1
EXHIBIT 10.1
INCENTIVE AND PERFORMANCE STOCK OPTION AGREEMENT
UNDER THE
1992 PRIMEDIA INC. STOCK PURCHASE AND OPTION PLAN
AS AMENDED (THE "PLAN")
This Incentive Stock Option Agreement (the "Option Agreement") has been
entered into as of July 1, 2002 (the "Effective Date") between PRIMEDIA Inc., a
Delaware corporation (unless the context otherwise requires), together with any
subsidiary (as such term is defined in the Plan), (the "Corporation"), and
Xxxxx X. Xxxx (the "Optionee") pursuant to certain provisions of the Plan.
1. DEFINITIONS. Throughout this Option Agreement, capitalized terms not
otherwise defined herein shall have the meanings indicated in the
Plan.
2. OPTION GRANT. Subject to the terms and conditions set forth herein,
the Corporation grants to the Optionee that number of options to
purchase from the Corporation at the respective purchase prices set
forth below per share, (as adjusted from time to time pursuant to the
terms of this Agreement and the Plan, (the "Purchase Price"), up to,
but not exceeding, in the aggregate, 100,000 shares of Common Stock
(the "Options"), as adjusted pursuant to the Plan. Thirty percent of
the Options will vest in accordance with the provisions of Section 4
(a) (the "Time Vest Options") and 70% of the Options will vest in
accordance with the provisions of Section 4 (b) (the "Performance Vest
Options").
TIME VEST OPTIONS
NUMBER OF OPTIONS PURCHASE PRICE
----------------- --------------
30% of Options $ 4
PERFORMANCE VEST OPTIONS
30% of Options $ 5
40% of Options $ 6
3. GRANT INTENDED AS INCENTIVE STOCK OPTION; OTHER OPTIONS. These Options
are intended to be treated for federal income tax purposes as
Incentive Stock Options under Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), to the maximum extent permissible
under the Code. If for any reason, all or any of these Options cannot
be treated as Incentive Stock Options under the Code, the part of
these Options that cannot be treated as Incentive Stock Options shall
be valid and outstanding non-qualified stock options. These Options
are in addition to any other options heretofore or hereafter granted
to the Optionee by the Corporation or any subsidiary but a duplicate
original of this instrument shall not cause the grant of another
option.
2
4. VESTING.
(a) TIME VEST OPTIONS. So long as the Optionee continues to be
employed by the Corporation through the applicable vesting date,
the Optionee's right to exercise these Options with respect to
the number of Time Vest Options described in Section 2 shall vest
on an equal prorata basis at the end of each of the 48 calendar
months starting with the month in which the Effective Date
occurs.
(b) PERFORMANCE VEST OPTIONS. So long as the Optionee continues to be
employed by the Corporation or a subsidiary through the
applicable vesting date, the Optionee's right to exercise these
Options with respect to 100% of the Performance Vest Options
shall vest on the eighth anniversary of the Effective Date;
HOWEVER, Optionee's right to exercise the Performance Vest
Options shall accelerate if the respective Target EBITDA (as
defined below) is met in the respective years, as set forth in
subsection (d) below.
(c) For purposes of this Section 4:
(i) "EBITDA" shall mean for any Fiscal Year an amount equal to
the Corporation's consolidated net income from continuing
businesses for such year PLUS the sum of interest expense,
provisions for income and franchise taxes, depreciation,
amortization of intangible assets, other (income) and
charges including non-cash compensation and non-recurring
charges, provision for severance, closures and
restructuring related costs, (gains) losses on the sales
of businesses and other, net, amortization of deferred
financing costs, provisions for impairment of investments,
impairments of goodwill and intangibles, expenses paid or
accrued for consulting services provided by Capstone
Consulting, and extraordinary charges MINUS the sum of
interest income and extraordinary gains, if any, for such
year. EBITDA shall be determined in a manner consistent
with the Corporation's prior practice as set forth in the
Corporation's financial statements forming part of its
Quarterly Report on Form 10-Q for the calendar quarter
ended March 31, 2002 (Footnote 15, Business Segment
Information) which will in any event be in accordance with
generally accepted accounting principles as in existence
on March 31, 2002.
(ii) "Fiscal Year" means any one of the Corporation's calendar
years 2002 through 2005, as applicable.
(iii) "Target EBITDA" shall mean, for any given Fiscal Year the
EBITDA set forth in Section 4.
(d) The Performance Vest Options shall accelerate in accordance with
the following table when the respective Target EBITDA is met in
any one of the Fiscal Years set forth in the column "Fiscal Year"
next to the Target EBITDA:
NUMBER OF PURCHASE FISCAL
TRANCHE OPTIONS PRICE TARGET EBITDA YEAR
--------- -------------- ------- ------------- ------------------
Tranche 1 30% of Options $ 5 $ 300 million 2003
Tranche 2 30% of Options $ 6 $ 340 million 2003 or 2004
Tranche 3 10% of Options $ 6 $ 380 million 2003, 2004 or 2005
3
(e) In the event that the Corporation fails to achieve, in respect of
any given Fiscal Year, Target EBITDA set for such year, there
shall be no acceleration of vesting of any Tranche as to which
the Target EBITDA is not met in that Fiscal Year.
(f) The Corporation shall use its best efforts to determine EBITDA
for each Fiscal Year by March 31 of the following Fiscal Year
and, following such determination, the Corporation shall promptly
notify Optionee of the results of such determination.
(g) In addition, the Compensation Committee may adjust any or all
Target EBITDA to fairly and appropriately reflect the effect of
any significant mergers, acquisitions, or dispositions approved
by the Board of Directors in any case that was not contemplated
in establishing the respective Target EBITDA; PROVIDED, HOWEVER,
that in the event the Compensation Committee takes any such
action, such adjustment shall be only the amount deemed
reasonably necessary by the Compensation Committee, in the
exercise of its good faith judgment, to accurately reflect the
direct and measurable effect such event has on such Target
EBITDA. The Compensation Committee's determination of such
necessary adjustment shall be made within 60 days following the
completion or closing of such event, and shall be based on the
Corporation's accounting as set forth in its books and records
and on the Corporation's financial plan pursuant to which the
Target EBITDA was originally established.
(h) The Options shall vest on the last day of the Fiscal Year as to
which the EBITDA Target is met.
5. CHANGE OF CONTROL. In the event of a "Change of Control" (as defined
in this paragraph), then 100% of such unvested portion of the Time
Vest Options shall become fully vested. A "Change of Control" for
purposes of this Option Agreement shall mean:
(a) A transaction or series of related transactions
whereby KKR Associates and/or its Affiliates ("KKR") (a) 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 Corporation representing
35% or more of the combined voting power of all securities of the
Corporation entitled to vote in the election of directors of the
Corporation 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.
(b) the Corporation 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 Corporation is disposed of pursuant to a merger,
consolidation or other transaction (unless the shareholders of
the Corporation 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 Corporation, all of the voting stock or other ownership
interests of the entity or entities, if any, that succeed to the
business of the Corporation); or the Corporation combines with
another Corporation and is the
4
surviving corporation but, immediately after the combination, the
shareholders of the Corporation immediately prior to the
combination hold, directly or indirectly, 50% or less of the
voting stock of the combined Corporation (there being excluded
from the number of shares held by such shareholders, but not from
the voting stock of the combined Corporation, any shares received
by affiliates of such other Corporation in exchange for stock of
such other Corporation).
6. EXPIRATION OF OPTIONS. The Options granted hereunder may not be
exercised to any extent after the first to occur of the following
events (the "Expiration Date"):
(a) The tenth anniversary of the Grant Date; or
(b) The first anniversary of the effective date of the Optionee's
termination of employment by reason of death, Retirement or
Permanent Total Disability or
(c) 90 days after termination of the Optionee's employment for any
reason other than for death, Permanent or Total Disability or
Retirement; or
(d) If the Committee so determines, the effective date of either the
merger or consolidation of Corporation into another corporation,
or the exchange or acquisition by another corporation of all or
substantially all of Corporation's assets or 80% or more of its
then outstanding voting stock, or the recapitalization,
reclassification, liquidation or dissolution of Corporation. At
least ten (10) days prior to the effective date of such event,
the Committee shall give the Optionee notice of such event if the
Options have not yet been fully exercised and the Expiration Date
has not yet occurred. Nothing in this provision shall negate the
acceleration of the Time Vest Options upon a change.
7. EXERCISE.
(a) During the Optionee's lifetime, only the Optionee may
exercise the Options or any exercisable portion thereof. After
the death of the Optionee and prior to the close of business on
the Expiration Date, the Options or any exercisable portion
thereof may be exercised by the Optionee's personal
representative, or by any person empowered to do so under the
Optionee's will or under the then applicable laws of descent and
distribution. The party entitled to exercise the Options shall be
referred to herein as the "Exercising Party".
(b) The Options or any exercisable portion thereof may be
exercised in whole or in part at any time prior to the close of
business on the Expiration Date; provided, however, that any
exercise shall be for whole shares only.
(c) The Options or any exercisable portion thereof may be
exercised solely by delivering to the Office of the Secretary of
Corporation all of the following prior to the closing of business
on the Expiration Date:
(i) Notice in writing, signed by the Exercising Party, stating
the number of Shares with respect to which the Options are
being exercised;
(ii) Full payment (in cash, by check, or Shares owned more than
six months which shall be valued at their fair market
value, or by a combination thereof) for the Shares with
5
respect to which such Options or portion thereof are
exercised, plus any withholdings applicable thereto; and
(iii) In the event that the Exercising Party is not the Optionee,
appropriate proof, in the sole judgement of Corporation,
of the right of such person to exercise the Options.
(d) No Options shall become exercisable as to any additional Shares
following the effective date of the termination of employment of
the Optionee for any reason other than the death, Permanent or
Total Disability or Retirement of Optionee; and
(e) In the event of a termination of employment because of death,
Permanent or Total Disability or Retirement, the Options shall
become exercisable as to all Shares as of the effective date of
such termination of employment
(f) Notwithstanding the other provisions of this Section 7, the
Committee may take such reasonable additional steps that it
reasonably deems appropriate, including the requirement of
additional documents, representations and actions of or by the
Exercising Party, to ensure the observance and performance of the
representations set forth in the notice of exercise, and
compliance with applicable federal or state securities laws or
regulations.
(g) In addition, Corporation shall not be required to issue or
deliver any certificate representing Shares prior to the
obtaining of approval or other clearance from any state or
federal governmental agency or securities exchange that the
Committee shall, in its absolute discretion, determine to be
necessary or advisable.
(h) The Shares deliverable upon the exercise of the Options, or any
portion thereof, may be either previously authorized but unissued
shares of Common Stock or issued Shares that have been reacquired
subsequently by Corporation. Such Shares shall be fully paid and
nonassessable.
(i) Each Exercising Party shall be obligated to notify Corporation in
writing when any Shares are sold, transferred or otherwise
disposed of.
(j) Neither the Optionee nor any Exercising Party shall be a
stockholder of the Corporation or have any of the rights or
privileges thereof in respect of any Shares unless and until
certificates representing such Shares shall have been issued by
Corporation to such Optionee or other Exercising Party.
(k) Notwithstanding the foregoing, the Options may be exercised by
the Exercising Party utilizing a "cashless exercise" or "brokered
exercise" transaction.
8. POWERS OF COMMITTEE. The Committee shall have the power to interpret
the Plan and this Agreement and to adopt such rules for the
administration, interpretation and application of the Plan as are
consistent therewith and to interpret or revoke any such rules. All
actions taken and all interpretations and determinations made by the
Committee shall be final and binding upon the Optionee or other
Exercising Party, Corporation and all other interested persons. No
member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the
Plan or this Agreement. In its absolute discretion, the Board of
Directors of Corporation may at any
6
time and from time to time exercise any and all rights and duties of
the Committee under the Plan and this Agreement.
9. OPTIONS NOT TRANSFERABLE. The Optionee's rights under this Agreement
may not be transferred or assigned, and neither the Options nor any
interest or right therein or part thereof shall be liable for the
debts, contracts or engagements of the Optionee or his or her legal
successors or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means,
whether such disposition be voluntary or involuntary or occur by
operation of law by judgement, levy, attachment, garnishment or any
other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect.
Notwithstanding the foregoing, this Section 9 shall not prevent
transfers by will or by the applicable laws of descent and
distribution. All of the terms and provisions of this Agreement shall
be binding on, and shall inure to the benefit of, the respective legal
successors and assigns of the parties.
10. NO OBLIGATION TO EXERCISE OPTIONS. The grant and acceptance of these
Options imposes no obligation on the Optionee to exercise.
11. ADJUSTMENTS. The Option Purchase Price and the number of shares of
Common Stock subject to these Options shall be subject to adjustment
from time to time in accordance with Section 7.1 of the Plan.
12. RIGHTS AS SHAREHOLDER. An Optionee shall have no rights as a
stockholder of the Corporation with respect to any shares underlying
the Options until the day of the payment of the Option Purchase Price
in accordance with the terms and provisions hereof.
13. PAYMENT OF WITHHOLDING TAXES. Upon the Optionee's exercise of his or
her Options in accordance with the provisions of this Option
Agreement, the Optionee shall pay to the Corporation at the time of
delivery of the notice and payment of the Purchase Price the amount of
any federal, state or local income tax withholding or other employment
related tax that may be due upon the exercise of the Options. The
determination of the amount of any such federal, state or local income
tax withholding or other employment tax due in such event shall be
made by the Corporation and shall be binding upon the Optionee.
14. RESERVATION AND REGISTRATION OF SHARES. The Corporation shall at all
times during the term of the Options reserve and keep available such
number of shares of Common Stock as will be sufficient to satisfy the
requirements of this Agreement. The Shares issuable upon the exercise
of the Options are registered under the Securities Act of 1933 (the
"Act") and the Corporation shall use its best efforts to maintain the
registration under the Act of the Shares issuable upon exercise of the
Options.
15. DEFERRAL OF ISSUANCE TO COMPLY WITH APPLICABLE LAWS. Anything in this
Option Agreement to the contrary notwithstanding, if, at any time
specified herein for the issuance of Common Stock resulting from the
exercise of these Options, any law, regulation or requirements of any
governmental authority having jurisdiction in the premises shall
require either the Corporation or the Optionee, in the judgment of the
Corporation, to take any action in connection with the shares then to
be issued, then the issue of such shares shall be deferred until such
action shall have been taken.
7
16. ADJUSTMENTS IN OPTIONS PURSUANT TO MERGER, CONSOLIDATION, ETC. In the
event that the outstanding shares of the stock subject to Options are,
from time to time, changed into or exchanged for a different number or
kind of shares of the Corporation or other securities of the
Corporation by reason of a merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of shares,
or otherwise, the Corporation shall make an adjustment in the number
and kind of shares and/or the amount of consideration as to which or
for which, as the case may be, such Options, or portions thereof then
unexercised, shall be exercisable, in such manner as the Corporation
determines is reasonably necessary to maintain as nearly as
practicable the rights, benefits and obligations that the parties
would have had absent such event. Any such adjustment made by the
Corporation shall be final and binding upon the Optionee, the
Corporation and all other interested persons.
17. MISCELLANEOUS.
(a) Any notice to be given under the terms of this Agreement to the
Corporation shall be addressed to Corporation as follows:
PRIMEDIA, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Secretary
Any notice to be given to the Optionee shall be sent to the
address given beneath his or her signature to this Agreement. By
a notice given pursuant to this Section 17, either party may
hereafter designate a different address for notices. Any notice
that is required to be given to the Optionee shall, if the
Optionee is then deceased, be given to the Optionee's personal
representative if such representative has previously informed
Corporation of his or her status and address by written notice
under this Section 17. All notices and other communications under
this Option Agreement shall be in writing and shall have been
deemed duly given when delivered personally, mailed by registered
mail, return receipt requested or sent by documented overnight
delivery service.
(b) Titles are provided herein for convenience of reference only
and are not to serve as a basis for interpretation or
construction of this Option Agreement.
(i) This Option Agreement, the Options and any Shares issued
hereunder shall be subject to all of the terms and
provisions of the Plan to the extent applicable. In the
event of any conflict between this Option Agreement and
the Plan, the terms of the Plan shall control.
(ii) Notwithstanding the provisions of any agreement relating
to Optionee's employment heretofore entered into, none of
the Performance Vest Options shall vest upon a Change of
Control.
(c) No provision of this Option Agreement may be amended or modified
except by an instrument or instruments in writing signed by the
parties hereto. Any party may waive compliance by another with
any of the provisions of this Option Agreement, provided that (a)
no waiver of any provision hereof shall be construed as a waiver
of any other provision or subsequent breach and (b) any such
waiver shall be in writing. The failure
8
of any party hereto to enforce at any time any provision hereof
shall not be construed to be a waiver of such provision, nor in
any way to affect the validity hereof of any part hereof or the
right of any party thereafter to enforce each and every such
provision.
(d) To the extent not governed by the laws of the United
States, including the Code, this Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the
State of
Delaware (without regard to conflicts of law principles
for such state).
(e) Corporation and the Optionee hereby irrevocably submit
to the jurisdiction of any New York or
Delaware state court, or
any Federal court in the Southern District of New York or in
Delaware in any action or proceeding arising out of or relating
to this Option Agreement, and the parties hereto irrevocably
agree that all claims in respect of such action or proceeding
shall be heard and determined only in such courts. Corporation
and the Optionee hereby consent to and grant to any such court
jurisdiction over the persons of such parties and over the
subject matter of any such dispute and agree that delivery or
mailing of any process or other papers in the manner provided in
Section 17 herein, or in such other manner as may be permitted by
law, shall be valid and sufficient service thereof.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto on the date first set forth above.
PRIMEDIA Inc.
By:
--------------------------
Xxxxxxx X. Xxxxx
Title: Vice Chairman
AGREED AND ACCEPTED BY:
-----------------------------
Optionee Signature
Optionee Name (Print):
--------------------------------------
Social Security Number:
-------------------------------------
Address:
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
