Exhibit 10.20
Execution Copy
EMPLOYMENT AGREEMENT
AGREEMENT, made and entered into as of the Effective Date by and between
PRIMEDIA Inc., a Delaware corporation (together with its successors and assigns
permitted under this Agreement, the "Company"), and Xxxxxx X. Xxxxxx (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive and to enter into an
agreement embodying the terms of such employment (this "Agreement") and the
Executive desires to enter into this Agreement and to accept such employment,
subject to the terms and provisions of this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company and the Executive (individually a
"Party" and together the "Parties") agree as follows:
1. Definitions.
(a) "Affiliate" of a person or other entity shall mean a person or
other entity that directly or indirectly controls, is controlled by, or is under
common control with the person or other entity specified.
(b) "Base Salary" shall mean the salary provided for in Section 4
below or any increased salary granted to the Executive pursuant to Section 4.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Cause" shall mean:
(i) the Executive is convicted of a felony involving moral
turpitude or involving fraud against the Company; or
(ii) the Executive is guilty of willful gross neglect or
willful gross misconduct, in carrying out his duties under this Agreement,
including, without limitation, a non-appealable final determination by a court
that he has committed sexual harassment, resulting, in either case, in material
economic harm to the Company, unless the Executive reasonably believed in good
faith that such act or nonact was in the best interests of the Company.
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(e) "Change in Control" shall mean the occurrence of any one of the
following events:
(i) a transaction or series of related transactions whereby
KRR Associates and/or its Affiliates ("KKR") 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
representing 35% or more of 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 KKR, 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;
(ii) the Company adopts any plan of liquidation providing for
the distribution of all or substantially all of its assets;
(iii) all or substantially all of the assets or business of
the Company is disposed of pursuant to a merger, consolidation or other
transaction (unless the shareholders of the Company 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, all of the Voting Stock or other ownership interests of the
entity or entities, if any, that succeed to the business of the Company); or
(iv) 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 hold, directly or
indirectly, 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).
(f) "Constructive Termination Without Cause" shall mean termination
by the Executive of his employment at his initiative following the occurrence of
any of the following events without his consent:
(i) a reduction in the Executive's initial Base Salary or
target bonus opportunity or the termination or material reduction of any
employee benefit or perquisite enjoyed by him (other than as part of an
across-the-board reduction applicable to all executive officers of the Company);
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(ii) the failure to elect or reelect the Executive to any of
the positions described in Section 3 or the removal of him from any such
position;
(iii) a material diminution in the Executive's duties or the
assignment to the Executive of duties which are materially inconsistent with his
duties or which materially impair the Executive's ability to function as the
Chairman and Chief Executive Officer of the Company;
(iv) the relocation of the Company's principal office, or the
Executive's own office location, as assigned to him by the Company, other than a
relocation at the Executive's initiative, to a location more than 50 miles from
New York, New York; or
(v) the failure of the Company to obtain the assumption in
writing of its obligation to perform this Agreement by any successor to all or
substantially all of the assets of the Company within 30 calendar days after a
merger, consolidation, sale or similar transaction, or
(vi) the occurrence of a Change in Control.
Following written notice from the Executive of any of the events described
above, the Company shall have 30 calendar days in which to cure. If the Company
fails to cure, the Executive's termination shall become effective on the 31st
calendar day following the written notice.
(g) "Disability" shall mean the Executive's inability, due to
physical or mental incapacity, to substantially perform his duties and
responsibilities under this Agreement as determined by a medical doctor selected
by the Company and the Executive. If the Parties cannot agree on a medical
doctor, each Party shall select a medical doctor and the two doctors shall
select a third who shall be the approved medical doctor for this purpose.
(h) "Effective Date" shall be January 3, 2000; provided, however
that Executive may commence his employment with the Company earlier if his
obligation to provide services under his employment contract with his previous
employer ends earlier, in which event such earlier date of commencement of
employment with the Company shall be the Effective Date. The Executive warrants
he has no such contractual obligations with his previous employer as of January
3, 2000.
(i) "Execution Date" shall mean the date on which this Agreement is
executed by both Parties and placed in escrow.
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(j) "Fair Market Value" per share on any given date shall mean the
closing price of the shares of Stock on such date on the principal securities
exchange on which such shares may at the time be listed, or if shares are not so
listed, the average of the representative bid and asked prices quoted on the
Nasdaq or any similar successor organization. If at any time the shares are not
listed or quoted, the Fair Market Value per share shall be agreed between
Executive and the Company. If the Executive and the Company cannot agree, the
matter shall be submitted to arbitration in New York, NY and shall be settled in
accordance with the Expedited Procedures of the then-prevailing Commercial
Arbitration Rules (the "Rules") of the American Arbitration Association ("AAA"),
by a neutral arbitrator to be selected by mutual agreement between the Executive
and the Company. Anything herein to the contrary notwithstanding, in the event
that a different plan or agreement is currently in effect or is subsequently
adopted or entered into which provides a different definition of and/or
mechanism for ascertaining Fair Market Value, the definition in such different
plan or agreement will prevail as to the interpretation of that plan or
agreement.
(k) "Pro Rata" shall mean a fraction, the numerator of which is the
number of days that the Executive was employed in the applicable performance
period (a calendar year in the case of an annual bonus and a performance cycle
in the case of an award under the Long-Term Incentive Plan) and the denominator
of which shall be the number of days in the applicable performance period.
(l) "Stock" shall mean the Common Stock of the Company.
(m) "Term of Employment" shall mean the period specified in Section
2 below (including any extension as provided therein).
(n) "Voting Stock" shall mean capital stock of any class or classes
having general voting power under ordinary circumstances, in the absence of
contingencies, to elect the directors of a corporation.
2. Term of Employment.
The Term of Employment shall begin on the Effective Date, and shall
extend until the fourth anniversary of the Effective Date, with automatic
one-year renewals thereafter unless either Party notifies the other at least 6
months before the scheduled expiration date that the term is not to renew.
Notwithstanding the foregoing, the Term of Employment may be earlier terminated
by either Party in accordance with the provisions of Section 12.
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3. Position, Duties and Responsibilities.
(a) Commencing on the Effective Date and continuing for the
remainder of the Term of Employment, the Executive shall be employed as the
Chairman of the Board and Chief Executive Officer of the Company and be
responsible for the general management of the affairs of the Company. The
Executive shall also be elected by the Board as a member of the Board, effective
as of the Effective Date. The Executive, in carrying out his duties under this
Agreement, shall report to the Board. During the term of this Agreement, the
Executive shall devote substantially all of his business time and attention to
the business and affairs of the Company and shall use his best efforts, skills
and abilities to promote its interests.
(b) Nothing herein shall preclude the Executive from (i) serving on
the boards of directors of a reasonable number of other corporations with the
concurrence of the Board (which approval shall not be unreasonably withheld),
(ii) serving on the boards of a reasonable number of trade associations and/or
charitable organizations, (iii) engaging in charitable activities and community
affairs, and (iv) managing his personal investments and affairs, provided that
such activities set forth in this Section 3 (b) do not conflict or materially
interfere with the effective discharge of his duties and responsibilities under
Section 3 (a).
4. Base Salary.
The Executive shall be paid an annualized Base Salary, payable in
accordance with the regular payroll practices of the Company, of $1,200,000. The
Base Salary shall be reviewed annually for increase in the discretion of the
Board.
5. Annual Incentive Award.
During the Term of Employment, commencing in 2000 the Executive
shall have a target bonus opportunity each year equal to $800,000, payable in
that amount if the performance goals established for the relevant year are met.
If such performance goals are not met, the Executive shall receive a lesser
amount (or nothing) as determined in accordance with agreed upon measures and
benchmarks. In addition, the Executive may receive an additional bonus payment,
at the Board's discretion, in an amount of up to $1 million for extraordinary
performance. The performance measures and benchmarks shall be mutually agreed
upon and may include, without limitation, such areas as revenue and EBITDA
growth, debt management, market share and other strategic objectives. In
addition to the foregoing, the Executive shall be paid a one-time guaranteed
annual incentive award of $400,000 payable contemporaneously with the payment of
1999 annual incentive awards to other senior executives of the Company. The
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Executive shall be paid his annual incentive awards no later than other senior
executives of the Company are paid their annual incentive awards.
6. Stock Purchase.
Within 60 days of the Effective Date, the Executive agrees to
purchase a number of shares of the Company's Stock pursuant to the Company's
1992 Stock Option and Purchase Plan; such number of shares shall be determined
by dividing $2,000,000 by the Fair Market Value of a share of the stock on the
Execution Date.
7. Equity Awards.
(a) General. As soon as practicable following the Effective Date,
the Company shall grant the Executive the equity-based awards described in this
Section 7.
(b) Restricted Stock Award. In order to keep the Executive whole in
respect of compensation he is forfeiting at his previous employer, as of the
Effective Date the Company shall award the Executive shares of restricted stock
with terms substantially as summarized in Exhibit A attached hereto, such terms
to be embodied in an agreement as soon as practicable.
(c) Stock Option Award. As of the Effective Date, the Company shall
grant the Executive a ten-year stock option award to purchase 5 million shares
of Stock, with terms substantially as summarized in Exhibit B, attached hereto,
such terms to be embodied in an agreement as soon as practicable.
(d) Awards in Separate Internet Ventures. In the event that one or
more separate internet ventures ("Internet Ventures") are formed by the Company,
the Executive shall be granted 3% of the equity of each Internet Venture in the
form of options (the "Internet Options"). In addition, the Executive shall be
offered an opportunity to purchase an additional 2% of the equity of each such
Internet Venture (together with the Internet Options, the "Internet Equity").
The purchase price and the exercise price of the Internet Options shall be the
lower of the price then utilized by the Company either to (i) sell equity or
grant options to executives in the relevant Internet Venture or (ii) sell equity
or enter into a transaction with a third party, and if no such transaction has
taken place then the purchase price and the exercise price shall be as the
parties shall agree. The Executive and the Company shall agree on the specific
terms of the option grants or equity purchases at the time of such grants and
purchases. Such agreement shall include terms relating to vesting,
anti-dilution, tag-along, and registration rights (whether the Internet Ventures
are private or public). Such terms will address the basis for providing
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Executive liquidity in the event the relevant Internet Venture is not or does
not become, a publicly traded entity, including in cases of termination without
Cause, death and Disability (which, in such cases, shall be on a basis
comparable to that outlined in Section 12 and Exhibit B with respect to such
terminations). The terms of such options to, and purchases of, Internet Equity
as applied to the Executive may be more substantial than or different from the
terms of similar transactions in the relevant Internet Venture involving grants
or sales to other employees, as determined at such time. In each case, the
Company and the Executive shall consider, in determining the terms of the option
or purchase, the specific business being developed.
(e) Going Private Protection. The Executive's equity participation
shall continue in the event the Company is taken private by KKR. Prior to the
Company's being taken private, the Company and the Executive shall negotiate, in
good faith, definitive agreements governing the rights of the Executive
following such event, it being the intention of the Parties to provide the
Executive with a comparable equity opportunity to that contemplated at the time
such Stock and options were granted. The agreements will specify, among other
things, that the Executive will have the opportunity to sell his equity
interests on a basis comparable to the sales made by KKR, on behalf of itself
and its fund investors, and will have terms governing registration rights,
tag-along rights, anti-dilution rights and puts and calls between the Executive
and the Company. The agreement will also specify how the Executive will be able
to avail himself of full liquidity in the case of death, disability and
termination without cause, so as to continue to effectuate the intent of Section
12 and Exhibit B with respect to such terminations.
8. Additional Stock Option Awards.
The Executive may be eligible for stock option awards commencing
with awards in 2000 in accordance with Coin an practices applicable to its
senior-level executives at the sole discretion of the Board.
9. Employee Benefit Programs.
During the Term of Employment, the Executive shall be entitled to
participate in any employee pension and welfare benefit plans and programs made
available to the Company's senior level executives or to its employees
generally, as such plans or programs may be in effect from time to time,
including, without limitation, pension, profit sharing, savings and other
retirement plans or programs, 401(k), medical, dental, hospitalization,
short-term and long-term disability and life insurance plans, accidental death
and dismemberment protection, travel accident insurance, and any other pension
or retirement plans or programs
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and any other employee welfare benefit plans or programs that may be sponsored
by the Company from time to time, including any plans that supplement the
above-listed types of plans or programs, whether funded or unfunded. The
Executive's participation shall be based on, and the calculation of all benefits
shall be based on, the assumptions that the Executive has met all service-period
or other requirements for such participation provided that no such assumptions
shall be made as to a tax-qualified plan if such assumption would jeopardize the
tax-qualified status of such plan.
10. Supplemental Pension.
It is the intention of the Parties that the Company in the near
future shall give good faith consideration to the adoption of a pension or
deferred compensation arrangement in which the Executive would participate. Such
arrangement would take into account his 13 years of credited service at his
previous employer, in addition to his years of service with the Company, as well
as the level of benefits provided to him at his previous employer. Any decision
by the Company on whether to adopt such a pension or deferred compensation
arrangement shall be made by the Board in its sole discretion.
11. Reimbursement of Business and Other Expenses; Perquisites; Vacations.
(a) The Executive is authorized to incur reasonable expenses in
carrying out his duties and responsibilities under this Agreement and the
Company shall promptly reimburse him 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. The Company shall pay all
reasonable financial consultant and legal fees and expenses incurred by the
Executive in connection with the negotiation of the Executive's employment
arrangements with the Company.
(b) During the Term of Employment, the Executive shall be entitled
to a car and driver and to participate in the Company's other perquisites in
accordance with the terms and conditions of such arrangements as they are in
effect from time to time for the Company's chief executive officer, including
without limitation, tax preparation and financial counseling, first-class air
travel and limousine services.
(c) The Executive shall be entitled to five weeks paid vacation per
year of employment, which shall accrue and otherwise be subject to the Company's
vacation policy for senior executives.
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12. Termination of Employment.
(a) Termination Due to Death. In the event that the Executive's
employment is terminated due to his death, his estate or his beneficiaries, as
the case may be, shall be entitled to the following benefits:
(i) Base Salary through the end of the month in which death
occurs;
(ii) annual incentive award for the year in which the
Executive's death occurs, based on the original target award performance for
such year, payable in a single installment promptly after his death;
(iii) all outstanding options in the shares of the Company or
any Internet Venture, whether or not then exercisable, shall become exercisable
and shall remain exercisable until the end of their originally scheduled terms;
and
(iv) the restrictions on restricted stock shall lapse.
(b) Termination Due to Disability. In the event that the Executive's
employment is terminated due to his Disability, he shall be entitled to the
following benefits:
(i) disability benefits in accordance with the long-term
disability program then in effect for senior executives of the Company;
(ii) Base Salary through the end of the month in which
disability benefits commence;
(iii) annual incentive award for the year in which the
Executive's termination occurs, based on the original target award for such
year, payable in a single installment promptly after his termination;
(iv) all outstanding options, both in the shares of the
Company and any Internet Venture, whether or not then exercisable, shall become
exercisable and shall remain exercisable until the end of their originally
scheduled terms; and
(v) the restrictions on any restricted stock shall lapse.
In no event shall a termination of the Executive's employment for
Disability occur until the Party terminating his
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employment gives written notice to the other Party in accordance with Section 23
below.
(c) Termination by the Company for Cause.
(i) A termination for Cause shall not take effect unless the
provisions of this paragraph (i) are complied with. The Executive shall be given
written notice by the Board of the intention to terminate him for Cause, such
notice (A) to state in detail the particular act or acts or failure or failures
to act that constitute the grounds on which the proposed termination for Cause
is based and (B) to be given within six months of the Board learning of such act
or acts or failure or failures to act. The Executive shall have ten calendar
days after the date that such written notice has been given to the Executive in
which to cure such conduct, to the extent such cure is possible. If he fails to
cure such conduct or such cure is not possible, the Executive shall then be
entitled to a hearing before the Board. Such hearing shall be held within 15
calendar days of such notice to the Executive, provided he requests such hearing
within ten calendar days of the written notice from the Board of the intention
to terminate him for Cause. If, within five calendar days following such
hearing, the Executive is furnished written notice by the Board confirming that,
in its judgment, grounds for Cause on the basis of the original notice exist, he
shall thereupon be terminated for Cause.
(ii) In the event the Company terminates the Executive's
employment for Cause:
(A) he shall be entitled to Base Salary through the date
of the termination;
(B) all outstanding options both in shares of the
Company and any Internet Venture which are not then exercisable shall be
forfeited; exercisable options and warrants shall remain exercisable until the
earlier of the forty-fifth day after the date of termination or the originally
scheduled expiration date of the options unless the Compensation Committee
determines otherwise; and
(C) all restricted stock as to which restrictions have
not lapsed shall be forfeited.
(d) Termination without Cause or Constructive Termination without
Cause. In the event the Executive's employment is terminated by the Company
without Cause, other than due to Disability or death, or in the event there is a
Constructive Termination without Cause, the Executive shall be entitled to the
following benefits:
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(i) Base Salary through the date of termination;
(ii) Base Salary, at the annualized rate in effect on the date
of termination, for a period of 24 months following such termination, provided
that, at the Executive's option, the Company shall pay him the present value of
such salary continuation payments in a lump sum (using as the discount rate the
Applicable Federal Rate specified under Section 1274 of the Internal Revenue
Code of 1986, as amended (the "Code"), for short-term Treasury obligations as
published by the Internal Revenue Service for the month in which such
termination occurs);
(iii) a Pro Rata annual incentive award for the year in which
termination occurs, based on his original target award for such year, payable
when annual incentive awards are paid to other senior executives (or in a lump
sum in accordance with the proviso in Xxxxxxx 00 (x) (xx));
(iv) an annual incentive award for a period of 24 months
following the date of termination, based on his original target award for the
year in which termination occurs and payable in equal monthly installments over
the 24-month period of Base Salary continuation payments pursuant to Section 12
(d) (ii) (or in a lump sum in accordance with the proviso in Xxxxxxx 00 (x)
(xx));
(v) options granted pursuant to Section 7 (c) shall accelerate
and remain exercisable in accordance with Exhibit B; all options both in shares
of the Company and any Internet Venture, whether or not then exercisable, shall
become exercisable and shall remain exercisable until the end of their
originally scheduled terms;
(vi) the restrictions on restricted stock shall lapse; and
(vii) the Executive shall be entitled to continued
participation in all medical, dental, vision and hospitalization insurance
coverage and in other employee benefit plans or programs in which he was
participating on the date of his termination until the earlier of:
(A) 24 months following the date of termination and
(B) the date, or dates, he becomes eligible for coverage
and benefits under the plans and programs of a subsequent employer. The
Executive shall promptly advise the Company of any such subsequent employment
and the benefits he receives in connection therewith.
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In the event the Company's plans do not permit continuation of Executive's
participation following his termination, the Company shall provide the Executive
with an amount which, after taxes, is sufficient for him to purchase equivalent
benefits.
(e) Voluntary Termination. A termination of employment by the
Executive on his own initiative, other than a termination due to death or
Disability or a Constructive Termination without Cause or retirement
following the end of the Term of Employment, shall have the same consequences
as provided in Section 12 (c) (ii) for a termination for Cause. A voluntary
termination under this Section 12 (e) shall be effective 30 calendar days
after prior written notice is received by the Company, unless the Company
elects to make it effective earlier.
(f) Non-renewal by the Company. In the event that the Company
notifies the Executive pursuant to Section 2 of this Agreement that the Term of
Employment shall not renew, the Executive shall be entitled to the same benefits
as provided in Section 12 (d); provided, however that the period for which
entitlements are provided shall be 12 months instead of 24 months in all
subsections where such period applies.
(g) Consequences of a Change in Control.
(i) Upon Executive's termination of employment pursuant to
Section 12 (d), following a Change in Control, the Executive shall be entitled
to the benefits provided in Section 12 (d) above as well as to the benefits
provided in Section 12 (g) (ii)
(ii) Immediately following a Change in Control, whether or not
he remains employed, all amounts, rights and benefits to which the Executive is
entitled at the Company or at any Internet Venture but not yet vested, whether
under this Agreement or otherwise, shall become fully vested.
(iii) In the event that any amount or benefit (collectively,
the "Covered Payments") paid or distributed to the Executive by the Company or
any Affiliate 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 Executive 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 determination
of whether Covered Payments are subject to Excise Tax and, if so, the amount of
the Tax Reimbursement Payment to be paid to the Executive shall be made by an
independent auditor (the "Auditor") jointly selected by the Company and the
Executive and paid by the Company. The Auditor
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shall be a nationally recognized United States public accounting firm which has
not, during the two years preceding the date of its selection, acted in any way
on behalf of the Company. If the Executive and the Company cannot agree on the
firm to serve as the Auditor, then Executive and the Company shall each select
an accounting firm and those two firms shall jointly select the accounting firm
to serve as the Auditor. The portion of the Tax Reimbursement Payment
attributable to a Covered Payment shall be paid to the Executive by the Company
prior to the date that the corresponding Excise Tax payment is due to be paid by
the Executive (through withholding or otherwise). The Executive covenants that
he will use the Tax Reimbursement Payment under this subsection (iii) for the
sole purpose of paying the Excise Tax.
(h) Other Termination Benefits. In the case of any of the foregoing
terminations, the Executive or his estate shall also be entitled to:
(i) the balance of any incentive awards due for performance
periods which have been completed, but which have not yet been paid;
(ii) any expense reimbursements due the Executive; and
(iii) other benefits, if any, in accordance with applicable
plans and programs of the Company.
(i) No Mitigation; No Offset. In the event of any termination of
employment under this Section 12, the Executive shall be under no obligation to
seek other employment and there shall be no offset against amounts due the
Executive under this Agreement on account of any remuneration attributable to
any subsequent employment that he may obtain.
(j) Nature of Payments. Any amounts due under this Section 12 are in
the nature of severance payments considered to be reasonable by the Company and
are not in the nature of a penalty.
13. Confidentiality.
(a) The Executive agrees that he will not, at any time during the
Term of Employment or thereafter, disclose or use any trade secret, proprietary
or confidential information of the Company or any subsidiary or Affiliate of the
Company, obtained during the course of his 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 the Executive receives legal process with regard to
disclosure of
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such information, he shall promptly notify the Company and cooperate with the
Company in seeking a protective order.
(b) The Executive agrees that at the time of the termination of his
employment with the Company, whether at the instance of the Executive or the
Company, and regardless of the reasons therefor, he 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 his
possession, except for 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 the Executive's employment and his personal rolodex, personal
files, phone book and similar items.
(c) The Executive agrees that the Company's remedies at law would be
inadequate in the event of a breach or threatened breach of this Section 13;
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.
14. Resolution of Disputes.
Any disputes arising under or in connection with this Agreement
shall be resolved by third party mediation of the dispute and, failing that, by
binding arbitration, to be held in New York, in accordance with the rules and
procedures of the American Arbitration Association. Judgment upon the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof. Each Party shall bear his or its own costs of the mediation,
arbitration or litigation.
15. Indemnification.
(a) The Company agrees that if the Executive is made a party, or is
threatened to be made a party, to any action, suit or proceeding, whether civil,
criminal, administrative or investigative ("Proceeding"), by reason of the
fact that he is or was a director, officer or employee of the Company or is or
was serving at the request of the Company as a director, officer, member,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans,
whether or not the basis of such Proceeding is the Executive's alleged action in
an official capacity while serving as a director, officer, member, employee or
agent, the Executive shall be indemnified and held harmless by the Company to
the fullest extent legally permitted or authorized by the Company's certificate
of incorporation or bylaws or resolutions of the Company's Board of Directors
or, if greater, by the laws of the State of Delaware, against all cost, expense,
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liability and loss (including, without limitation, attorney's fees, judgments,
fines, ERISA excise taxes or other liabilities or penalties and amounts paid or
to be paid in settlement) reasonably incurred or suffered by the Executive in
connection therewith, and such indemnification shall continue as to the
Executive even if he has ceased to be a director, member, employee or agent of
the Company or other entity and shall inure to the benefit of the Executive's
heirs, executors and administrators. The Company shall advance to the Executive
all reasonable costs and expenses incurred by him in connection with a
Proceeding within 20 calendar days after receipt by the Company of a written
request for such advance. Such request shall include an undertaking by the
Executive to repay the amount of such advance if it shall ultimately be
determined that he is not entitled to be indemnified against such costs and
expenses.
(b) Neither the failure of the Company (including its board of
directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of any proceeding concerning payment of
amounts claimed by the Executive under Section 15 (a) above that indemnification
of the Executive is proper because he has met the applicable standard of
conduct, nor a determination by the Company (including its board of directors,
independent legal counsel or stockholders) that the Executive has not met such
applicable standard of conduct, shall create a presumption that the Executive
has not met the applicable standard of conduct.
(c) The Company agrees to indemnify the Executive against any
action which the Executive's previous employer may bring against the Executive
in connection with his resignation whether for damages, injunction or other
forms of equitable relief, including the costs in the form of reasonable
attorneys' fees and disbursements; provided, however, that nothing in this
Agreement shall be construed as requiring any breach of Executive's existing
contractual obligations, including, without limitation, the term of his services
and the preservation of confidentiality of his previous employer's proprietary
information.
(d) The Company agrees to continue and maintain a directors' and
officers' liability insurance policy covering the Executive to the extent the
Company provides such coverage for its other executive officers.
16. Assignability; Binding Nature.
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors, heirs (in the case of the Executive)
and assigns. Rights or obligations of the Company under this Agreement may be
assigned or transferred by the Company pursuant to a merger or consolidation in
which the
16
Company is not the continuing entity, or the sale or liquidation of all or
substantially all of the assets of the Company, provided that the assignee or
transferee is the successor to all or substantially all of the assets of the
Company and such assignee or transferee assumes the liabilities, obligations and
duties of the Company, as contained in this Agreement, either contractually or
as a matter of law. The Company further agrees that, in the event of a sale of
assets or liquidation as described in the preceding sentence, it shall take
whatever action it reasonably can in order to cause such assignee or transferee
to expressly assume the liabilities, obligations and duties of the Company
hereunder. No rights or obligations of the Executive under this Agreement may be
assigned or transferred by the Executive other than his rights to compensation
and benefits, which may be transferred only by will or operation of law.
17. Entire Agreement.
This Agreement contains the entire understanding and agreement
between the Parties concerning the subject matter hereof and supersedes all
prior agreements, understandings, discussions, negotiations and undertakings,
whether written or oral, between the Parties with respect thereto.
18. Amendment or Waiver.
No provision in this Agreement may be amended unless such amendment
is agreed to in writing and signed by the Executive and an authorized officer of
the Company. No waiver by either Party of any breach by the other Party of any
condition or provision contained in this Agreement to be performed by such other
Party shall be deemed a waiver of a similar or dissimilar condition or provision
at the same or any prior or subsequent time. Any waiver must be in writing and
signed by the Executive or an authorized officer of the Company, as the case may
be.
19. Severability.
In the event that any provision or portion of this Agreement shall
be determined to be invalid or unenforceable for any reason, in whole or in
part, the remaining provisions of this Agreement shall be unaffected thereby and
shall remain in full force and effect to the fullest extent permitted by law so
as to achieve the purposes of this Agreement.
20. Survivorship.
Except as otherwise expressly set forth in this Agreement, the
respective rights and obligations of the Parties hereunder shall survive any
termination of the Executive's employment. This Agreement itself (as
distinguished from the Executive's employment) may not be terminated by either
Party
17
without the written consent of the other Party. Upon the expiration of the term
of the Agreement, the respective rights and obligations of the Parties shall
survive such expiration to the extent necessary to carry out the intentions of
the Parties as embodied in the rights (such as vested rights) and obligations of
the Parties under this Agreement.
21. References.
In the event of the Executive's death or a judicial determination of
his incompetence, reference in this Agreement to the Executive shall be deemed,
where appropriate, to refer to his beneficiary, estate or other legal
representative.
22. Governing Law.
This Agreement shall be governed in accordance with the laws of New
York without reference to principles of conflict of laws.
23. Notices.
All notices and other communications required or permitted hereunder
shall be in writing and shall be deemed given when (a) delivered personally, (b)
delivered by certified or registered mail, postage prepaid, return receipt
requested or (c) delivered by overnight courier (provided that a written
acknowledgment of receipt is obtained by the overnight courier) to the Party
concerned at the address indicated below or to such changed address as such
Party may subsequently give such notice of:
If to the Company: PRIMEDIA Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
If to the Executive: Xxxxxx X. Xxxxxx
c/o PRIMEDIA Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
24. Headings.
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
25. Counterparts.
This Agreement may be executed in two or more counterparts.
18
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
PRIMEDIA Inc.
By: /s/ Xxxxx Xxxxxx
----------------------------------
Xxxxx Xxxxxx
/s/ Xxxxxx X. Xxxxxx
-------------------------------------
Xxxxxx X. Xxxxxx
A-l
EXHIBIT A
RESTRICTED STOCK
SUMMARY OF KEY TERMS
1. Number of Shares Number of shares determined by dividing
$17,000,000 by Fair Market Value of a share of
Stock as of the Execution Date
2. Grant Date Granted as soon as practicable following the
Effective Date
3. Vesting Vests in three equal installments on the first
three anniversaries of the Effective Date
4. Accelerated Vesting Vests immediately if stock price is double the
Fair Market Value on the Execution Date and
does not fall below that doubled value for a
period of 30 consecutive calendar days. For
this purpose the Fair Market Value on the
Execution Date shall be appropriately adjusted
for stock splits, stock dividends, etc.
5. Consequences of Vesting and exercisability in the event of the
Termination of following:
Employment
- Death
- Disability
- Termination for Cause
- Termination without Cause or Constructive
Termination
- Voluntary Termination
- Change in Control
shall be pursuant to Section 12 of the
Employment Agreement.
6. Going Private The consequences in the event the Company is
taken private shall be pursuant to Section
7(e) of the Employment Agreement.
X-x
EXHIBIT B
STOCK OPTION GRANT
SUMMARY OF KEY TERMS
1. Number of Shares 5 million
2. Grant Date Granted as soon as practicable following the
Effective Date
3. Term 10 years
4. Exercise Price Fair Market Value on Execution Date
5. Vesting Vests monthly over 4 years in 48 equal
tranches or 104,167 shares per month.
6. Additional Shares: In the event of a Termination without Cause or
a Constructive Termination Without Cause
Accelerated Vesting additional shares not yet vested shall vest
upon Termination (the "Additional Shares") so that Executive
without Cause or shall have no less than the following total
Constructive number of vested shares:
Termination
Without Cause
(including by
Change in Control)
Termination 1.75 million
prior to the
end of year 1
Termination 3 million
after the
completion
of year 1
In the event of a termination without Cause or
a Constructive Termination without Cause, all
shares that became vested pursuant to this
Section 6 or that have previously vested under
Section 5 shall continue to be exercisable for
the remainder of the option term.
7. Performance Shares: Of the 5 million shares, 2 million will be in
a "special acceleration pool" that can
Accelerated accelerate faster based on achievement of
Performance Vesting stock price targets (the "Performance Shares")
as Alternative This leaves 3 million shares under this
Calculation to calculation to vest on a time basis of 1/48
Accelerate Monthly per month. If the Stock doubles in value from
Vesting the exercise price and remains at that level
for 30 consecutive calendar days, all 2
million shares will become vested. The 2
million shares in this "pool" will vest on a
pro-rata basis if the stock price increases
to a level less than double the exercise
price. The potential vesting of the shares in
this "pool" is in lieu of the vesting of
41,667 shares on a monthly basis of the total
104,167 which vest monthly. All shares of
Stock vesting pursuant to this Section 7 shall
continue to be exercisable for the remainder
of the option term except in the case of a
termination for Cause or a voluntary
termination (see Section 9 below).
The operation of this paragraph will never
result in the number of options that vest
being less than the number which would have
vested based on the vesting schedule of
104,167 shares per month.
B-3
8. Illustration of To illustrate the above, assume on the second
Accelerated Vesting anniversary date the stock has gone up 100% in
value. 2.5 million shares will have vested on
the basis of monthly vesting. In this
instance, however, Executive would be entitled
to full acceleration of the 2 million shares
in the "special acceleration pool" for an
aggregate of 3.5 million shares as follows:
- 1.5 million shares based on monthly vesting
at the rate of 1/48 per month for 3 million
non-acceleration shares plus
- 2 million "special acceleration pool"
performance shares based on achievement of
100% of the target price increase (the target
being double the market price)
9. Consequences of Vesting and exercisability in the
Termination of event of the following:
Employment on
Vesting and - death or disability - full vesting and
Exercisability option remains exercisable for remainder of
(Other than option term
Termination without
Cause or - termination for Cause or voluntary
Constructive termination - unvested option shares forfeited
Termination) and already vested option remains exercisable
for 90 days
10. Going Private The consequences in the event the Company is
taken private shall be pursuant to Section
7 (e) of the Employment Agreement.
AMENDMENT I
AMENDMENT made and entered into as of the Effective Date by and between
PRIMEDIA Inc., a Delaware corporation (together with its successors and assigns
permitted under this Amendment, the "Company") and Xxxxxx X. Xxxxxx (the
"Executive")
WITNESSETH
WHEREAS, the Company and the Executive entered into an Employment
Agreement (the "Employment Agreement"); and
WHEREAS the Company and the Executive wish to amend the Employment
Agreement;
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein and other good and valuable consideration, the receipt of which
is mutually acknowledged, the Company and the Executive agree as follows:
1. The capitalized terms contained in this Amendment which are not
specifically defined herein shall have the meaning ascribed to them in the
Employment Agreement.
2. Section 12 (c) (ii) (C) shall be amended by deleting the period and by
adding the following "...; provided that (I) if such termination occurs
after October 26, 2000, at least one-third of all of the restricted stock
shall be vested and all unvested restricted stock forfeited and (II) if
such termination occurs after the conditions set forth in Section 4 of
Exhibit A(without giving effect to the addition to the first sentence
thereof added in accordance with Section 4 of this Amendment) have been
met, none of the restricted stock shall be forfeited.
3. Section 3 of Exhibit A is amended by deleting everything following "on"
and substituting in lieu thereof the following "...January 1, 2001,
October 26, 2001 and October 26, 2002."
4. Section 4 of Exhibit A is amended by deleting the period at the end of
the first sentence thereof and adding thereto the following "...; provided
however that such accelerated vesting shall occur no earlier than January
1, 2001."
5. Except as specifically set forth in this Amendment to the contrary, the
Employment Agreement shall be unmodified and remain in full force and
effect.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
date first written above.
PRIMEDIA Inc.
by /s/ Xxxxxxx X. Xxxxx
---------------------------
Vice Chairman
/s/ Xxxxxx X. Xxxxx
------------------------------
Xxxxxx X. Xxxxx
