Employment Agreement - PRIMEDIA Inc. and Charles G. McCurdy
April 7, 2001
Mr. Charles G. McCurdy
President
PRIMEDIA Inc.
745 Fifth Avenue
New York, NY 10151
Dear Charles:
The purpose of this letter is to set forth the terms and conditions of
certain aspects of the employment arrangement between PRIMEDIA Inc. (the
"Company") and you (the "Executive").
1. The Executive's base annual salary shall remain at $700,000 and his
target bonus percentage under the Executive Incentive Compensation Plan
(discretionary and non-discretionary together) remain at 55% of base
annual salary. In addition, the Executive is eligible annually for a
discretionary cash bonus of up to $200,000 for superlative performance.
2. The Executive shall upon execution hereof receive a one-time cash
payment of $117,600 in consideration of the cancellation of the
Executive's Long Term Performance Plan.
3. The Executive will before April 30, 2001 be granted stock options to
purchase 1 million shares of Company Common stock with an option
exercise price of $17.4375 per share. Such stock options shall be
granted under the Company's Stock Purchase and Option Plan, as amended,
and shall contain all of the same terms and conditions as the prior
Company stock options granted to the Executive except that the
Executive shall have 90 days to exercise upon termination of
employment, and the options shall vest upon a "Change of Control". The
options shall vest 20% on the date of grant and 20% on each January 18
thereafter through January 18, 2005. All of such stock options which
are unvested upon the Executive's death shall thereupon immediately
vest, and the Executive's estate or beneficiary shall have one year
following his date of death to exercise.
(i) "Change of Control" shall mean the occurrence of one of the
following events:
(A) a transaction or series of related transactions where the
controlling party (a party owning more than 50% of the
Company's voting stock) on the date of this Agreement (the
"Controlling Party") sells or otherwise disposes of
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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 representing 35% or more of the
Voting Stock (stock having the combined voting power of all
securities of the Company entitled to vote in the election of
directors of the 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), other than
to an affiliate of the Controlling Party 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;
(B) the Company 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 is disposed of pursuant to a merger, consolidation or
other transaction or the Company combines with another
company pursuant to a merger, consolidation or sale of the
Company's securities and the Company is not the surviving
corporation (unless the shareholders of the Company
immediately prior to any 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, the voting stock or other ownership
interests of the entity or entities, ir any, that succeed to
the business of the Company); or
(D) the Company combines with another company and is the
surviving corporation but, immediately after the combination,
the shareholders of the Company immediately prior to the
combination have beneficial ownership of 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
received by such shareholders in their capacity of
shareholders of such other Company in exchange for stock of
such other company).
(ii) Notwithstanding anything contained in this Agreement to the
contrary, in the event the Executive shall, upon leaving the
Company's employ, become employed by any firm or corporation that
directly competes with the Company in a majority of its business
lines, the Company may give the Executive written notice
shortening the 90 day period to exercise his then unexercised
stock options. Such exercise period shall then expire on the first
to occur of the 45th day following receipt of the written notice
or the 90th day following the Executive's termination, whichever
shall occur first.
4. With respect to the Company stock options granted pursuant to the terms
of this letter agreement, the Executive shall have the right to pay the
option exercise price by delivering shares of Company common stock
which the Executive has held for six months or more that have a market
value (based on the closing price the trading day preceding the date of
exercise) equal to the aggregate exercise price of the stock options
being exercised. It is understood and
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agreed that other than the exercise price all payments required to be
made in connection with the exercise of a stock option shall be made in
cash.
5. The Executive has been or shall be granted stock options in each of the
Internet entities listed below (each an "Internet Entity") equal to the
respective percentage set forth below next to each such Internet Entity
of the Fully Diluted Equity of the Internet Entity. For the purposes
hereof, Fully Diluted Equity shall mean that number of shares
determined by multiplying 120% by the actual number of Common Shares
outstanding excluding all options. All such stock options shall, during
the Executive's employment, vest at the rate of 25% on the first
anniversary of the respective date of grant and 6.25% each subsequent
three month period with 90 days to exercise upon termination of
employment and one year to exercise in the event of the Executive's
death. All unvested stock options shall vest upon a Change of Control,
as defined above except that for the purposes of such definition the
Internet Entity shall be the "Company".
Internet Entity Equity %
Industry Click 1.75%
HPCi 1%
Gr8Ride 1.5%
Teen 1.5%
Baby 1.5%
Bride 1.5%
Enthusiast 1.5% (this may be in each of outdoor, equine, craft,
history, etc, in lieu thereof)
NYMetro .375%
SoapCity .30% (if the transaction with SONY is consummated)
6. With respect to HPCi, if there is a "Transforming Event" in the future
while the Executive is in the employ of the Company, then the Executive
shall be granted an additional 1% of the equity of HPCi.
7. For the purposes of this letter agreement, a "Transforming Event" shall
mean:
(a) an entity which is not an affiliate of the Company shall acquire
a 10% or more interest in HPCi or
(b) the equity in, or substantially of the assets of, HPCi shall be
used to acquire in equity interest in an existing Internet
enterprise or as the contribution to create an enterprise.
If the Transforming Event eventuates in the Company or one of
its subsidiaries owning less than 100% of the total equity of
HPCi (excluding management stock options) then the percentage
set forth in paragraph 6 above shall represent a percentage of
the equity that PRIMEDIA or its subsidiary owns in HPCi as then
constituted following the Transforming Event, and not a
percentage of the total outstanding equity of HPCi as then
constituted.
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8. The per share stock option exercise price for options in the Internet
Entities shall be $.50. The date of grant for the Internet Entities
shall be June 30, 1999 except for the additional 1% of HPCi, where in
the date of grant shall be the actual grant date.
(a) With respect to NY Metro, the date of grant is March 24, 2000
and for the venture between Soap Opera Digest and Sony's
Soapsonline, the closing date.
(b) For all other stock options in Internet Entities, the date stock
options are first granted to any persons.
9. In the event that the Company and the Executive shall determine in good
faith that there will be no initial public offering or sale of all of
the equity securities of an Internet Entity (a "Value Event") in which
the Executive holds stock options prior to the expiration date of the
stock options in that Internet Entity, but that either a parent company
or subsidiary of such Internet Entity has or will prior to such
expiration have a Value Event, the Executive shall have the right to
swap the stock options from the non-Value Event entity to the Value
Event entity in the same manner and on the same terms as other senior
executives of PRIMEDIA other than Tom Rogers in the non-Value Event
entity generally.
10. With respect to internet entities not listed in Section 5 above, the
Executive shall be considered for stock option grants therein on the
same basis as other corporate executives considering such factors as
level of involvement.
11. In the event that the form of an Internet Entity shall be an LLC, a
partnership, etc. in lieu of a corporation, options to acquire LLC
units, partnership interests, etc. for stock options having the same
economics and other effects shall be substituted.
12. The Executive agrees to the following limitations on the Executive's
sale of PRIMEDIA Common Stock, including shares acquired in the
exercise of PRIMEDIA stock options.
(a) The Executive will not:
(i) sell in any one day more than the greater of 10,000 shares
or 15% of the average daily volume over the 30 trading
days preceding the date of sale,
(ii) sell at a price less than $15 per share, and
(iii) sell on any day if for the five previous trading days
the closing price of the Common Stock was below the
closing price on the prior day.
(b) The Executive may:
(i) sell blocks above 10,000 shares to parties identified by
the PRIMEDIA Investor Relations Department, but such
blocks must sell at $15 per share or above.
(c)
(i) in the event the Executive cannot sell 400,000 shares by
June 30, 2001 because of the limitations or restrictions
set forth herein or imposed by law, the Executive shall
have the right to sell to the Company, by notice given no
later than July 15, 2001, that number of shares of
PRIMEDIA Common Stock received on the exercise of Company
Stock Options determined as follows: 400,000 minus all
shares sold (including both previously owned
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shares or shares received in the exercise of stock
options) during the period June 1, 2000 through June 30,
2001;
(ii) The purchase price per share will be the average closing
price for all trading days commencing June 1, 2000 and
ending June 30, 2001 but limited to $1,500,000 in the
aggregate.
(d) The restrictions set forth in this Section 12 shall lapse upon
the Executive's termination of employment or an event of default
causing an acceleration of any of the Company's debt.
(e) The restrictions set forth in this Section 12 shall not apply to
shares sold in a registered offering under the Securities Act of
1933 except for shares sold under the Registration Statement on
Form S-8 covering the Stock Purchase and Option Plan.
13. Nothing in this Agreement shall constitute an undertaking by the
Executive to stay in the Company's employ nor by the Company to
continue the Executive in its employ.
14. 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 New York. In the event
there shall be a dispute under this letter, the parties agree that such
dispute shall be determined in an arbitration proceeding conducted by
the American Arbitration Association and its applicable rules in New
York City. Each and every decision of the arbitrators shall be binding
on the parties hereto.
15. 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 air, first
class, registered or certified mail, (ii) one business day after being
deposited with an overnight courier with all charges prepaid, or (iii)
when delivered, if hand-delivered by messenger, 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
If to the Executive: 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.
16. Waiver by either party of a breach of any provision of this letter
agreement by the other party shall not operate or be construed as a
waiver of any subsequent breach by such waiving party.
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17. This instrument contains the entire agreement and understanding of the
parties hereto except for the agreements relating to stock options.
Notwithstanding anything contained in any agreement to the contrary, in
the event the provisions of this agreement shall conflict with the
provisions of any other agreement to which the Company and Executive
are parties, the provisions of this agreement shall govern. This
agreement may not be changed except by an agreement in writing signed
by the Executive and the Company.
18. Simultaneously herewith and as a part hereof, Executive and the Company
are executing the Stock Option Amendments in the form attached hereto.
19. Provided that the transaction does not result in an earnings charge to
the Company's earnings, the Executive may, six months prior to the
exercise of any exercisable PRIMEDIA Stock Options, elect to exchange
the stock options for deferred restricted stock units. Upon exercise of
the stock options in accordance with stock option agreements as
modified by this letter, the receipt of the shares of Common Stock
issuable upon the exercise of the stock options shall be deferred in
accordance with the Executive's deferral election and a Rabbi Trust
shall be established for the benefit of the Executive to hold that
number of shares equal to the number of exercised stock options.
Please indicate your agreement with the foregoing terms by executing this letter
agreement in the space indicated below.
Very truly yours,
PRIMEDIA Inc.
By: /s/ Beverly C. Chell
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Title: Vice Chairman
AGREED TO AND ACCEPTED:
/s/ Charles G. McCurdy
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By: Charles G. McCurdy