Employment Agreement - PRIMEDIA Inc. and John P. Loughlin
March 16, 2000
Mr. John P. Loughlin
1855 NW 130th Street
Clive, Iowa 50325
Dear John:
The purpose of this letter is to set forth the terms and conditions of
the employment agreement (the "Agreement") between you and PRIMEDIA Inc. (the
"Company").
1. SERVICES.
a. The Company hereby retains you, and you agree to be employed by the
Company in a full-time capacity, as Executive Vice President of the Company and
as President and Chief Executive Officer of the Company's consumer and
enthusiast magazines and related Internet operations, as constituted by the
Company from time to time (consisting on the date of this Agreement of the
operations listed on Schedule I hereto) (collectively, the "Consumer Company")
together with such other similar or higher executive duties that you may be
requested to perform during the term of this Agreement (consistent with the
duties of a Chief Executive Officer of the Consumer Company) including serving
as a corporate officer of any of the Company's subsidiaries to which you may be
elected. Notwithstanding the foregoing you may share management responsibility
for the Teen/Young Adult Internet Venture (as hereafter defined). You shall
report directly to the Chief Executive Officer of the Company and perform such
other duties as such Chief Executive Officer shall direct, consistent with your
positions with the Company.
b. You shall devote substantially all of your attention, business time
and efforts to the business and affairs of the Company, provided that nothing
shall prohibit you from participating in charitable or educational activities or
the Board of Directors of other companies (provided such other companies do not
compete with the Company), provided such activities do not in the aggregate
materially interfere with the provision of services by you under this Agreement.
c. Your office will be located in Manhattan.
2. TERM
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The Term of this Agreement shall commence on the date of this Agreement
and your employment shall commence on the date on which you commence your
employment with the Company (the "Start Date") which shall be no later than
April 15, 2000 and shall expire on the third anniversary of the Start Date (the
"Expiration Date"), unless earlier terminated in accordance with Section 6.
3. COMPENSATION
a. BASE SALARY. Commencing on the Start Date you shall be paid an
annual base salary equal to $700,000 (subject to annual review for increases in
the Company's discretion) less applicable withholdings, payable bi-weekly in
arrears, on the Company's regular pay dates.
b. ANNUAL INCENTIVE AWARD. Commencing with April 1, 2000 you shall
participate in the annual Short Term Senior Executive Performance Plan and the
Short Term Senior Executive Discretionary Plan (together, the "Bonus Plans")
provided that your bonus shall be determined based on the performance of the
Consumer Company. Your aggregate target bonus in the Bonus Plans shall equal 60%
of your earned annual base salary; provided that for the 2000 calendar year your
aggregate bonus shall be no less than 30% of your earned base salary in 2000. A
description of the Bonus Plans is attached.
c. SIGN-ON BONUS. No later than ten (10) days after your Start Date,
the Company will pay to you $250,000 less applicable withholdings.
4. STOCK OPTIONS
a. COMPANY STOCK OPTIONS. As soon as practicable after the Start Date
(the "Grant Date"), the Company shall grant you an option to purchase 150,000
shares of Company Common Stock at a per share option exercise price equal to the
closing price on the New York Stock Exchange on the date of execution of this
Agreement and in accordance with the terms of the Company's1992 Stock Option
Plan (the "Plan"). Your options will vest at the rate of 20% on each anniversary
date of the Grant Date and, provided you remain in the Company's employ, shall
have a ten-year life from the Grant Date. You shall be considered for annual
grants under the Plan, which grants shall be at the discretion of the Company.
Your stock options granted pursuant to Sections 4(a) and (b) shall be "Incentive
Stock Options" as that term is defined under the Federal tax code, to the
fullest extent possible.
b. INTERNET STOCK OPTIONS. The Company has formed three separate
internet ventures known as Gr8ride, Enthusiast and Teen/Young Adult (the
"Consumer Internet Ventures"). As soon as practicable after the Start Date (the
"Internet Grant Date"), you shall be granted options to purchase .67% of the
shares of the Common Stock of each of the Consumer Internet Ventures at the per
share exercise price of $0.50 per share. Your options will vest at the rate of
25% on the first anniversary of the Internet Grant Date and 1/16th of the total
grant each subsequent three months thereafter through the fourth
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anniversary of the Internet Grant Date, provided you remain in the Company's
employ. Your Consumer Internet Venture stock options shall be granted pursuant
to the form of stock option plan and agreement attached hereto with such changes
are specifically set forth in this Agreement.
c. CHANGE IN CONTROL.
(i) Change of Control shall mean the occurrence of any one of the
following events:
(A) a transaction or series of related transactions where
the controlling party sells or otherwise disposes of
Beneficial Ownership (within the meaning of Rule
13d-3 of the Securities Exchange Act of 1934, as
amended (the "1934 Act") ) of securities of the
company in question representing 35% or more of the
Voting Stock (stock having the combined voting power
of all securities of that company entitled to vote in
the election of directors of that company) to any
single person or group (within the meaning of Section
13 (d) (3) of the 1934 Act, and the rules and
regulations promulgated thereunder), and in
connection with or following such disposition such
single person or group obtains control of a majority
of the seats (other than vacant seats) on the Board
of Directors of the company in question;
(B) the company in question adopts any plan of
liquidation providing for the distribution of all or
substantially all of its assets;
(C) all or substantially all of the assets or business of
the company in question is disposed of pursuant to a
merger, consolidation or other transaction (unless
the shareholders of the company in question
immediately prior to such merger, consolidation or
other transaction beneficially own, directly or
indirectly, in substantially the same proportion as
they owned the voting stock of the company in
question, all of the voting stock or other ownership
interests of the entity or entities, if any, that
succeed to the business of the company in question);
or
(D) the company in question combines with another company
and is the surviving corporation but, immediately
after the combination, the shareholders of the
company in question immediately prior to the
combination have Beneficial Ownership, equal to 50%
or less of the Voting Stock of the combined company
(there being excluded from the number of shares held
by such shareholders, but not from the Voting Stock
of the combined company, any shares
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received by affiliates of such other company in
exchange for stock of such other company).
(ii) In the event of a Change of Control of the Company or any of
the Consumer Internet Ventures and notwithstanding anything
contained in any stock option plan or agreement pursuant to
which such stock options have been granted, all then unvested
stock options in the company experiencing the Change of
Control shall immediately vest and shall be treated in the
Change of Control transaction as vested stock options.
(iii) CONTROLLING PROVISIONS. The terms and provisions of this
Section 4 shall take precedence over and control in the case
of any conflict with the terms of any option plan or option
agreement to which you are party, now or in the future.
5. FRINGE BENEFITS; EXPENSES AND MOVING EXPENSES.
a. FRINGE BENEFITS. During the term of this Agreement, the Company will
provide you with benefits commensurate with those provided generally to the
Company's most senior corporate officers (other than the Chief Executive Officer
of the Company) at the Company's executive offices including health, medical,
life and disability insurance and thrift and retirement plan, subject to the
terms of those plans as in effect from time to time. You will be entitled to
four weeks vacation.
b. REIMBURSEMENT OF BUSINESS EXPENSES. You are authorized to incur
reasonable expenses in carrying out your duties and responsibilities under this
Agreement and the Company shall promptly reimburse you for all reasonable
business expenses incurred in connection with carrying out the business of the
Company, subject to documentation in accordance with the Company's policy for
executives at your level.
c. REIMBURSEMENT OF MOVING EXPENSES. The Company agrees to reimburse
you for your reasonable moving expenses moving to the New York metropolitan
area, in accordance with the Company's Executive Relocation Policy attached
hereto.
6. EARLY TERMINATION. This Agreement
a. shall terminate upon your death;
b. may be terminated by the Company on written notice to you upon your
"Permanent Disability"; or
c. may be terminated by the Company on written notice to you for
"Cause."
d. As used herein, "Permanent Disability" shall mean a physical or
mental disability which renders you unable to perform your duties hereunder in a
reasonably
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professional manner provided you have failed to perform such duties as a result
of such disability for an aggregate period of six months in any 12 consecutive
month period during the Term. Permanent Disability shall be determined by the
opinion of at least two doctors associated with major hospitals in Manhattan
practicing in the field to which the disability relates, selected by the Company
in its reasonable discretion.
e. As used herein, "Cause" shall mean (i) any substantial breach or
non-observance of any of your material obligations as set forth herein, (after
reasonable advance written notice and a reasonable opportunity to cure such
breach or non-observance), (ii) the immoderate use of alcohol by you on a
habitual basis to the detriment of the Company (after reasonable advance written
notice and a reasonable opportunity to cease such use), (iii) the illegal use of
narcotics or drugs by you (after reasonable advance written notice and a
reasonable opportunity to cease such use), (iv) willful and repeated absence
from the business for any unreasonable period of time, without leave following
reasonable written notice and an opportunity to cure. and (v) willful and
repeated failure or refusal to perform your duties hereunder which failure or
refusal continues following reasonable advance written notice to you specifying
such failure or refusal and a reasonable opportunity to cure such failure or
refusal. Failure to meet financial targets shall not alone constitute Cause.
f. As used herein, "Date of Termination" shall mean the date of your
death, the effective date of your termination under Sections 6(b) or (c) or your
last date of employment if you voluntarily leave the Company's employ.
7. COMPENSATION UPON TERMINATION.
a. In the event that this Agreement shall terminate pursuant to Section
6(a) or (b), you or your estate shall be entitled to receive (i) all accrued and
unpaid annual base salary earned through the Date of Termination plus (ii) an
amount equal to your target bonuses for the calendar year during which the Date
of Termination occurs multiplied by a fraction, the numerator of which is the
number of days from the start of the calendar year to the Date of Termination
and the denominator of which is 365.
b.In the event this Agreement shall terminate pursuant to Section 6(c)
or if you voluntarily terminate, you shall be entitled to receive your accrued
and unpaid annual base salary through the Date of Termination.
c. In the event of any termination under Section 6, you or your estate
shall be paid all other amounts or benefits due under any fringe benefit or
other plans or arrangements in which you then participate in accordance with the
terms thereof then in effect plus reimbursement for all accrued and unpaid
business expenses.
d. In the event your employment is terminated by the Company without
Cause prior to the first anniversary of the Start Date, that number of stock
options granted to you pursuant Section 4(a) and (b) of this Agreement which
would have vested had you
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stayed in the Company's employ through and including the first anniversary of
the Grant Date or Internet Grant Date shall vest.
e. In the event your employment shall end on or after the Expiration
Date, you shall receive one year's annual base salary at the rate in effect at
your then rate less applicable withholding in one lump sum payment.
8. AGREEMENT NOT TO COMPETE OR SOLICIT TO HIRE, CONFIDENTIALITY.
a. NON-COMPETE, NO HIRE. Through the first anniversary of the
Expiration Date if you leave the Company's employ on the Expiration Date or
through the first anniversary of your Date of Termination if you voluntarily
leave the Company's employment before or after the Expiration Date or your
employment terminates under Section 6(c);
(i) .You agree not to accept employment with, or provide
services to, any person, firm or corporation that
competes directly with: (A) specific Consumer Company
magazines and Consumer Internet Ventures,
representing in the aggregate excess of 25% of the
gross revenues of the Consumer Company in your last
year of employment; or (B) other Company businesses
over which you have had managerial supervision and
control during the last 6 months of employment by the
Company hereunder which represent in excess of 25% of
the gross revenues of the Company in its last fiscal
year.
(ii) You agree not to yourself or for and on behalf of any
person, firm or corporation for which you provide
services, solicit for employment or hire any employee
employed by the Consumer Company or any of the
Company's businesses to which you render services
during the term of your employment with the Company.
b. EXCEPTION. Nothing contained in this Section 8 shall prohibit you
from owning less than 5% of the equity securities of any company as a passive
investor.
c. CONFIDENTIALITY.
(i) You agree that you will not, at any time during the
term of this Agreement or thereafter, disclose or use
any trade secret, proprietary or confidential
information of the Consumer Company, the Company or
any subsidiary or affiliate of the Company, which
information is not in the public domain, obtained
during the course of your employment, except as
required in the course of such employment or with the
written permission of the Company or, as applicable,
the Consumer Company or any subsidiary or affiliate
of the Company or as may be required by law, provided
that, if you
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receive legal process with regard to disclosure of
such information, you shall promptly notify the
Company and reasonably cooperate with the Company, at
the Company's sole expense, in seeking a protective
order.
(ii) You agree that at the time of the termination of your
employment with the Company, whether at your instance
or the Company's instance, and regardless of the
reasons therefor, you will deliver to the Company,
and not keep or deliver to anyone else, any and all
notes, files, memoranda, papers and, in general, any
and all physical matter containing information,
including any and all documents significant to the
conduct of the business of the Consumer Company, the
Company or any subsidiary or affiliate of the Company
which are in your possession, except for (A) any
documents for which the Consumer Company, the Company
or any subsidiary or affiliate of the Company has
given written consent to removal at the time of the
termination of employment and (B) your personal
rolodex, personal files, phone book and similar
items.
d. You agree that the Company's remedies at law would be inadequate in
the event of a breach or threatened breach of this Section 8; accordingly, the
Company shall be entitled, in addition to its rights at law, to seek an
injunction and other equitable relief.
9. GOVERNING LAW. This Agreement shall be governed and interpreted and
enforced in accordance with the laws of the State of New York applicable to
agreements made and to be performed in the State of New York.
10. ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement or the breach thereof shall be conclusively settled by
arbitration to be held in New York, New York, in accordance with the American
Arbitration Association's Employment Dispute Resolution Rules. Any award
resulting from such arbitration shall be final and binding upon both parties.
Judgment may be entered in any court having jurisdiction.
11. NOTICES. Any notice required or desired to be served, given or
delivered hereunder shall be in writing, and shall be deemed to have been
validly served, given or delivered (i) five business days after deposit in the
United States mails, with proper postage prepaid, whether by registered or
certified mail, (ii) one business day after being deposited with an overnight
courier with all charges prepaid, or (iii) , if hand-delivered by messenger on
the scheduled delivery date, all of which shall be properly addressed to the
party to be notified and sent to the address indicated as follows:
If to the Company: PRIMEDIA Inc.
745 Fifth Avenue
New York, NY 10151
Attn: General Counsel
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If to you: To address first above written
or to such other address as such party may specify to the other in writing in
accordance with the provisions hereof.
12. NO RESTRICTIONS. You represent and acknowledge that you are not
subject to any contractual or judicial restraints, including, without
limitation, non-competition, no-hire or non-solicitation undertakings or
agreements.
13. MISCELLANEOUS.
a. WAIVER. Waiver by either party of a breach of any provision of this
Agreement by the other party shall not operate or be construed as a waiver of
any subsequent breach by such waiving party.
b. ASSIGNMENT. This Agreement shall not be assignable by either party
except that the Company may assign its rights and obligations hereunder to any
of its subsidiaries, provided that any such assignment results from a
restructuring of the Company or similar transaction so that your position,
duties and responsibilities are not diminished, and that any such assignment
shall not result in any change in the terms of this Agreement and Company shall
remain jointly and severally liable for its obligations hereunder.
c. ENTIRE AGREEMENT, PREEMPTION.
(i) This instrument contains the entire agreement and
understanding of the parties hereto. It may not be
changed except by an agreement in writing signed by
you and the Company.
(ii) In the event there is difference between the terms or
provisions of this Agreement and the terms or
provisions of any stock option plans or stock option
agreements relating to the stock options being
granted to you in accordance with Section 4 of this
Agreement, the terms and provisions of this Agreement
shall govern.
d. ENFORCEABILITY. If any term, condition or provision of this
Agreement shall be declared, to any extent, invalid or unenforceable, the
remainder of the Agreement, other than the term, condition or provision held
invalid or unenforceable, shall not be affected thereby and shall be considered
in full force and effect and shall be valid and be enforced to the fullest
extent permitted by law.
e. CAPTIONS. The captions set forth in this Agreement are used solely
for convenience or reference and shall not control or affect the meaning or
interpretation of any of the provisions.
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f. COUNTERPARTS. This Agreement may be signed in any number of
counterparts each of which shall be deemed an original.
g. SURVIVAL. The provisions of Section 6 and Section 8, which by their
terms extend beyond the Date of Termination or the Expiration Date, of this
Agreement, shall survive the termination of this Agreement and the termination
of your employment hereunder.
h. INDEMNIFICATION. You shall be indemnified by the Company as an
executive officer of the Company and as an executive, officer and director of
the Company's subsidiaries and affiliates to the same extent as the most senior
management of the Company. The Company maintains directors' and officers'
liability insurance pursuant to which upon your election as an officer of the
Company you shall become an insured.
If you are in agreement with the foregoing, please sign the enclosed
copy of this Agreement and return a copy to the undersigned.
PRIMEDIA Inc.
By:
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Title: Vice Chairman
AGREED TO AND ACCEPTED:
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By: John P. Loughlin
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Schedule I
PRIMEDIA Magazines Inc.
PRIMEDIA Enthusiast Group
McMullen Argus Publishing, Inc.
Gr8ride
Teen/Young Adult