Employment Agreement - PRIMEDIA Inc. and Larry Rutkowski
December 2, 1999
Mr. Larry Rutkowski
69 Heather Drive
New Canaan, CT 06840
Dear Larry:
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 the Executive Vice President and Chief
Financial Officer of the 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 an Executive Vice President and Chief
Financial Officer) and to serve as Executive Vice President or other office of
the any of the Company's subsidiaries to which you may be elected. You shall
report directly to the President of the Company and perform such other duties as
the Chief Executive Officer shall direct. You shall be based in the New York
Metropolitan area.
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.
2. TERM
The Term of this Agreement shall commence on the date of this Agreement
and your employment shall commence on the Effective Date (the "Effective Date")
and shall expire on December 31, 2003, unless earlier terminated in accordance
with Section 6. For the purposes of this Agreement, the "Expiration Date" shall
mean December 31, 2003.
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3. COMPENSATION
A. BASE SALARY. Commencing January 10, 2000 you shall be paid an annual base
salary equal to no less than $400,000 until the first anniversary of the
Effective Date, no less than $450,000 thereafter until the second anniversary,
no less than $500,000 thereafter until the third anniversary and $550,000
thereafter through the Expiration Date, less applicable withholdings, payable
bi-weekly in arrears, on the Company's regular pay dates.
B. ANNUAL INCENTIVE AWARD. Commencing with the 2000 calendar year, you shall
participate the same bonus and incentive plans in which corporate officers
generally participate including the annual Short Term Senior Executive
Performance Plan and the Short Term Senior Executive Discretionary Plan
(together, the "Bonus Plans") and any other incentive plans now existing or
hereafter established providing for additional revenue or profit growth
(including without limitation stock plans). Your aggregate target bonus in the
Bonus Plans shall equal no less than 30% of your annual base salary.
Notwithstanding anything contained in the Bonus Plans or elsewhere, for any year
as to which the Company makes the target financial goals, your bonus shall be no
less than 30% of your then earned base salary.
4. STOCK OPTIONS
a. COMPANY STOCK OPTIONS. As soon as practicable after the Effective
Date (the "Grant Date"), the Company shall grant you an option to purchase
200,000 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 in accordance with the terms of the 1992 Stock
Option Plan. Your options will vest at the rate of 25% 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.
b. INTERNET STOCK OPTIONS. The Company has formed three separate
internet ventures known as HPCi , ConsumerClick and IndustryClick (collectively,
the "Internet Ventures"). As soon as practicable after the Effective Date, you
shall be granted options to purchase 125,000 shares of Common Stock in each of
the Internet Ventures (for an aggregate of 375,000 options), which options shall
have the same provisions as to term, vesting, and other normal option terms as
those generally applicable to other corporate officers of the Company provided
that the per share option price shall in no event exceed the initial per share
exercise price for options for that Internet Venture, which in the case of
IndustryClick is $1.00 per share. In the event that the Company and you shall
determine in good faith that there will be no Value Event in any one or more of
the Internet Ventures during the option term, the Company shall in good faith
modify the terms of your options to provide to you an equivalent value in one or
more of the Internet Ventures or other multimedia initiatives of the Company
that has had, or is anticipated in the then near future to have, a Value Event.
For the purposes of this Section, Value Event shall mean an initial public
offering, sale of equity securities to an unaffiliated party (such as a venture
capitalist) or similar type of event.
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C. DEATH.
(i) In the event of your death during the Term, notwithstanding
anything contained in any option plan or agreement pursuant to
which you are granted stock options under subsection (a) or
(b) of this Section 4, all then unvested options shall vest
and your estate shall have one year from the date of your
death to exercise any or all of your stock options.
(d) 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
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immediately prior to the combination have Beneficial
Ownership, 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 affiliates of such other company
in exchange for stock of such other company).
(ii) In the event of a Change of Control of any company as
to which you have been granted stock options pursuant
to subsection (a) or (b) of this Section 4, 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) In the event of a Change of Control of the Company,
and if thereafter your duties or responsibilities are
diminished substantially, you shall have the right to
terminate this Agreement on thirty days prior notice
to the Company and you shall be paid the lesser of
(A) two years salary at the then rate plus two times
target bonus for the year of termination or (B) the
remaining amounts due under this Agreement for salary
and bonus.
(iv) In the event that any amount or benefit
(collectively, the "Covered Payments") paid or
distributed to you by the Company or any Internet
Venture incurs an excise tax under Section 4999 of
the Internal Revenue Code of 1986, as amended (the
"Code") or any similar tax that may hereafter be
imposed ("Excise Tax"), the Company shall pay to you
at the time specified below, the Tax Reimbursement
Payment. The Tax Reimbursement Payment is defined as
an amount which, after imposition of all income,
employment and excise taxes thereon, is equal to the
Excise Tax on the Covered Payments. The Tax
Reimbursement Payment attributable to a Covered
Payment shall be paid to you by the Company prior to
the date that the corresponding Excise Tax payment is
due to be paid by you (through withholding or
otherwise). You covenant that you will use the Tax
Reimbursement Payment under this subsection (iii) for
the sole purpose of paying the Excise Tax.
5. FRINGE BENEFITS AND EXPENSES
A. FRINGE BENEFITS. During the term of this Agreement, the Company will
provide you with benefits commensurate with those provided to other corporate
officers
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generally at the Company's corporate 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.
b. REIMBURSEMENT OF BUSINESS AND OTHER EXPENSES; PERQUISITES.
(i) You are authorized to incur reasonable expenses in
carrying out your duties and responsibilities under
this Agreement (including first class travel) 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.
(ii) During the term of this Agreement, you shall be
provided with a car that the Company already has for
you (a 1998 BMW 740i) or a reasonable substitute
therefor.
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"; and
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 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 of three doctors associated with major
hospitals in Manhattan practicing in the field to which the disability relates
and selected by the Company acting reasonably.
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; 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, provided however that in no event shall it constitute
"Cause" if you are exercising your rights under Section 4 (d) (iii) of this
Agreement
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f. As used herein, "Date of Termination" shall mean the date of your
death or effective date of your termination under Sections 6(b) or (c).
7. COMPENSATION UPON TERMINATION. In the event that this Agreement
shall terminate:
a. 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 termination year
target bonuses multiplied by a fraction, the numerator of which is the number of
days from the start of the calendar year during which the Date of Termination
occurs and the denominator of which is 365.
b. Pursuant to Section 6(c), you shall be entitled to receive your
accrued and unpaid annual base salary through the Date of Termination.
c. If this Agreement terminates at the Expiration Date, you shall be
entitled to receive your base salary through the Expiration Date and your earned
bonus under Section 3(b) for the 2003 calendar year but you shall not be
entitled to any severance payments whatsoever.
d. In the event of any termination, you shall be paid all other amounts
or benefits due under any fringe benefit or other plans or arrangement plans in
which you then participate in accordance with the terms thereof then in effect.
e. If by November 20, 2003 the Company has not offered to renew this
Agreement, on the same or better terms then in effect on December 31, 2003,
through December 31, 2004, and you choose to leave the Company's employ on at
least on the day after the Expiration Date you shall be paid an amount equal to
six months' salary at the rate then in effect.
8. AGREEMENT NOT TO COMPETE OR SOLICIT TO HIRE, CONFIDENTIALITY.
a. NON-COMPETE, NO HIRE. (i)Through (A) the Date of Termination
in the event of termination without cause or termination by
you following a Change of Control in accordance with the terms
of this Agreement and (B) the Expiration Date in the event of
termination hereunder by you voluntarily or under Sections 6
(b) or (c) above, you agree not to accept employment with or
provide services to any person, firm or corporation that
competes with the Company or any of its subsidiaries in any of
the Company's businesses during the term of your employment
with the Company, and (ii) through the first anniversary of
the Expiration Date, 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 Company or any of its subsidiaries during the
last six months of your employment with the Company provided
that it shall not be a violation hereof if your employer
solicits or hires such
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employee without your participation or knowledge and further
provided that if the Company terminates you for "Cause" and
you dispute such "Cause in good faith, you may work for a
competitor unless the Company's claim is sustained in court in
which event you shall cease such employment. 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.
b. 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 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, any subsidiary or
affiliate of the Company or as may be required by
law, provided that, if you receive legal process with
regard to disclosure of such information, you shall
promptly notify the Company and cooperate with the
Company 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 Company or any
subsidiary or affiliate of the Company which are in
your possession, except for (A) any documents for
which 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.
(c) 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
without the need to post a bond.
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.
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10. 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 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 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.
11. MISCELLANEOUS.
a. MITIGATION. No amounts payable hereunder, including without
limitation amounts payable under Sections 4(d)(iii) and 7, shall be subject to
mitigation.
b. 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.
c. 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 secondarily liable for its obligations hereunder.
d. ENTIRE AGREEMENT. This instrument contains the entire agreement and
understanding of the parties hereto except for such further provisions as may be
set forth in the By-laws or Certificate of Incorporation of the Company. It
may not be changed except by an agreement in writing signed by you and the
Company.
e. ENFORCEABILITY. If any term, condition or provision of this
Agreement shall be declared, to any extent, invalid or unenforceable, the
remainder if 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.
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f. 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.
g. COUNTERPARTS. This Agreement may be signed in any number of
counterparts each of which shall be deemed an original.
h. BOARD OF DIRECTORS MEETINGS. You shall be in attendance at all of
the Company's Board of Directors meetings at least during the financial review
portion thereof.
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:
AGREED TO AND ACCEPTED:
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By: Larry Rutkowski