EXHIBIT 99.5
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated October 29, 2000 by and
between PRIMEDIA Inc. (the "Parent"), Xxxxx.xxx, Inc. (the "Company") and
Xxxxxxx Xxx (the "Executive").
Parent and the Company desire to employ Executive and to enter into an
agreement embodying the terms of such employment;
Executive desires to accept such employment and enter into such an
agreement;
In consideration of the premises and mutual covenants herein and for
other good and valuable consideration, the parties agree as follows:
1. TERM OF EMPLOYMENT. Subject to the provisions of Section 8 of this
Agreement, Executive shall be employed by the Company for a period commencing on
the Effective Time (as defined in the Merger Agreement among Parent, the Company
and Abracadabra Acquisition Corporation) (the "Commencement Date") and ending on
the fourth anniversary of the Commencement Date (the "Employment Term") on the
terms and subject to the conditions set forth in this Agreement.
2. POSITION. During the Employment Term, Executive shall serve at the
Company as Chief Operating Officer reporting to the Chief Executive Officer of
the Company ("CEO"). In such position, Executive shall have such operating
responsibilities as the CEO shall determine, and such duties and authority
consistent with his duties with the Company prior to the Commencement Date with
the understanding that the Company is no longer a standalone public company.
3. BASE SALARY. During the Employment Term, the Company shall pay
Executive a base salary (the "Base Salary") at the minimum annual rate of
$350,000, payable in regular installments in accordance with the Company's usual
payment practices. Executive shall be entitled to such increases in Executive's
Base Salary, if any, as may be determined from time to time in the sole
discretion of the CEO. Such Base Salary review shall occur at least on an annual
basis.
4. ANNUAL BONUS. With respect to each calendar year during the
Employment Term, Executive shall be eligible to earn an annual bonus award (an
"Annual Bonus") in such amount, as determined in the sole discretion of the CEO
based upon the achievement of performance goals established by the CEO within
the first three months of each calendar year during the Employment Term,
provided that the minimum bonus for any calendar year during the Term shall be
$650,000 (the "Minimum Bonus"). Any bonus shall be prorated for any partial
calendar year based on the number of days in such calendar year in which
Executive performed services divided by 365. Such Annual Bonus shall be paid no
later than March 31 of the year following the end of the measuring calendar
year.
2
5. EQUITY ARRANGEMENTS.
OPTIONS. a. As of the Commencement Date, Executive
shall be granted a nonqualified stock options (the "Options"), pursuant
to the new Stock Option Plan (which shall be substantially the same as
the 1992 PRIMEDIA Stock Option and Purchase Plan, as amended, except
for the ability to grant stock options with an exercise price of less
than 50% of fair market value), to purchase 877,000 shares of the
Parent's common stock ("Shares") at an exercise price equal to thirty
percent (30%) of the fair market value per Share on the Commencement
Date. The Options shall vest, subject to Executive's continued
employment with the Company or a subsidiary, with respect to
twenty-five percent (25%) of the Shares covered by the Options on the
first anniversary of the Commencement Date and with respect to an
additional twenty-five percent (25%) of the Shares covered by the
Options on each anniversary thereafter, so that the Options would
become fully vested on the fourth anniversary of the Commencement Date
b. RESTRICTED SHARE UNITS. As of the Commencement Date,
Executive shall be granted 744,350 phantom stock units (the "Units"), each Unit
shall represent the value of one Share, pursuant to the Plan. Subject to
Executive's continued employment with the Company or an affiliate, the Units
shall vest, and become payable in Shares, with respect to twenty-five percent
(25%) of the Units on the first anniversary of the Commencement Date and with
respect to an additional twenty-five percent (25%) of the Units on each
anniversary thereafter, so that the Units would become fully vested and issued
on the fourth anniversary of the Commencement Date. No later than six months
prior to the date that Units vest, the Executive and Parent may at Executive's
sole election enter into an agreement to defer receipt of the Shares to which
the Units relate.
6. EMPLOYEE BENEFITS. During the Employment Term, Executive shall be
entitled to participate in the Company's employee benefit plans (other than
bonus, incentive or severance plans) as in effect from time to time
(collectively "Employee Benefits"), on the same basis as those benefits are
generally made available to other senior executives of the Company, including
the 401(k) plan and the restoration plan.
7. BUSINESS EXPENSES. During the Employment Term, reasonable business
expenses incurred by Executive in the performance of Executive's duties
hereunder shall be reimbursed by the Company in accordance with Company
policies, provided that the Executive shall be entitled to first class travel
and first class hotel accommodations.
8. TERMINATION. The Employment Term and Executive's employment
hereunder may be terminated by either party in accordance with this Section 8.
a. BY THE COMPANY FOR CAUSE OR BY EXECUTIVE RESIGNATION WITHOUT
GOOD REASON.
(i) The Employment Term and Executive's employment hereunder
may be terminated by the Company for Cause (as defined below) and shall
terminate automatically upon the effective date of Executive's resignation
without Good Reason (as defined in Section 8b) or
3
Diminution (as defined in Section 8c); provided that Executive will be required
to give the Company at least 30 days advance written notice.
(ii) For purposes of this Agreement, "Cause" shall mean
(A) Executive's continued failure substantially to perform Executive's duties
hereunder (other than as a result of total or partial incapacity due to physical
or mental illness) for a period of 10 days following written notice by the
Company to Executive specifying in detail the basis of the allegation of such
failure and stating in such written notice that such continued failure shall be
deemed to be "Cause", (B) dishonesty materially adversely affecting the Company
or any of its affiliates, (C) conviction of, or a plea of nolo contendre to, a
felony under the laws of the United States or any state thereof, (D) Executive's
willful malfeasance or willful misconduct in connection with Executive's duties
hereunder or any willful act or omission taken in bad faith which is materially
injurious to the financial condition or business reputation of the Company or
any of its subsidiaries or affiliates or (E) Executive's breach of the
provisions of Sections 10 or 11 of this Agreement.
(iii) If Executive's employment is terminated by the Company for
Cause, or if Executive resigns without Good Reason:
(A) the Base Salary through the date of termination;
(B) any Annual Bonus earned but unpaid as of the date
of termination for any previously completed calendar year;
(C) reimbursement for any unreimbursed business expenses
properly incurred by Executive in accordance with Company policy prior to the
date of Executive's termination; and
(D) such Employee Benefits, if any, as to which Executive
may be entitled under the employee benefit plans of the Company (the amounts
described in clauses (A) through (D) hereof being referred to as the "Accrued
Rights").
Following such termination of Executive's employment by the Company for
Cause or resignation by Executive without Good Reason, except as set forth in
this Section 8(a)(iii), Executive shall have no further rights to any
compensation or any other benefits under this Agreement.
b. BY THE COMPANY WITHOUT CAUSE OR RESIGNATION BY EXECUTIVE FOR GOOD
REASON OR FOR DEATH OR DISABILITY.
(i) The Employment Term and Executive's employment hereunder
shall terminate upon Executive's death and may be terminated by the Company if
Executive becomes physically or mentally incapacitated and is therefore unable
for a period of six (6) consecutive months or for an aggregate of nine (9)
months in any eighteen (18) consecutive month period to perform Executive's
duties (such incapacity is hereinafter referred to as "Disability"). Any
question as to the existence of the Disability of Executive as to which
Executive and the
4
Company cannot agree shall be determined in writing by a qualified independent
physician mutually acceptable to Executive and the Company. If Executive and the
Company cannot agree as to a qualified independent physician, each shall appoint
such a physician and those two physicians shall select a third who shall make
such determination in writing. The determination of Disability made in writing
to the Company and Executive shall be final and conclusive for all purposes of
the Agreement.
(ii) The Employment Term and Executive's employment
hereunder may be terminated by the Company without Cause or by Executive's
resignation for Good Reason; provided that Executive will be required to give
the Company at least 30 days advance written notice.
(iii) For purposes of this Agreement, "Good Reason" shall mean
(A) a reduction in Executive's Base Salary or Minimum Bonus, (B) any material
reduction in Executive's duties, authority and responsibilities from those
described in Section 2 hereof, (C) any reduction in Executive's duties,
authority and responsibilities following Xxxxx Xxxxxx ceasing to be CEO of the
Company or (D) a transfer of Executive's primary workplace by more than thirty
(30) miles from Manhattan, New York; provided that the events described in
clauses (A),(B), (C) or (D) of this Section 8(c)(iii) shall constitute Good
Reason only if the Company fails to cure such event within 15 days after receipt
from Executive of written notice of the event which constitutes Good Reason;
provided, further, that "Good Reason" shall cease to exist for an event on the
60th day following the later of its occurrence or Executive's knowledge thereof,
unless Executive has given the Company written notice thereof prior to such
date. Executive acknowledges that the reduction of position constituting a right
to resign for Good Reason under clause (B) above must be more significant, than
the diminution of position constituting a right to resign for Diminution, as
described below.
(iv) If Executive's employment is terminated by the Company
without Cause, by reason of death or disability or if Executive resigns for Good
Reason, Executive shall be entitled to receive: (A) the Accrued Rights;
(B) continued payment of the Base Salary and the Minimum
Bonus for the remainder of the Employment Term determined as if such termination
had not occurred; provided that the aggregate amount described in this clause
(B) shall be reduced by the present value of any other cash severance or
termination benefits payable to Executive under any other plans, programs or
arrangements of the Company or its affiliates and no reduction shall be made by
reason of any amount payable under this Agreement or earned by Executive outside
of the Company and its affiliates; and
(C) ALL OPTIONS AND UNITS NOT YET VESTED SHALL BE FULLY
VESTED.
Following Executive's termination of employment by the
Company without Cause, by reason of Executive's death or Disability or by
Executive's resignation for Good Reason, except as set forth in this Section
8(b)(iii), neither Executive nor his estate, in the
5
case of his death, shall have any further rights to any compensation or any
other benefits under this Agreement.
(c) BY THE EXECUTIVE FOR DIMINUTION OF POSITION
(i) The Employment Term and Executive's
employment hereunder may be terminated by the Executive by notice in writing to
the Company if at any time during the Employment Term the Executive shall, in
good faith, determine that the position of the Executive as described in this
Agreement has been diminished ("Diminution")
(ii) If the Executive resigns for Diminution,
Executive shall be entitled to:
(A) the Accrued Rights, and
(B) An amount equal to one-half of Base
Salary and Minimum Bonus for the
remaining Employment Term determined as
if such termination had not occurred;
and
(C) One-half of all Options and one-half of
all Units not yet vested shall be
fully vested,
(iii) The parties agree that the Executive's
determination to resign for Diminution shall be binding on the Company unless
the Executive acted in bad faith in making such determination.
(iv) Following a resignation for Diminution,
except as set forth under this Section 8 (c), Executive shall have no rights to
any compensation or other benefits under this Agreement.
d. CONTINUED EMPLOYMENT BEYOND THE EXPIRATION OF THE EMPLOYMENT TERM.
Unless the parties otherwise agree in writing, continuation of Executive's
employment with the Company beyond the expiration of the Employment Term shall
be deemed an employment at-will and shall not be deemed to extend any of the
provisions of this Agreement and Executive's employment may thereafter be
terminated at will by either Executive or the Company; provided that the
provisions of Sections 10, 11 and 12 of this Agreement shall survive any
termination of this Agreement or Executive's termination of employment
hereunder.
e. NOTICE OF TERMINATION. Any purported termination of employment by
the Company or by Executive (other than due to Executive's death) shall be
communicated by written Notice of Termination to the other party hereto in
accordance with Section 13(h) hereof. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of employment under the provision so indicated.
6
f. BOARD RESIGNATION. Upon termination of Executive's employment for
any reason, Executive agrees to resign, as of the date of such termination and
to the extent applicable, from (i) the Board of Directors of the Parent and the
Board of Directors of any of the Parent's affiliates and (ii) any other office
or position with the Parent or any of its affiliates.
9. CHANGE IN CONTROL
a. "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 13 d-3 of the Securities
Exchange Act of 1934, as amended (the "1934 Act")) of securities of Parent
representing 35% or more of the combined voting power of all securities of the
Parent entitled to vote in the election of directors of Parent 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) Parent 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 Parent
are disposed of pursuant to a merger, consolidation or other transaction (unless
the shareholders of Parent immediately prior to such merger, consolidation or
other transaction beneficially own, directly or indirectly, in substantially the
same proportion as they owned the voting securities of the Parent, all of the
voting securities or other ownership interests of the entity or entities, if
any, that succeed to the business of Parent; or
(iv) Parent combines with another company and is the surviving
corporation but, immediately after the combination, the shareholders of Parent
immediately prior to the combination hold, directly or indirectly, 50% or less
of the voting securities of the combined company (there being excluded from the
number of shares held by such shareholders, but not from the voting securities
of the combined company, any shares received by affiliates of such other company
in exchange for stock of such other company).
b. TERMINATION BY THE EXECUTIVE FOLLOWING CHANGE OF CONTROL.
The Employment Term and Executive's employment hereunder may be
terminated by the Executive by resignation following a Change in Control
provided that the Executive will be required to give Parent at least 30 days'
advance written notice.
c. CONSEQUENCES OF A CHANGE IN CONTROL
(i) upon Executive's termination of employment pursuant to
Section 9(b), following a Change in Control, Executive shall be entitled to:
7
(A) the Accrued Rights;
(B) continued payment of the Base Salary and
Minimum Bonus for the remainder of the
Employment Term determined as if such
termination had not occurred;
(C) all Options and Units not vested shall
become fully vested. Following
Executive's termination of employment
following a Change in Control, except as
set forth in this Section 9 (c),
Executive shall have no further rights
to any compensation or any benefits
under this Agreement.
10. NON-COMPETITION.
a. "Competing Business" shall mean a business whose primary business
is content websites.
b. (i) "Employment Period" shall mean
(A) the early termination date of the Employment Term
in the case of termination under Sections 8 (b),
or 8 (c), or 9 (b), or
(B) if the Employment Term is terminated early under
Section 8 (a),the later of
(1) the date the Employment Term would have ended
but for the early termination or
(2) the second anniversary of the date of early
termination.
(ii) "Restricted Period" shall mean the
period which starts on the last day of the Employment
Period and ends on the last day of the sixth full
calendar month thereafter; and
(iii) "Extended Restricted Period" shall
mean the period commencing on the day following the
last day of the Restricted Period and ending at the
end of fourteen (14) calendar months thereafter
provided that Parent has given Executive notice in
writing no later than thirty (30) days following the
end of the Employment Period that Parent elects to
have the Extended Restricted Period take effect and
pays to the Executive during the Extended Restricted
Period the Base Salary in effect immediately prior to
the end of the Employment Term and the Minimum Bonus.
c. Executive acknowledges and recognizes the highly competitive nature
of the businesses of the Company and its affiliates and accordingly agrees as
follows:
(i) During the Employment Period, the
Restricted Period and, at the election of Parent, the
Extended Restricted Period, if any (provided
8
that in the event of termination under Section 8 (a)
there shall be no Restricted Period or Extended
Restricted Period) Executive will not directly or
indirectly:
(A) engage in any business that
is a Competing Business;
(B) enter the employ of, or render
any services to, any person or
entity (or any division of any
person or entity) which is a
Competing Business;
(C) acquire a financial interest
in, or otherwise become
actively involved with or in ,
any Competing Business,
directly or indirectly, as an
individual, partner,
shareholder, officer, director,
principal, agent, trustee or
consultant; or
(D) interfere with, or attempt to
interfere with, business
relationships (whether formed
before, on or after the date of
this Agreement) between the
Company or any of its
affiliates and its material
customers, clients or
suppliers.
(ii) Notwithstanding anything to the contrary in this Agreement,
Executive may, directly or indirectly own, solely as an investment, securities
of any person engaged in a Competing Business which are publicly traded on a
national or regional stock exchange or on the over-the-counter market if
Executive (i) is not a controlling person of, or a member of a group which
controls, such person and (ii) does not, directly or indirectly, own 5% or more
of any class of securities of such person.
(iii) During the Employment Period, Restricted Period and the Extended
Restricted Period, if any, (provided that in the event of termination under
Section 8 (a) there shall be no Restricted Period or Extended Restricted
Period), Executive will not, whether on Executive's own behalf or on behalf of
or in conjunction with any person, company, business entity or other
organization whatsoever, directly or indirectly:
(A) solicit any executive of the Company or any
business that reported to Executive during the Employment Term (a "Reporting
Business"), or
(B) hire any such executive who was employed by The
Company or any Reporting Business as of the date of Executive's termination of
employment with the Company or who left the employment of the Company or any
Reporting Business coincident with, or within one year prior to or after, the
termination of Executive's employment with the Company or any Reporting
Business.
9
(iv) No provision of this Section 10 shall prohibit Executive from
continuing to serve on the board of directors of other business entities upon
which Executive served during the Employment Term.
d. It is expressly understood and agreed that although
Executive and the Company consider the restrictions contained in this Section 10
to be reasonable, if a final judicial determination is made by a court of
competent jurisdiction that the time or territory or any other restriction
contained in this Agreement is an unenforceable restriction against Executive,
the provisions of this Agreement shall not be rendered void but shall be deemed
amended to apply as to such maximum time and territory and to such maximum
extent as such court may judicially determine or indicate to be enforceable.
Alternatively, if any court of competent jurisdiction finds that any restriction
contained in this Agreement is unenforceable, and such restriction cannot be
amended so as to make it enforceable, such finding shall not affect the
enforceability of any of the other restrictions contained herein.
11. CONFIDENTIALITY. Executive will not at any time (whether during or
after Executive's employment with the Company) disclose or use for Executive's
own benefit or purposes or the benefit or purposes of any other person, firm,
partnership, joint venture, association, corporation or other business
organization, entity or enterprise other than the Company and any of its
subsidiaries or affiliates, any trade secrets, information, data, or other
confidential information relating to customers, development programs, costs,
marketing, trading, investment, sales activities, promotion, credit and
financial data, manufacturing processes, financing methods, plans, or the
business and affairs of the Company generally, or of any subsidiary or affiliate
of the Company; provided that the foregoing shall not apply to information which
is not unique to the Company or which is known to the industry or the public
other than as a result of Executive's breach of this covenant. Except as
required by law, Executive will not disclose to anyone, other than his immediate
family and legal or financial advisors, the existence or contents of this
Agreement. Executive agrees that upon termination of Executive's employment with
the Company for any reason, he will return to the Company immediately all
memoranda, books, papers, plans, information, letters and other data, and all
copies thereof or therefrom, in any way relating to the business of the Company
and its affiliates, except that he may retain personal notes, notebooks and
diaries that do not contain confidential information of the type described in
the preceding sentence. Executive further agrees that he will not retain or use
for Executive's account at any time any trade names, trademark or other
proprietary business designation used or owned in connection with the business
of the Company or its affiliates.
12. SPECIFIC PERFORMANCE. Executive acknowledges and agrees that the
Company's remedies at law for a breach of any of the provisions of Section 10 or
Section 11 would be inadequate and, in recognition of this fact, Executive
agrees that, in the event of such a breach, in addition to any remedies at law,
the Company, without posting any bond, obtain equitable relief in the form of
specific performance, temporary restraining order, temporary or permanent
injunction or any other equitable remedy which may then be available.
13. MISCELLANEOUS.
10
a. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to conflicts
of laws principles thereof.
b. ENTIRE AGREEMENT/AMENDMENTS. This Agreement contains the entire
understanding of the parties with respect to the employment of Executive by the
Company. There are no restrictions, agreements, promises, warranties, covenants
or undertakings between the parties with respect to the subject matter herein
other than those expressly set forth herein. This Agreement may not be altered,
modified, or amended except by written instrument signed by the parties hereto.
c. NO WAIVER. The failure of a party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver of
such party's rights or deprive such party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
d. SEVERABILITY. In the event that any one or more of the provisions of
this Agreement shall be or become invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
of this Agreement shall not be affected thereby.
e. ASSIGNMENT. This Agreement shall not be assignable by Executive.
This Agreement may be assigned by the Company to a person or entity which is an
affiliate or a successor in interest to substantially all of the business
operations of the Company. Upon such assignment, the rights and obligations of
the Company hereunder shall become the rights and obligations of such affiliate
or successor person or entity.
f. SUCCESSORS; BINDING AGREEMENT. This Agreement shall inure to the
benefit of and be binding upon personal or legal representatives, executors,
administrators, successors, heirs, distributes, devises and legatees.
g. NOTICE. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered by hand or overnight courier or
three days after it has been mailed by United States registered mail, return
receipt requested, postage prepaid, addressed to the respective addresses set
forth below Agreement, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.
If to the Company or Parent:
Xxxxx.xxx, Inc.
c/o PRIMEDIA Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
11
Attention: Chairman and Chief Executive Officer
Copy to: PRIMEDIA Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel
If to Executive: To the most recent address of Executive set forth
in the personnel records of the Company.
Copy to: Frankfurt, Garbus, Kurnit, Xxxxx & Xxxx
000 Xxxxxxx Xxx.
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxx, Esq.
h. EXECUTIVE REPRESENTATION. Executive hereby represents to the Company
that the execution and delivery of this Agreement by Executive and the Parent
and the performance by Executive of Executive's duties hereunder shall not
constitute a breach of, or otherwise contravene, the terms of any employment
agreement or other agreement or policy to which Executive is a party or
otherwise bound.
i. PRIOR AGREEMENTS. This Agreement supercedes all prior agreements and
understandings (including verbal agreements) between Executive and the Company
and Executive and the Parent regarding the terms and conditions of Executive's
employment with the Company.
j. COOPERATION. Executive shall provide his reasonable cooperation in
connection with any action or proceeding (or any appeal from any action or
proceeding) which relates to events occurring during Executive's employment
hereunder. This provision shall survive any termination of this Agreement.
k. WITHHOLDING TAXES. The Company may withhold from any amounts payable
under this Agreement such Federal, state and local taxes as may be required to
be withheld pursuant to any applicable law or regulation.
l. COUNTERPARTS. This Agreement may be signed in counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
12
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
PRIMEDIA Inc. EXECUTIVE
/s/ Xxxxxxx X. Xxxxx /s/ Xxxxxxx Xxx
--------------------------- ---------------------------
By: Xxxxxxx X. Xxxxx By: Xxxxxxx Xxx
Title: Vice Chairman Title: President and Chief
Operating Officer
Xxxxx.xxx, Inc.
/s/ Xxxxx Xxxxxx
---------------------------
By: Xxxxx Xxxxxx
Title: Chairman and Chief
Executive Officer
[Signature Page to Day Employment Agreement]
