1 Agreement and Plan of Merger, dated as of April 28, 1999, by and among
United News & Media plc, Miller Freeman Worldwide plc, MFW Acquisition Corp.
and CMP Media Inc.
2 Tender and Voting Agreement, dated as of April 28, 1999, by and among MFW
Acquisition Corp. and Certain Stockholders of CMP Media Inc.
3 Agreement to Terminate Option Agreement and Stockholders' Agreement and to
Amend Employment Agreement, dated as of April 23, 1999, by and between CMP
Media Inc. and Michael S. Leeds.
4 Agreement to Terminate Option Agreement and Stockholders' Agreement and to
Amend Employment Agreement, dated as of April 23, 1999, by and between CMP
Media Inc. and Daniel H. Leeds.
5 Agreement to Amend Option Agreement, dated as of April 23, 1999, by and
between CMP Media Inc. and Kenneth D. Cron.
6 Letter to Stockholders dated May 6, 1999.*
7 Opinion of Lazard Freres & Co. LLC dated April 28, 1999.*
8 Press Release issued jointly by United News & Media plc and CMP Media Inc.
on April 29, 1999.
* Included in copies mailed to stockholders.
14
SIGNATURE
After reasonable inquiry and to the best of his knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
Dated: May 6, 1999
[Download Table]
CMP MEDIA INC.
By: /s/ Michael S. Leeds
Michael S. Leeds
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ANNEX A
CMP MEDIA INC.
600 COMMUNITY DRIVE
MANHASSET, NEW YORK 11030
INFORMATION STATEMENT PURSUANT
TO SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
NO VOTE OR OTHER ACTION OF THE COMPANY'S STOCKHOLDERS IS REQUIRED
IN CONNECTION WITH THIS INFORMATION STATEMENT.
NO PROXIES ARE BEING SOLICITED AND
YOU ARE REQUESTED NOT TO SEND THE COMPANY A PROXY.
This Information Statement is being mailed on or about May 6, 1999, as part
of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") to the holders of shares ("Shares") of Class A Common Stock, $0.01 par
value per share (the "Class A Common Stock"), of CMP Media Inc. (the "Company").
Capitalized terms used and not otherwise defined herein shall have the meaning
ascribed to them in the Schedule 14D-9. You are receiving this Information
Statement in connection with the possible election of persons designated by
Merger Sub to a majority of the seats on the Board of Directors of the Company
(the "Board of Directors"). The Merger Agreement requires the Company, after the
purchase by Merger Sub pursuant to its cash tender offer to acquire all of the
Shares (the "Offer") or such number of Shares representing not less than a
majority of the outstanding shares of Common Stock on a fully diluted basis, to
cause Merger Sub's designees (the "Designees") to be elected to a majority of
the seats on the Board of Directors as set forth below. This Information
Statement is required by Section 14(f) of the Securities Exchange Act of 1934
(the "Exchange Act") and Rule 14f-1 thereunder. You are urged to read this
Information Statement carefully. However, you are not required to take any
action.
Pursuant to the Merger Agreement, Merger Sub commenced the Offer on May 6,
1999. The Offer is scheduled to expire on June 3, 1999.
The information contained in this Information Statement (including
information listed in Schedule I attached hereto) concerning Merger Sub, Parent,
MF Worldwide, United and the Designees has been furnished to the Company by
Merger Sub, Parent, MF Worldwide and United, and the Company assumes no
responsibility for the accuracy or completeness of such information.
GENERAL
The Company's Class A Common Stock and Class B Common Stock, par value $0.01
per share (the "Class B Common Stock" and, collectively, with the Class A Common
Stock, the "Common Stock"), are the only classes of voting securities of the
Company outstanding. Each share of Class A Common Stock has one vote. As of
April 28, 1999, there were 12,948,956 shares of Class A Common Stock
outstanding. Each share of Class B Common Stock has ten votes. As of April 28,
1999, there were 10,152,810 shares of Class B Common Stock outstanding.
DESIGNEES
Pursuant to the Merger Agreement, promptly upon the purchase by Merger Sub
of Shares pursuant to the Offer, and from time to time thereafter as shares of
Company Common Stock are acquired by Merger Sub, Merger Sub shall be entitled to
designate such number of directors, rounded up to the next whole number, on the
Board of Directors as will give Merger Sub, subject to compliance with Section
14(f) of the Exchange Act, representation on the Board of Directors of the
Company equal to at least that number of directors which equals the product of
the total number of directors on the Board of Directors (giving effect to the
directors appointed or elected pursuant to this sentence) multiplied by the
percentage obtained by dividing (i) the aggregate number of votes represented by
the Shares beneficially owned by Merger Sub or any affiliate of Merger Sub
(including such Shares as are accepted for payment pursuant to the Offer, but
excluding Shares held by the Company) by (ii) the number of votes represented by
all Shares outstanding
(excluding Shares held by the Company). At such times, if requested by Merger
Sub, the Company will also cause each committee of the Board of Directors to
include persons designated by Merger Sub constituting the same percentage of
each such committee as Merger Sub's designees are of the Board of Directors.
Merger Sub has informed the Company that it will choose the Designees from
the individuals listed in Schedule I attached hereto. Merger Sub has informed
the Company that each of the individuals listed in Schedule I has consented to
act as a director if so designated. The business address of Merger Sub and
Parent is 32 Union Square East, 5th Floor South, New York, New York 10003.
DIRECTORS OF THE COMPANY
The directors of the Company are as follows:
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NAME AGE
---------------------------------------------------------------------------------------- ---
Richard W. Anderson..................................................................... 61
Kenneth D. Cron......................................................................... 42
Daniel H. Leeds......................................................................... 43
Gerard G. Leeds......................................................................... 76
Lilo J. Leeds........................................................................... 71
Michael S. Leeds........................................................................ 46
Richard A. Leeds........................................................................ 45
Sharon Lee Patrick...................................................................... 56
Richard W. Anderson was elected a director of the Company in October 1997
and is the Chairperson of the Audit Committee and a member of the Compensation
Committee of the Board. Mr. Anderson retired in 1997 as Vice President and
General Manager of the Microwave and Communications Group of Hewlett-Packard
Company, after having been employed by that company for 38 years. After retiring
from Hewlett-Packard, he became Executive Chairman and CEO of Microelectronics
Technology Incorporated, a position he held until October of 1998. Mr. Anderson
is also a director of Wireless Data Corporation, ScyTek Laboratories, Inc.,
Microelectronics Technology Incorporated and Novalux.
Kenneth D. Cron is an Executive Vice President of the Company and has been
its President of Publishing since 1994. He joined the Company in 1978 and held
various sales, publishing and group publishing positions in its technology
publications business prior to assuming his present responsibilities. He was
elected a director of the Company in October 1997.
Daniel H. Leeds is an Executive Vice President of the Company and has been
the President of International of the Company since 1992. He joined the Company
in 1985 and held positions in its printing and electronic publishing businesses
prior to assuming his present responsibilities. He has served as a director of
the Company since 1987.
Gerard G. Leeds has been a director since 1971 when he and his wife, Lilo
Leeds, founded the Company. Mr. Leeds served as the President and Chief
Executive Officer of the Company until 1988 when he assumed his current position
as Co-Chairperson of the Board. Mr. Leeds also serves as Co-Chairperson and a
director of Institute for Student Achievement, Inc., a not-for-profit public
charity.
Lilo J. Leeds has been a director since 1971 when she and her husband,
Gerard Leeds, founded the Company. Mrs. Leeds served as a Senior Vice President
of the Company until 1987 when she was appointed Chairperson of the Board. In
1988, she became Co-Chairperson of the Board. Mrs. Leeds also serves as
Co-Chairperson and a director of Institute for Student Achievement, Inc., a not-
for-profit public charity.
Michael S. Leeds has been the President and Chief Executive Officer of the
Company since 1988. He joined the Company in 1984 and, prior to assuming his
present responsibilities, held publishing and group publishing positions in its
travel publications business and led the Company's entry into international
publishing. He has served as a director of the Company since 1987.
A-2
Richard A. Leeds is the President of InfiniteStores.com Inc. Mr. Leeds has
served as a director of the Company since February 1997 and previously served as
a director from December 1991 to February 1993 and from February 1995 to
February 1996.
Sharon Lee Patrick is the President and a director of Martha Stewart Living
Omnimedia LLC. She was elected a director of the Company in October 1997 and is
a member of the Audit Committee and the Chairperson of the Compensation
Committee of the Board. Prior to joining Martha Stewart Living Omnimedia in
1997, she was an executive at Cablevision Systems Corporation and a partner of
McKinsey & Company, Inc.
BOARD COMMITTEES, MEETINGS AND COMPENSATION
The Board of Directors has a standing Audit Committee and Compensation
Committee. It does not have a nominating committee or a committee performing
similar functions. The Audit Committee consists solely of Mr. Anderson and Ms.
Patrick and held three meetings in 1998. The Compensation Committee consists
solely of Mr. Anderson and Ms. Patrick and held two meetings during 1998. The
Board of Directors held a total of four meetings during 1998 (including
regularly scheduled and special meetings). Each director attended all of the
meetings of the Board of Directors held during 1998 and all of the meetings held
by the committees of the Board of Directors on which he or she served during
1998.
AUDIT COMMITTEE. The functions of the Audit Committee include recommending
to the Board of Directors the appointment of the Company's independent
accountants; reviewing with the independent accountants and the Company's
internal auditors their annual audit plans; reviewing management's plans for
engaging the independent accountants to perform management advisory services;
discussing with management, the independent accountants and the internal
auditors the adequacy of the Company's internal controls and financial reporting
process; monitoring significant accounting and reporting issues; reviewing the
Company's policies and procedures concerning officers' expenses; and monitoring
compliance with the Company's policies relating to ethics and conflicts of
interest. Both the independent accountants and the internal auditors have
unrestricted access to the Audit Committee, including the opportunity to meet
with the Audit Committee alone.
COMPENSATION COMMITTEE. The functions of the Compensation Committee include
overseeing the administration of the Company's compensation policies and
practices; establishing and administering the compensation plans for members of
senior management and authorizing any adjustments thereto; administering the
Company's Stock Incentive Plan and authorizing all awards granted thereunder;
and reporting annually to the stockholders of the Company on matters concerning
the compensation of executives of the Company.
Each non-employee director currently receives an annual retainer of $20,000
for serving as a member of the Board of Directors, a fee of $2,500 for each
meeting of the Board attended and a fee of $1,000 for each meeting of a
committee of the Board held on a date not coinciding with a meeting of the
Board. The annual retainer of each non-employee director owning less than 1% of
the Company's outstanding Common Stock is paid 50% in cash and 50% in the form
of options to purchase shares of the Company's Class A Common Stock. The
per-share exercise price of such options is equal to the fair market value of a
share of Class A Common Stock on the date of grant; the number of options
granted is determined using the Black-Scholes option-pricing model; and options
vest in installments of one-third on each anniversary of the grant date. Each
non-employee director has the right to waive the payment of all or any portion
of his or her annual cash retainer in exchange for options to purchase Class A
Common Stock. Following initial election and qualification to the Board, each
non-employee director who is not a member of the Founding Family (as hereafter
defined) receives a grant of restricted shares of Class A Common Stock with a
fair market value of $10,000. Such restricted shares vest over a period of five
years.
Directors who are also employees of the Company receive no compensation for
their service as directors of the Company.
A-3
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Richard Anderson and Sharon Patrick are the only members of both the Audit
Committee and the Compensation Committee. Mr. Anderson and Ms. Patrick are
independent directors and neither is a current or former employee of the
Company.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as follows:
[Enlarge/Download Table]
NAME AGE POSITION
------------------------------------ --- ---------------------------------------------------------------------
Michael S. Leeds.................... 46 President, Chief Executive Officer and a Director
Kenneth D. Cron..................... 42 Executive Vice President, President of Publishing and a Director
Daniel H. Leeds..................... 43 Executive Vice President, President of International and a Director
Joseph E. Sichler................... 58 Executive Vice President and Chief Financial Officer
Robert D. Marafioti................. 51 Executive Vice President, Secretary and General Counsel
Barbara Kerbel...................... 52 Vice President of Corporate Communications
Mary Jones-Herbert.................. 54 Vice President of Human Resources
Debra Robinson...................... 46 Vice President/Chief Information Officer
Jeffrey L. Strief................... 43 Executive Vice President, Technology Buyers
John Russell........................ 39 Senior Vice President, Channel
Steven Weitzner..................... 48 Vice President, OEM
Gretchen Teichgraeber............... 45 Vice President, Marketing and Information Services
All executive officers of the Company are elected by the Board of Directors
annually.
Michael S. Leeds has been the President and Chief Executive Officer of the
Company since 1988. He joined the Company in 1984 and was elected a director in
1987. Mr. Leeds is the brother of Daniel H. Leeds, the President of
International, and the son of Gerard and Lilo Leeds, founders of the Company and
Co-Chairpersons of the Board of Directors.
Kenneth D. Cron is an Executive Vice President of the Company and has been
the President of Publishing of the Company since 1994. He joined the Company in
1978 and held various sales, publishing and group publishing positions prior to
assuming his present responsibilities. He was elected a director in 1997.
Daniel H. Leeds is an Executive Vice President of the Company and has been
the President of International since 1992. He joined the Company in 1985 and was
elected a director in 1987. He is the brother of Michael S. Leeds, the President
and Chief Executive Officer of the Company, and the son of Gerard and Lilo
Leeds, founders of the Company and Co-Chairpersons of the Board of Directors.
Joseph E. Sichler joined the Company as Chief Financial Officer in 1992. He
was elected a Vice President in 1996 and an Executive Vice President of the
Company in 1999.
Robert D. Marafioti joined the Company as General Counsel in 1988. He was
elected a Vice President in 1993, Secretary of the Company in 1997 and an
Executive Vice President of the Company in 1999.
A-4
Barbara Kerbel has been the Vice President of Corporate Communications of
the Company since 1995. She first joined the Company in 1981 and held various
editorial, marketing and communications positions prior to assuming her present
responsibilities.
Mary Jones-Herbert joined the Company as Vice President of Human Resources
in October 1997. From 1995 to 1997, she served as Director of Human Resources,
Finance, of Allied Signal Inc., which she joined in 1993.
Debra Robinson joined the Company as Vice President/Chief Information
Officer in October 1997. From 1995 to 1997, she served as Vice President,
Information Technologies, of Delaware North Companies.
Jeffrey L. Strief joined the Company in 1985 and held various sales,
publishing and group publishing positions prior to his election as a Senior Vice
President of the Company since 1994. He assumed his present responsibilities as
the group publisher of the Company's technology buyers publications in 1997 and
was elected an Executive Vice President in 1999.
John Russell joined the Company in 1983 and held various editorial and
publishing positions prior to being elected a Vice President and assuming his
present responsibilities as the group publisher of the Company's channel
publications in 1994. He was elected a Senior Vice President of the Company in
1999.
Steven Weitzner joined the Company in 1984 and held various editorial and
publishing positions prior to assuming his present responsibilities as the group
publisher of the Company's OEM publications. He was elected a Vice President in
1999.
Gretchen Teichgraeber joined the Company as General Manager, Publishing in
1997. She was promoted to Vice President, Marketing and Information Services in
1999. Prior to joining the Company, she served as Director, Marketing Planning
and Product Management at The New York Times newspaper.
A-5
EXECUTIVE COMPENSATION
The following table provides information concerning all compensation awarded
to, earned by or paid to the Company's Chief Executive Officer and the four
other most highly compensated executive officers of the Company who were serving
as executive officers at December 31, 1998 (collectively, the "Named Executive
Officers") for all services rendered in all capacities to the Company in 1998,
1997 and 1996.
SUMMARY COMPENSATION TABLE
[Enlarge/Download Table]
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------------------- -----------------------------------------
RESTRICTED
STOCK SECURITIES
OTHER ANNUAL AWARDS UNDERLYING ALL OTHER
NAME & PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (1) (2) OPTIONS COMPENSATION (3)
------------------------------- --------- --------- ------------ ---------------- --------- ----------- -----------------
Michael S. Leeds, ............. 1998 $ 600,000 $ 689,029 -- -- -- $ 16,438
President & Chief Executive 1997 600,000 1,092,458 -- -- -- 14,481
Officer 1996 600,000 1,908,062 -- $6,606,000 755,040 13,236
Kenneth D. Cron, .............. 1998 $ 500,000 $ 525,889 -- -- -- $ 19,907
President of Publishing 1997 500,000 900,727 -- -- -- 17,562
1996 500,000 1,727,316 -- $4,404,000 943,800 17,888
Daniel H. Leeds, .............. 1998 $ 450,000 $ 166,977 138,752 -- -- $ 15,860
President of International 1997 400,000 $ 376,605 121,000 -- -- 13,967
1996 400,000 506,814 121,000 $4,404,000 943,800 12,461
Jeffrey L. Strief, ............ 1998 $ 400,000 $ 335,467 -- -- -- $ 15,860
Executive Vice President, 1997 375,000 625,000 -- -- 67,925 22,338
Technology Buyers 1996 325,000 675,001 -- -- -- 14,711
John Russell, Senior Vice ..... 1998 $ 325,000 $ 260,134 -- -- -- $ 17,016
President, Channel 1997 300,000 325,000 -- -- 51,123 24,685
1996 275,000 300,462 -- -- -- 16,262
------------------------
(1) The amounts shown for Daniel Leeds, who is based in Europe, reflect a cost
of living allowance of $90,000 for 1998 and $80,000 for 1997 and 1996,
reimbursement of educational expenses of $38,252 for 1998 and $35,000 for
1997 and 1996 and a car allowance of $6,000 for all years. The Company has
not included in the Summary Compensation Table the value of incidental
personal perquisites furnished by the Company to any of the other Named
Executive Officers, since such value did not exceed the lesser of $50,000 or
10% of the total of annual salary and bonus reported for any such Named
Executive Officers.
(2) The amounts shown represent the fair market value of the restricted stock on
the date of purchase (as determined by an independent appraisal) less the
amount paid by each Named Executive Officer for such stock. Holders of
restricted stock are entitled to dividends, if any, paid on the Company's
Common Stock. Such stock is subject to restrictions on resale until December
31, 2003 in the case of Michael Leeds and December 31, 2005 in the case of
Kenneth Cron and Daniel Leeds, except that as of January 1, 1998, a limited
number of shares of restricted stock may be sold each year provided that the
Company's market capitalization is a certain amount on the business day
preceding the date of sale of such shares. Michael Leeds purchased a total
of 566,280 shares of restricted stock with an appraised aggregate fair
market value at the date of purchase of $7,200,000; Kenneth Cron purchased a
total of 377,520 shares of restricted stock with an appraised aggregate fair
market value at the date of purchase of $4,800,000; and Daniel Leeds
purchased a total of 377,520 shares of restricted stock with an appraised
aggregate fair market value at the date of the purchase of $4,800,000. At
December 31, 1998, the aggregate fair market value of the restricted stock
held by Michael Leeds, Kenneth Cron and Daniel Leeds was $10,334,610,
$6,889,740 and $6,889,740, respectively. Under the terms of the purchase of
restricted stock, in the event of a merger or sale which results in a change
in control prior to March 1, 2000, vesting of the stock will accelerate the
respect to the same percentage of such shares as the percentage of shares of
the principal stockholders of the Company sold in such merger or sale.
(3) Amounts reported under "All Other Compensation" include in 1998: (a)
contributions made by the Company on behalf of each Named Executive Officer
under the Company's Profit Sharing and Retirement Savings Plan and (b) $231
for life insurance premiums paid by the Company for the benefit of each
Named Executive Officer under the Company's group life insurance benefit
plan.
A-6
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
[Enlarge/Download Table]
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS/SARS AT FISCAL THE-MONEY OPTIONS/SARS AT
SHARES YEAR-END (1) (2) FISCAL YEAR-END (1) (2)
ACQUIRED VALUE ---------------------------- --------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------------------------------------------- --------------- --------- ------------- ------------- ----------- -------------
Michael S. Leeds............................ (3) $ 336,800 20,000 815,040 $ 250,800 $ 4,927,651
Kenneth D. Cron............................. (3) 336,800 67,190 956,610 511,761 5,710,533
Daniel H. Leeds............................. (3) 336,800 20,000 1,003,800 250,800 5,971,494
Jeffrey L. Strief........................... -- -- 10,367 57,558 57,330 318,296
John Russell................................ -- -- 7,507 43,616 41,514 241,196
------------------------
(1) As of December 31, 1998, Michael Leeds held 755,040 options, all of which
were unexercisable; Kenneth Cron held 943,800 options, 47,190 of which were
exercisable and 896,610 of which were unexercisable; and Daniel Leeds held
943,800 options, all of which were unexercisable. The value of exercisable
and unexercisable options as included in the above table was calculated as
the difference between the exercise price of the options and the fair market
value of the Company's Class A Common Stock as of December 31, 1998. If
there is a change in control prior to March 1, 2000, all of the options held
by Kenneth Cron, Jeffrey Strief and John Russell will become 100 percent
exercisable and all of the options held by Michael Leeds and Daniel Leeds
will be waived and canceled.
(2) Under the Company's Equity Appreciation Plan (the "EAP"), certain Named
Executive Officers hold share appreciation rights ("SARs"), the value of
which is determined annually by a formula based on the Company's net sales
and pre-tax earnings for the year. The terms of the EAP provide that
participants must redeem 20% of their SARs by June 30 of each of the years
1998 through 2002. All payments under the EAP are in the form of cash. As of
December 31, 1998, Michael Leeds, Kenneth Cron and Daniel Leeds each held
80,000 SARs under the EAP, 20,000 of which are redeemable in 1999 for
$250,800 (which are therefore included as exercisable above) and 60,000 of
which are redeemable in 2000 through 2002 (which are therefore included as
unexercisable above). The value of 80,000 SARs at December 31, 1998 was
$1,003,080. If there is a change in control prior to March 1, 2000, the
remaining 60,000 SARs held by Michael Leeds, Kenneth Cron and Daniel Leeds
would become redeemable for an amount based upon the value of the
transaction.
(3) During 1998, in accordance with the EAP, Michael Leeds, Kenneth Cron and
Daniel Leeds each redeemed 20% of their SARs. As all payments under the EAP
are in the form of cash, no shares were issued upon redemption of the SARs;
each individual received a cash payment of $336,800.
PENSION PLAN
The Company's noncontributory defined benefit pension plan (the "Pension
Plan") was frozen as of December 31, 1992. No additional benefits have accrued
since that date or will accrue in the future. The fixed benefit payable monthly
under that Pension Plan for the life of each of the Named Executive Officers
after retirement at age 65 is as follows:
[Enlarge/Download Table]
NAME MONTHLY BENEFIT
----------------------------------------------------------------------------- ---------------
Michael S. Leeds............................................................. $ 728
Kenneth D. Cron.............................................................. 1,002
Daniel H. Leeds.............................................................. 530
Jeffrey L. Strief............................................................ 592
John Russell................................................................. 435
EMPLOYMENT AGREEMENTS
Michael Leeds, Daniel Leeds and Kenneth Cron each have an employment
agreement with the Company. Each employment agreement is terminable at the will
of either party, provided that the employee gives ninety days notice of any
voluntary resignation or ten business days notice of a Resignation for Good
Reason, or the Company gives ten business days notice of a Dismissal for Cause
(as defined in the respective employment agreements). Each agreement provides
that the employee shall be entitled to an annual base salary, the benefits
provided to employees generally and an annual incentive bonus determined by the
Compensation Committee of the Board of Directors.
A-7
Each agreement prohibits the disclosure or use of any of the Company's
confidential or proprietary information. The agreements with Michael Leeds and
Daniel Leeds provide that the employee will not compete with the Company for up
to three years following termination of employment as long as the Company
continues to pay cash compensation as determined under the respective
agreements; provided, however, that such payments will be made only if
employment with the Company terminates by reason of Dismissal Without Cause or
Resignation for Good Reason (as defined in the respective employment agreements)
and not by reason of voluntary resignation or Dismissal for Cause (as defined in
the respective employment agreements) and only until the employee attains the
age of sixty-five. The agreements with Michael Leeds and Daniel Leeds also
provide that, upon termination of employment by reason of retirement at or after
attainment of age 65, the Company has the right to require, at its option,
continued compliance with the non-compete covenants for a period of up to two
additional years as long as the Company continues to pay an amount equal to that
determined under the agreements. The agreement with Mr. Cron provides that he
will not compete with the Company for up to five years following termination of
employment as long as the Company pays him cash compensation as determined under
his employment agreement. The agreement with Mr. Cron also provides that, upon
termination of employment by reason of retirement at or after attaining age 65,
the Company has the right to require, at its option, continued compliance with
the non-compete covenants for a period of up to five additional years as long as
the Company continues to pay cash compensation determined under his employment
agreement.
Each of Michael S. Leeds, Daniel H. Leeds and Kenneth D. Cron entered into
an agreement with the Company as of April 23, 1999 (each, an "Amendment
Agreement") providing for certain amendments to his existing option agreement
and employment agreement with the Company (and, in the case of Michael Leeds and
Daniel Leeds, to their respective stockholders' agreements which govern their
restricted shares of Class A Common Stock). Under their respective Amendment
Agreements, each of Michael Leeds and Daniel Leeds agreed that his option
agreement would be terminated in the event that the Company consummated a
transaction resulting in a change of control of the Company on or before March
1, 2000, and that all options issuable to him under such option agreement would
thereupon be canceled. In consideration of the termination of the option
agreements of Michael Leeds and Daniel Leeds, the Company agreed, in the event
of a change of control, to terminate their respective stockholders' agreements
and to amend certain provisions of their respective employment agreements in
order to modify the scope of certain restrictive covenants and to eliminate the
Company's right to reduce its severance payments to each executive by 50% of
cash compensation earned by such executive from other employment after
termination of his employment with the Company. Under the Amendment Agreement
with Mr. Cron, his option agreement was amended to provide that, upon a change
of control of the Company, all of Mr. Cron's unvested options to purchase Class
A Common Stock would immediately vest and become exercisable. No changes were
made to Mr. Cron's stockholders' agreement or employment agreement with the
Company. The Amendment Agreements (the terms of which are incorporated by
reference herein) have been filed with the Securities and Exchange Commission as
Exhibits 3, 4 and 5 to the Schedule 14D-9 to which this information statement
pursuant to Rule 14f-1 of the Exchange Act is attached as Annex A.
RETENTION BONUSES
The Company adopted the CMP Media Inc. Retention Bonus Plan (the "Retention
Plan") effective March 1, 1999, pursuant to which a committee appointed by the
Board of Directors of the Company has the discretion to award bonuses to
employees who remain employed with the Company through a period specified by the
committee (the "Retention Period"). The committee may define the amount of a
Retention Plan bonus as a fixed dollar amount or as a formula. If an employee
who receives a Retention Plan award is terminated by the Company for cause, as
defined in the Retention Plan, or resigns voluntarily without good reason, as
defined in the Retention Plan, prior to the expiration of his or her Retention
Period, he or she forfeits the Retention Plan bonus.
A-8
SEVERANCE PAY
The Company has adopted the CMP Media Inc. Severance Pay Plan (the
"Severance Plan"), which will become effective upon the closing of a transaction
resulting in a change of control of the Company. The Severance Pay Plan provides
benefits to every employee of the Company who is not a party to a separate
written agreement with the Company which provides severance-type benefits
(unless such agreement confirms that he or she is eligible to receive benefits
under the Severance Plan as well). If an eligible employee is terminated by the
Company without cause, as defined in the Severance Plan, or resigns for good
reason, as defined in the Severance Plan, within one year after the closing date
of such a transaction, he or she is entitled to two weeks of pay for each full
year of service with the Company, although a committee appointed by the Board of
Directors may award benefits in excess of that amount. The minimum benefit is 8
weeks of pay and the maximum benefit is 104 weeks of pay. The Company is also
required to pay a share of such employee's COBRA premiums through the severance
period (if the employee elects to receive healthcare insurance coverage under
COBRA) and to provide outplacement services for the employee's benefit.
OTHER EXECUTIVE AGREEMENTS
The Company also entered into agreements with five of its executive officers
as of March 1, 1999, which agreements provide that, in the event of a change of
control, the Company will pay each executive a bonus under the Retention Plan
(provided the executive remains with the Company through the change of control
and does not resign without good reason, as defined in such agreements, for 90
days thereafter) and all of the executive's unvested options to purchase Class A
Common Stock will immediately vest and become exercisable on the date of such
change of control. Such agreements also provide that, if the executive is
dismissed by the Company without cause (as defined in such agreements) or
resigns for good reason (as defined in such agreements) within eighteen months
after a change of control, the executive is entitled to extended severance
benefits under the Severance Plan provided that he or she does not compete with
the Company during the severance period. In addition, the Company has the right
to reduce its severance payments by 50% of any cash compensation that the
executive receives from other employment during that period.
The Company entered into agreements with four of its other executive
officers as of March 1, 1999, which agreements required them to perform services
in connection with the Company's exploration of strategic alternatives as well
as their regular duties and, for a period of three years following a change of
control of the Company, to render services to the Company in their current
capacities and comply with certain restrictive covenants not to compete with the
Company, to solicit its employees, to interfere in its customer or supplier
relationships or to disclose its confidential information. Such agreements also
provide that, in the event of a change of control, the Company will pay each
executive a bonus (provided the executive remains with the Company through the
change of control and does not resign without good reason, as defined in such
agreement, for 90 days thereafter) and all of the executive's unvested options
to purchase Class A Common Stock will immediately vest and become exercisable on
the date of such change of control. The aggregate amount of the projected
bonuses to the nine executives who are parties to the above-described agreements
is approximately $17,375,000.
In the event the benefits received by any of the four above-mentioned
executives under such agreements are subject to an excise tax as an "excess
parachute payment", the Company will pay the executive a gross-up bonus to
offset the effect of such excise tax. If, following a change of control, any of
the four executives' employment is terminated by the Company without cause (as
defined in such agreement), or if an executive terminates employment with good
reason (as defined in such agreement), the executive remains subject to the
above-described restrictive covenants but is entitled to receive base salary and
incentive bonus compensation for the duration of the restricted period (reduced
by 50% of any cash compensation earned from other employment). The agreements
provide substantially similar benefits in the event the executive resigns,
without good reason, more than one year after the change of control. If an
executive resigns prior to the first anniversary of the change of control or is
terminated for cause, he is not entitled to any continued payments or benefits
under the agreements, but remains subject to the restrictive covenants.
A-9
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table furnishes certain information as of May 3, 1999 as to
the Common Stock beneficially owned by each of the directors, by each of the
Named Executive Officers, by all directors and executive officers as a group,
and by all other persons known to the Company to be the beneficial owners of
more than 5% of either class of the Company's Common Stock.
[Enlarge/Download Table]
CLASS A COMMON STOCK CLASS B COMMON STOCK
--------------------- -----------------------
NAME OF BENEFICIAL OWNER NUMBER % NUMBER %
----------------------------------------------------------------- ---------- --------- ------------ ---------
Richard W. Anderson.............................................. 408 *
Kenneth D. Cron (1).............................................. 377,620 2.92%
Greg Jobin-Leeds (2)............................................. 256,000 1.98% 1,392,567 13.72%
Daniel H. Leeds (3).............................................. 648,620 5.01% 1,705,999 16.80%
Jennifer Leeds (4)............................................... 303,330 2.34% 1,406,183 13.85%
Gerard G. Leeds (5).............................................. 2,217,684 21.84%
Lilo J. Leeds (5)................................................ 2,217,684 21.84%
Michael S. Leeds (6)............................................. 500,638 3.87% 1,987,640 19.58%
Richard A. Leeds (7)............................................. 540,120 4.17% 1,442,737 14.21%
Sharon Lee Patrick............................................... 408 *
John Russell..................................................... 880 *
Jeffrey L. Strief................................................ 1,820 *
All directors and executive officers as a group (14 persons)..... 1,334,397 10.31% 7,354,060 72.43%
1999 Leeds Family/CMP Media Inc. ................................ 1,282,052 9.90%
Employee Benefit Trust
c/o CMP Media Inc.
600 Community Drive
Manhasset, NY 11030
Connor Clark & Company, Ltd. (8) ................................ 358,100 2.77%
40 King Street, Ste. 5110, Box 125
Toronto, Ontario
Canada M5H 3Y2
Private Capital Management, Inc. (9) ............................ 1,563,450 12.07%
3003 Tamiami Trail North
Naples, FL 34103
J.&W. Seligman & Co. Incorporated (10) .......................... 910,500 7.03%
100 Park Avenue
New York, NY 10017
Wanger Asset Management, L.P. (11) .............................. 480,000 3.71%
227 W. Monroe Street, Ste 3000
Chicago, IL 60606
------------------------
* Represents less than 1.0% of the outstanding shares of Class A Common Stock.
(1) Includes 89,288 shares of Class A Common Stock held in trust by Kenneth Cron
as trustee for certain members of his family.
(2) Includes 256,000 shares of Class A Common Stock held by a private foundation
controlled by Greg Jobin-Leeds and 330,740 shares of Class B Common Stock
held in trust by Greg Jobin-Leeds as trustee for certain members of his
family.
A-10
(3) Includes 256,000 shares of Class A Common Stock held by a private foundation
controlled by Daniel H. Leeds and 392,520 shares of Class A Common Stock and
195,171 shares of Class B Common Stock held in trust by Daniel H. Leeds as
trustee for certain members of his family.
(4) Includes 303,330 shares of Class A Common Stock and 27,586 shares of Class B
Common Stock held by a private foundation controlled by Jennifer Leeds.
(5) 1,111,342 shares of Class B Common Stock are held by Gerard G. Leeds, and
1,106,342 shares of Class B Common Stock are held by Lilo J. Leeds. As
husband and wife, Gerard and Lilo Leeds are deemed to be the beneficial
owner of shares held by the other spouse, and therefore, the combined
beneficial ownership is shown in the table. Gerard and Lilo each disclaim
beneficial ownership of the shares held by the other.
(6) Includes 130,000 shares of Class A Common Stock held by a private foundation
controlled by Michael S. Leeds and 298,140 shares of Class A Common Stock
and 957,504 shares of Class B Common Stock held in trust by Michael S. Leeds
as trustee for certain members of his family.
(7) Includes 975,760 shares of Class B Common Stock held in trust by Richard A.
Leeds as trustee for certain members of his family, and 530,820 shares of
Class A Common Stock and 30,000 shares of Class B Common Stock held by a
private foundation controlled by Richard A. Leeds.
(8) This information derived from Schedule 13G filed by Connor Clark & Company,
Ltd on February 10, 1999.
(9) This information derived from Schedule 13G filed by Private Capital
Management, Inc. on February 16, 1999.
(10) This information derived from Schedule 13G filed by J. & W. Seligman & Co.
Incorporated on February 10, 1999.
(11) This information derived from Schedule 13G filed by Wanger Asset
Management, L.P. on February 23, 1999.
A-11
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Directors Michael Leeds, Daniel Leeds and Richard Leeds are children of
Directors Gerard and Lilo Leeds, the founders of the Company. Gerard and Lilo
Leeds, Michael Leeds, Daniel Leeds and Richard Leeds are parties to a
stockholders' agreement among Gerard and Lilo Leeds and all of their children
(the "Founding Family"), who collectively control all of the Company's Class B
Common Stock. Under such agreement, the parties are required to vote all their
shares of Class B Common Stock to elect as directors Gerard and Lilo Leeds, all
members of the Founding Family who are full-time senior executive employees of
the Company (currently Michael Leeds and Daniel Leeds) and one of the three
other children of Gerard and Lilo Leeds.
Gerard and Lilo Leeds are the founders and Co-Chairpersons of Institute for
Student Achievement, Inc. (the "Institute"), a not-for-profit public charity to
which the Company provides office space and services. The fair market value of
such office space and services provided in 1998 was approximately $605,000. The
Board of Directors passed a resolution which limits the aggregate annual cash
and in-kind contributions by the Company to public or private charities or
foundations (including the Institute) to 3% of the Company's consolidated income
before provision for income taxes for the preceding fiscal year.
At December 31, 1998, Kenneth Cron was indebted to the Company in the
principal amount of $750,000. The Company holds a note receivable for such debt,
which bears interest at a rate approximating LIBOR and on which interest
payments are due quarterly and principal payments annually. Full payment of the
note is due in 2023, subject to acceleration under certain conditions. Mr. Cron
will repay this debt in full within five business days after the closing of the
Offer.
The Company is the guarantor of a bank loan to Michael Leeds in the
principal amount of $1,200,000. The loan is due and payable in full on November
14, 2001, but under an agreement dated April 15, 1997, the Company is required
to extend the guarantee of this loan until December 31, 2005. Mr. Leeds will
repay this loan in full within five business days after the closing of the
Offer.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file reports of
ownership and changes of ownership with the Securities and Exchange Commission
and each exchange on which the Company's securities are registered. Officers,
directors and greater than ten percent stockholders are required by Securities
and Exchange Commission regulations to furnish the Company with copies of all
ownership forms they file. Based on a review of such copies and other records
available to the Company including written representations from certain
reporting persons that no forms were required for such persons, to the Company's
knowledge, all Section 16(a) filing requirements applicable to the Company's
directors, officers and greater than ten percent beneficial stockholders were
complied with, except that one late report covering one transaction was filed by
each of Gerard Leeds and Lilo Leeds.
A-12
SCHEDULE I
DESIGNEES OF MERGER SUB. The following table sets forth the name, current
business address, citizenship, present principal occupation or employment, and
material occupations and positions, offices or employments and business
addresses thereof for the past five years, of each person designated by Merger
Sub to become a member of the Board of Directors of the Company following
consummation of the Offer. None of such persons has been convicted in a criminal
proceeding, nor has any of them been a party to a proceeding related to U.S.
state and federal securities laws. To the Company's knowledge, none of such
persons owns any Shares or has engaged in any transactions with respect to
Shares during the past 60 days.
The designees of Merger Sub to become members of the Board of Directors of
the Company are:
[Enlarge/Download Table]
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND BUSINESS ADDRESS CITIZENSHIP POSITION AND FIVE-YEAR EMPLOYMENT HISTORY
------------------------------------------------- --------------- ---------------------------------------------
Andrew R. Baker.................................. British Group Development Manager, United News &
United News & Media Inc. Media plc, since February 1997. Graduate
32 Union Square East business studies, International Institute for
5th Floor South Management Development (Switzerland) January
New York, New York 10003 -December 1996. Business development manager,
Woolworths UK plc, 1993 - October 1995.
Gary Marshall.................................... British President and Chief Executive Officer, Miller
Miller Freeman Asia Limited Freeman Asia Ltd., since January 1995. Chief
4401 China Resources Building Financial Officer, Miller Freeman Asia Ltd.,
26 Harbour Road April 1994 - January 1995.
Hong Kong
China
Donald Pazour.................................... United States Chief Operating Officer and President, Miller
Miller Freeman Inc. Freeman Inc., since August 1996. Executive
600 Harrison Street officer, Miller Freeman Inc., 1977 - August
San Francisco, California 94107 1996.
Edwin O. Pinedo.................................. United States Chief Financial Officer, Miller Freeman
Miller Freeman Worldwide plc Worldwide plc, since February 1997. Chief
630 Chiswick High Road Financial Officer, United Advertising
London W4 5BG Publications/Consumer Publishing, 1986 -
United Kingdom February 1997.
Regina Ridley.................................... United States Executive Vice President, Miller Freeman
Miller Freeman Inc. Inc., since September 1998. Executive
600 Harrison Street officer, Miller Freeman Inc., 1981 -
San Francisco, California 94107 September 1998.
A-13
ANNEX B
[LETTERHEAD OF LAZARD FRERES & CO. LLC]
The Board of Directors April 28, 1999
CMP Media Inc.
600 Community Drive
Manhasset, NY 11030
Dear Members of the Board:
We understand that CMP Media Inc. (the "Company"), United News & Media plc
("United"), Miller Freeman Worldwide plc ("Parent") and MFW Acquisition Corp.,
an affiliate of Parent ("Merger Sub"), have entered into an Agreement and Plan
of Merger (the "Agreement") pursuant to which Merger Sub will commence a tender
offer (the "Offer") to purchase all the issued and outstanding shares of the
Company's Class A common stock, par value $0.01 per share (the "Class A Common
Stock"), and the Company's Class B common stock, par value $0.01 per share (the
"Class B Common Stock" and, collectively with the Class A Common Stock, the
"Common Stock") for $39.00 per share in cash, all as more fully provided in the
Agreement. Pursuant to the Agreement, following consummation of the Offer,
Merger Sub will merge with and into the Company (the "Merger"), and any
remaining outstanding shares of Common Stock (other than Common Stock held by
Parent, Merger Sub or any other affiliate of Parent, shares of Common Stock held
in the treasury of the Company and shares of Common Stock held by stockholders
who demand appraisal for such shares in accordance with the Delaware General
Corporation Law (the "DGCL"), if the DGCL provides for appraisal rights for such
shares in the Merger) will be converted into the right to receive $39.00 in
cash, all as more fully provided in the Agreement. References herein to the
"Consideration" is to the consideration to be received by the holders of the
Common Stock in the Offer and the Merger and references herein to the
"Transaction" is to the Offer and the Merger as contemplated by the Agreement.
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of shares of Common Stock, taken as a whole (other than
Merger Sub, Parent and its affiliates), of the aggregate Consideration to be
paid pursuant to the Transaction.
In connection with this opinion, we have:
(i) Reviewed the financial terms and conditions of the Agreement dated April
28, 1999;
(ii) Analyzed certain historical business and financial information relating
to the Company;
(iii) Reviewed various financial forecasts and other data provided to us by
the Company relating to its business;
(iv) Held discussions with members of the senior management of the Company
with respect to the business, prospects, and strategic objectives of
the Company;
(v) Reviewed public information with respect to certain other companies in
lines of business we believe to be generally comparable to the business
of the Company;
(vi) Reviewed the financial terms of certain business combinations involving
companies in lines of business we believe to be generally comparable to
those of the Company, and in other industries generally;
(vii) Reviewed the historical stock prices and trading volumes of the Class A
Common Stock; and
(viii) Conducted such other financial studies, analyses and investigations as
we deemed appropriate.
B-1
[LOGO]
We have relied upon the accuracy and completeness of the foregoing
information, and have not assumed any responsibility for any independent
verification of such information or any independent valuation or appraisal of
any of the assets or liabilities of the Company, or concerning the solvency or
fair value of the Company. With respect to financial forecasts, we have assumed
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of management of the Company. We assume no
responsibility for and express no view as to such forecasts or the assumptions
on which they are based.
Further, our opinion is necessarily based on economic, monetary, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof. In rendering our opinion, we did not address the Company's
underlying decision to effect the Transaction.
In rendering our opinion, we have assumed that the Transaction will be
consummated on the terms described in the Agreement, without any waiver of any
material terms or conditions by the Company and that obtaining any necessary
regulatory approvals for the Transaction will not have an adverse effect on the
Company.
Lazard Freres & Co. LLC is acting as investment banker to the Company in
connection with the Transaction and will receive a fee for our services, a
substantial portion of which is contingent upon the consummation of the
Transaction. We have in the past provided financial advisory services to the
Company for which we received usual and customary compensation. In addition, the
Company has agreed to indemnify us for certain liabilities that may arise out of
the rendering of this opinion.
Our engagement and the opinion expressed herein are for the benefit of the
Company's Board of Directors and our opinion is rendered to the Company's Board
of Directors in connection with its consideration of the Transaction. This
opinion is not intended to and does not constitute a recommendation to any
holder of Common Stock as to whether such stockholder should vote for the
Transaction or tender their share pursuant to the Offer. It is understood that
this letter may not be disclosed or otherwise referred to without our prior
consent, except as may otherwise be required by law or by a court of competent
jurisdiction.
Based on and subject to the foregoing, we are of the opinion that the
aggregate Consideration to be paid pursuant to the Transaction is fair to the
holders of Common Stock, taken as a whole (other than Parent and its
affiliates), from a financial point of view.
[Download Table]
Very truly yours,
LAZARD FRERES & CO. LLC
By: /s/ Peter R. Ezersky
-----------------------------------------
Peter R. Ezersky
MANAGING DIRECTOR
B-2
[Enlarge/Download Table]
EXHIBITS
1 Agreement and Plan of Merger, dated as of April 28, 1999, by and among United News &
Media plc, Miller Freeman Worldwide plc, MFW Acquisition Corp. and CMP Media Inc.
2 Tender and Voting Agreement, dated as of April 28, 1999, by and among MFW Acquisition
Corp. and Certain Stockholders of CMP Media Inc.
3 Agreement to Terminate Option Agreement and Stockholders' Agreement and to Amend
Employment Agreement, dated as of April 23, 1999, by and between CMP Media Inc. and
Michael S. Leeds.
4 Agreement to Terminate Option Agreement and Stockholders' Agreement and to Amend
Employment Agreement, dated as of April 23, 1999, by and between CMP Media Inc. and
Daniel H. Leeds.
5 Agreement to Amend Option Agreement, dated as of April 23, 1999, by and between CMP
Media Inc. and Kenneth D. Cron.
6 Letter to Stockholders dated May 6, 1999.
7 Opinion of Lazard Freres & Co. LLC dated April 28, 1999.
8 Press Release issued jointly by United News & Media plc and CMP Media Inc. on April 29,
1999.
Dates Referenced Herein and Documents Incorporated by Reference
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