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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 1-11106
PRIMEDIA INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 13-3647573
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
745 FIFTH AVENUE, NEW YORK, NEW YORK 10151
(Address of principal executive offices) (Zip Code)
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(212) 745-0100
(Registrant's telephone number, including area code)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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COMMON STOCK, PAR VALUE $.01 PER SHARE............. NEW YORK STOCK EXCHANGE
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes__X__ No____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the common equity of PRIMEDIA Inc.
("PRIMEDIA") which is held by non-affiliates of PRIMEDIA at February 29, 2000
was approximately $429 million.
As of February 29, 2000, 149,095,447 shares of PRIMEDIA's Common Stock were
outstanding.
The following documents are incorporated into this Form 10-K by reference:
PRIMEDIA's notice of annual meeting and proxy statement for its 2000 annual
meeting of shareholders into Part III hereof.
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TABLE OF GUARANTORS
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STATE OR OTHER PRIMARY STANDARD I.R.S.
EXACT NAME OF JURISDICTION OF INDUSTRIAL EMPLOYER
REGISTRANT AS SPECIFIED INCORPORATION OR CLASSIFICATION IDENTIFICATION
IN ITS CHARTER ORGANIZATION CODE NUMBER NUMBER
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American Heat Video Productions, Inc. .............. Missouri 8299 43-1418177
The Apartment Guide of Nashville, Inc............... Tennessee 2741 62-1224076
Bacon's Information, Inc. .......................... Delaware 7389 36-4011543
Bankers Consulting Company.......................... Missouri 8299 43-1771756
Bowhunter Magazine, Inc. ........................... Pennsylvania 2721 23-2667502
Calibre Press, Inc. ................................ Illinois 8299 36-3111917
Cambridge Research Group, Ltd. ..................... West Virginia 7812 55-0613105
Canoe & Kayak, Inc. ................................ Delaware 2721 41-1895510
Cardinal Business Media, Inc. ...................... Delaware 2721 23-2695564
Cardinal Business Media Holdings, Inc. ............. Delaware 2721 23-2695951
Channel One Communications Corp. ................... Delaware 4833 13-3783278
Climbing, Inc. ..................................... Delaware 2721 41-1885204
CommCorp. LLC....................................... California 2721 95-4653392
Communication Concepts, Inc. ....................... Nevada 2721 88-0329261
Cover Concepts Marketing Services, LLC.............. Delaware 7319 04-3370389
Cowles History Group, Inc. ......................... Virginia 2721 54-1606227
CSK Publishing Company Incorporated................. Delaware 2721 13-3023395
Cumberland Publishing, Inc. ........................ Maryland 2721 52-1758147
Films for the Humanities & Sciences, Inc. .......... Delaware 7812 13-1932571
Game & Fish Merger Subsidiary, Inc. ................ Georgia 2721 13-4082334
GO LO Entertainment, Inc. .......................... California 7389 95-4307031
Guinn Communications, Inc. ......................... Tennessee 2741 62-1486552
Haas Publishing Companies, Inc. .................... Delaware 2741 58-1858150
Horse & Rider, Inc. ................................ California 2721 33-0480523
Intermodal Publishing Co., Ltd. .................... New York 2721 13-2633752
Industrial Training Systems Corporation............. New Jersey 8299 22-2070040
IntelliChoice, Inc. ................................ California 2721 77-0168905
Intertec Publishing Corporation .................... Delaware 2721 48-1071277
Kitplanes Acquisition Company....................... Delaware 2721 95-4617433
Law Enforcement Television Network, Inc. ........... Texas 8299 75-2257839
Little Rock Apartment Guide, Inc. .................. Arkansas 2741 74-2298918
Lockert Jackson & Associates, Inc. ................. Washington 8299 91-1395126
Low Rider Publishing Group, Inc..................... California 2721 95-4307029
Maddux Publishing, Inc. ............................ Florida 2741 59-2338050
McMullen Argus Publishing, Inc. .................... California 2721 95-2663753
The Memphis Apartment Guide, Inc. .................. Tennessee 2741 62-0964956
Meridian Education Corporation ..................... Illinois 7812 37-1138686
Miramar Communications Inc. ........................ California 2721 95-2845391
Pictorial, Inc. .................................... Indiana 2731 35-1616640
Plaza Communications, Inc. ......................... California 2721 95-3053189
PRIMEDIA Enthusiast Publications, Inc. ............. Pennsylvania 2721 23-1577768
PRIMEDIA Holdings III Inc. ......................... Delaware 6719 13-3617238
PRIMEDIA Information Inc. .......................... Delaware 2721 13-3555670
PRIMEDIA Magazines Inc. ............................ Delaware 2721 13-3616344
PRIMEDIA Magazines Finance Inc. .................... Delaware 2721 13-3616343
PRIMEDIA Special Interest Publications Inc. ........ Delaware 2721 52-1654079
PRIMEDIA Workplace Learning, Inc. .................. Texas 8299 75-2110878
QWIZ, Inc. ......................................... Delaware 7372 58-2302364
R.E.R. Publishing Corporation....................... New York 2721 13-3090623
RetailVision, Inc. ................................. Delaware 2721 03-0339898
Simba Information, Inc. ............................ Connecticut 2721 06-1281600
Symbol of Excellence Publishers, Inc. .............. Alabama 2721 63-0845698
The Virtual Flyshop, Inc. .......................... Colorado 2721 84-1318377
TI-IN Acquisition Corporation....................... Texas 8299 75-2478738
TSECRP, Inc. ....................................... California 2721 95-4259640
Westcott Communications Michigan, Inc. ............. Michigan 8299 38-2955660
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STATE OR OTHER PRIMARY STANDARD I.R.S.
EXACT NAME OF JURISDICTION OF INDUSTRIAL EMPLOYER
REGISTRANT AS SPECIFIED INCORPORATION OR CLASSIFICATION IDENTIFICATION
IN ITS CHARTER ORGANIZATION CODE NUMBER NUMBER
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Westcott ECI, Inc. ................................. Texas 8299 75-2475419
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The address, including zip code, and telephone number, including area code,
of each additional registrant's principal executive office is 745 Fifth Avenue,
New York, New York 10151 (212-745-0100).
These companies are listed as guarantors of the debt securities of the
registrant. The consolidating condensed financial statements of the Company
depicting separately its guarantor and non-guarantor subsidiaries are presented
as Note 23 of the notes to the consolidated financial statements. All of the
equity securities of each of the guarantors set forth in the table above are
owned, either directly or indirectly, by PRIMEDIA, and there has been no default
during the preceding 36 calendar months with respect to any indebtedness or
material long-term leases of PRIMEDIA or any of the guarantors.
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PRIMEDIA INC.
ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 1999
CROSS REFERENCE SHEET FOR
PARTS I, II, III AND IV
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PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 6
Item 3. Legal Proceedings........................................... 7
Item 4. Submission of Matters to a Vote of Security Holders......... 7
PART II
Item 5. Market for Registrant's Common Equity and Related 7
Stockholder Matters.......................................
Item 6. Selected Financial Data..................................... 8
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 10
Item 7A. Quantitative and Qualitative Disclosures About Market 19
Risk......................................................
Item 8. Financial Statements and Supplementary Data................. 21
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 61
PART III -- Omitted, except Item 10 as to Executive Officers is included
as part of Part I
Item 1...................................................... 61
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on 61
Form 8-K..................................................
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PART I
ITEM 1. BUSINESS.
GENERAL
PRIMEDIA Inc. ("PRIMEDIA" or the "Company") is a targeted media company with
leading positions in consumer and business-to-business markets. Our properties
utilize the "full media arsenal" to deliver content via print (magazines and
directories), video (satellite and cable), live events (trade and consumer
shows) and Internet (more than 200 sites including vertical on-line
communities). Our products serve highly specialized niches and capitalize on the
growing trend toward targeted rather than mass information distribution.
PRIMEDIA's products command an average market share of 53%.
Many of the Company's products, such as those provided by PRIMEDIA's
consumer magazines, business-to-business magazines, CHANNEL ONE NEWS and the
apartment and homes guides afford advertisers with an opportunity to directly
reach niche market audiences. In 1999, 39% of PRIMEDIA's total revenues were
from "lead generation" advertising, bringing the advertisers and customers
together and providing a springboard for on-line communities.
The Company has exploited the Internet to take advantage of the
opportunities that this medium affords its targeted media properties. The
Company has numerous Internet sites which expand our role in our targeted
markets, and provide sources of additional revenue from content delivery,
advertising, subscriptions and e-commerce. The Internet provides PRIMEDIA with
various alternatives to grow beyond traditional operations. Activities include
partnerships with other Internet businesses, advertising for equity transactions
and sales of stakes in our Internet businesses to third parties. In addition,
PRIMEDIA Ventures, PRIMEDIA's Internet investment vehicle, invests in early
stage Internet companies and other technology opportunities such as e-commerce
services, enterprise software applications and advertising-related technologies.
Its current market valuation substantially exceeds the original cost of its
initial investments.
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Item 7, page 11) provides a description of segment sales and income.
SPECIALTY MAGAZINES
The specialty magazines segment consists of specialty consumer magazines and
business-to-business magazines. In 1999, 58% of its 105 specialty consumer
magazines and 48% of its 73 business-to-business magazines were number one in
their respective markets.
CONSUMER MAGAZINES
The Company is the largest specialty consumer magazine company in the U.S.,
with over 100 titles including SEVENTEEN, NEW YORK, MODERN BRIDE, FLY FISHERMAN,
AMERICAN BABY, HORTICULTURE, POWER & MOTORYACHT and leadership positions in such
categories as automotive, crafts, teens, outdoor recreation and city magazines.
The principal sources for specialty consumer magazines' sales are endemic
advertising, circulation and ancillary revenues. For the year ended
December 31, 1999, 51% of the sales were from advertising, 42% from circulation
and 7% were from ancillary sources.
Readers value specialty consumer magazines for their targeted editorial
content and also rely on them as catalogs of products in the relevant topic
areas. This catalog aspect makes the specialty consumer magazines important
media buys for advertisers. Advertising sales for the Company's specialty
consumer magazines are generated largely by in-house sales forces. The magazines
compete for advertising on the basis of circulation and the niche markets they
serve. Each of the Company's specialty consumer magazines faces competition in
its subject area from a variety of publishers and competes for readers on the
basis of quality targeted editorial, which is provided by in-house and
free-lance writers.
The Company is the largest publisher of teen magazines. SEVENTEEN is the
leading young women's fashion and beauty magazine based on both circulation and
advertising pages, with fashion, boys, beauty, talent and lifestyle editorial
targeted to girls aged 12 to 24. SEVENTEEN'S monthly rate base is 2.35 million
and its total monthly readership is 14.2 million. Its principal direct
competitor is TEEN PEOPLE. SEVENTEEN competes for circulation based on the
nature and quality of its editorial. The Company also is the largest
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publisher of magazines aimed at the 10-13 year old market with nine titles
including TIGER BEAT and BOP. In 1999, the Company started a new magazine,
ENTERTAINMENTEEN, targeted to the early teen market.
Seventeen.com, already a significant web site, will be relaunched in
mid-2000 with unique features and enhanced content. Seventeen.com capitalizes on
the growing use of the Internet by teenagers. In America, 6.8 million teens are
actively using the Internet today for e-mail and shopping research. In early
2000, Seventeen.com entered into an agreement with 1stUp.com Corporation to
offer free Internet services to Seventeen.com users.
The Company publishes the flagship magazines for the cities of New York and
Chicago. Since it was founded in April 1968, NEW YORK magazine has been New York
City's magazine of record, with extensive and regular coverage of local and
national news, entertainment, culture, fashion and personalities.
The Company publishes 35 automotive enthusiast magazines, including
AUTOMOBILE, catering to the high-end automotive market, as well as such highly
specialized enthusiast titles as LOWRIDER, the largest retail sales magazine in
the automotive category, TRUCKIN', the leading enthusiast truck customization
publication, MUSCLE MUSTANG & FAST FORDS, VETTE and SPORT COMPACT CAR. In early
2000, the Company launched GR8RIDE.com, an online community for performance
aftermarket auto enthusiasts offering content from the Company's magazines as
well as advertising and e-commerce.
In the baby care category, the Company publishes AMERICAN BABY, a monthly
publication distributed to approximately 1.5 million expectant and new parents
and HEALTHY KIDS, a bi-monthly publication for parents and children from birth
to age ten. The Company also offers a series of ancillary products such as a
cable television program called American Baby and sampling and couponing
programs. The unit's principal competitor is BABY TALK. In 1999, the Company
acquired Baby Faire, a consumer expo.
The Company is a leading provider of information for brides through MODERN
BRIDE plus 13 regional bridal magazines. MODERN BRIDE, in partnership with the
Wedding Network, an Internet based provider of registry solutions for retail
partners, provides a consumer information and registry service to brides.
In the recreation market, the Company is the leading publisher of magazines
for outdoor enthusiasts with such titles as FLORIDA SPORTSMAN, FLY FISHERMAN,
IN-FISHERMAN, GAME & FISH, SAIL, POWER & MOTORYACHT and SURFING and for equine
enthusiasts with such titles as EQUUS and PRACTICAL HORSEMAN. In 1999, the
Company acquired EquiSearch.com, the leading Internet community for equine
enthusiasts.
In the soap opera publication area, in 1999, PRIMEDIA commanded an 85%
market share through its SOAP OPERA DIGEST and SOAP OPERA WEEKLY. SOAP OPERA
DIGEST had an average 1999 circulation of 1.1 million per week, which is
approximately two-thirds from subscriptions. SOAP OPERA WEEKLY had an average
1999 circulation of 365,000. Both publications compete for circulation on the
basis of editorial content and quality against such publications as SOAP OPERA
UPDATE and SOAPS IN DEPTH, both of which have substantially lower circulation.
In order to maximize efficiencies and realize integration benefits, the
Company is integrating all enthusiast titles under common management.
The Company has a mix of sales between retail (largely newsstand and other
retail outlets) and subscription and is more heavily weighted toward retail. The
Company is less dependent upon sweepstakes for attracting subscriptions than
other leading publishers.
In early 2000, the Company partnered with others in the development of
Contentville.com which will be launched in the second half of the year.
Contentville.com will be an online distribution channel for all varieties of
content including magazines, books and transcripts.
BUSINESS-TO-BUSINESS MAGAZINES
The Company is the third largest U.S. publisher of business-to-business
magazines with 73 titles that provide vital information to professionals in such
fields as telecommunications (TELEPHONY), agriculture (SOYBEAN DIGEST),
transportation (FLEET OWNER), real estate (NATIONAL REAL ESTATE INVESTOR),
professional
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services (REGISTERED REPRESENTATIVE), marketing (CATALOG AGE) and cable
television (CABLE WORLD). In 1999, 70% of these titles ranked number one or two
in the fields they serve based on advertising pages. In 1999, 96% of magazine
revenue was derived from advertising as these magazines are distributed on a
controlled circulation basis, meaning that they are distributed free of charge
to select qualified readers.
Because each of the business-to-business magazines is distributed almost
exclusively to purchasing decision-makers in a targeted industry group, product
and service providers are able to focus their advertising. The advertising rates
charged are based on the quality and size of the circulation within the target
group as well as competitive factors. These magazines compete for advertising on
the basis of advertising rates, circulation, reach, editorial content and
readership commitment. Advertising sales are made by in-house sales forces and
are supplemented by independent representatives in selected regions and
overseas.
The Company sponsors seminars and trade shows, serving the advertisers and
readers of the corresponding publications, including LIGHTING DIMENSIONS
INTERNATIONAL, INTERNATIONAL WIRELESS COMMUNICATIONS EXPO and THE SATELLITE
COMMUNICATIONS EXPO & CONFERENCE. In 1999, the Company expanded its trade show
offerings by acquiring TELECOM BUSINESS, ANTI-AGING and WASTE AGE.
In 1999, the Company formed IndustryClick, a business-to-business Internet
company which builds and operates business-to-business vertical on-line
communities serving numerous industries and leveraging off of PRIMEDIA's already
strong traditional media presence. The sites are offered in such fields as media
(mediacentral.com), marketing (marketingclick.com) and telecommunications
(telecomclick.com). In 1999, IndustryClick acquired digibid.com, an on-line
auction site for professional audio and video equipment. In early 2000,
IndustryClick acquired a significant equity interest in Digital Media Online,
which operates leading websites for digital media production.
INFORMATION
The Company produces over 200 highly targeted consumer and business
information products, most of which hold dominant positions in their niche
markets. The Company's premier consumer information products are its apartment
guides and related website apartmentguide.com, its business directories which
include Bacon's for public relations professionals and INTELLICHOICE, which is
primarily Internet delivered, for automotive buyers.
The growth in advertising supported consumer information (e.g. targeted free
publications, such as the apartment guides) is being driven by the desire of
advertisers to reach their customers as cost effectively as possible.
Advertising revenue generated from free shopping guides in 2005 is expected to
be double that in 1995.
CONSUMER INFORMATION
The Company is the largest publisher of rental apartment guides in the U.S.
with 73 local versions of its apartment guides, most of which are distributed
monthly and provide informational listings about featured apartment communities.
Advertising community managers, who need to fill vacant apartments, represent
100% of apartment guide advertising revenues. The Company is the dominant
information provider in apartment listings and continues to gain in market share
from newspaper classifieds and other competitors due to the cost effectiveness
of its products as measured by cost per lease to the advertiser. The Company's
only national competitor is FOR RENT.
The number of monthly visitors to the Company's Internet site
apartmentguide.com grew from 68,000 in early 1999 to over 1 million by the end
of the year. During 1999, apartmentguide.com became the exclusive apartment site
on Yahoo!. The site, which carries all advertising included in the print
products, is the largest apartment rental site on the Internet. With
approximately 16,000 property listings, apartmentguide.com offers many features
not provided by its print products including virtual tours and search
functionality.
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The Company is a leader in new home guides with guides in 17 major markets
including northern California, southern California, Denver, Phoenix, Dallas-Fort
Worth, Philadelphia, and Atlanta.
A strategic advantage is the Company's DistribuTech Division which is the
nation's largest distributor of free publications, including its own consumer
directories and over 1,500 other titles. In 1999, it managed the distribution of
Haas' and other publishers' free publications to over 14,500 grocery,
convenience, video and drug stores in 70 metropolitan areas, as well as
universities, military bases and major employers. The majority of these
locations are operated under exclusive distribution agreements. The guides are
typically displayed in free-standing, multi-pocket racks. DistribuTech generates
substantial revenues by leasing additional distribution rack pockets to other
publications that it also distributes. DistribuTech competes for its rack
program on the basis of its prime retail locations. In early 2000, the Company
signed an agreement with Albertson's, the national supermarket chain, to
significantly expand distribution.
BUSINESS INFORMATION
The Company, with over 100 products, is the leading publisher of directories
and databases addressing the specialized information needs of professionals in
such areas as government information technology procurement (FEDERAL SOURCES),
public relations (BACON'S INFORMATION), automotive (WARD'S and INTELLICHOICE),
construction (MACHINERY INFORMATION DIVISION) and media (SIMBA). These databases
are increasingly being made available via electronic delivery. This allows for
greater functionality to the user (ability to update the product as a data
management system), and opportunity for product and brand extension. During
1999, Bacon's introduced its Internet directory services. Databases are compiled
by an in-house editorial staff, marketed directly to subscribers and advertisers
primarily by an in-house staff and distributed predominantly on a paid
subscription basis.
The Company also publishes periodicals that provide in-depth information on
selected markets. WARD'S AUTOMOTIVE REPORTS is recognized as the authoritative
source for industry-wide statistics on automotive production and sales. In
addition, the Company publishes used vehicle valuation information in print and
electronic formats. Other databases include THE ELECTRONICS SOURCE BOOK and
AC-U-KWIK.
Most of the business directories published by the Company have no
competition. Where competition does exist, in most cases, the Company's
publication is dominant. Competition is on the basis of price and quality of
data. Management believes that the comprehensiveness and quality of its data and
the specialized focus of its publications have prevented others from launching
competing publications or competing effectively.
EDUCATION
The Company's education segment consists of its Channel One and PRIMEDIA
Workplace Learning operations.
Channel One's Network news program, CHANNEL ONE NEWS, is the only daily news
program targeted to secondary school students. CHANNEL ONE NEWS broadcasts every
school day via satellite to 8 million students, 360,000 classrooms and
approximately 400,000 educators in approximately 12,000 secondary schools in the
United States, reaching more students than any other electronically delivered
educational product. CHANNEL ONE NEWS has ten times the teenage audience of the
evening newscasts of ABC, CBS, NBC and the cable networks combined. Its daily
reach in the teen market exceeds that of the Super Bowl.
Schools sign up for the CHANNEL ONE NETWORK service under a three-year
contract pursuant to which they agree to show CHANNEL ONE NEWS, in its entirety,
on at least 90% of all school days. CHANNEL ONE NETWORK provides to schools a
turnkey system of video cassette recorders and networked televisions. These
products and services are provided to schools at no charge; revenues are
generated by two minutes of advertising shown during the 12-minute daily
newscast. In addition, CHANNEL ONE CONNECTION provides a maximum of 120 minutes
of educational programming per school day at no charge. Substantially all school
contracts have come up for renewal at least once and 99% have been renewed in
each renewal cycle.
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CHANNEL ONE NETWORK has a library of over 1,700 broadcasts including
approximately 175 single subject series, 78 of which have been released as
videos. The Company's channelone.com online network and its teachworld.com
provide supplemental information to students and educators.
CHANNEL ONE NEWS has no direct competition in the schools but does compete
for advertising dollars with other media aimed at teenagers. The Company's
primary competitive advantages are its prize winning programming and total
audience reach. In early 2000, CHANNEL ONE NEWS entered into an agreement with
CBS to expand its audience beyond the classroom. CHANNEL ONE NEWS will be the
contributor of segments on teen issues for the CBS morning program, "The Early
Show."
Films for the Humanities and Sciences ("Films") is the exclusive distributor
of approximately 2,000 owned and 7,000 licensed educational videos, videodiscs,
CD-ROMs and related products. These products are sold primarily by direct mail
to teachers, instructors and librarians serving primarily grades 8 to 12 and
college markets. Films is the largest distributor of such products to colleges
and high schools and competes on the basis of quality and breadth of the subject
matter. In 1999, it acquired Meridian Education Corporation, adding an
additional 550 videos and CD-ROMs.
During 1999, the Company sold its supplemental education group ("SEG") which
includes PRIMEDIA Reference, WEEKLY READER and American Guidance Service for
$395 million in cash and retained a 5.1% interest in the group.
PRIMEDIA Workplace Learning is a leading provider of high quality
accreditation-oriented vocational networks, largely via satellite and
increasingly over the Internet. It is a leader in such markets as automotive
(AUTOMOTIVE SATELLITE TELEVISION NETWORK), industrial (INDUSTRIAL TRAINING
SYSTEMS), healthcare (HEALTH AND SCIENCES TELEVISION NETWORK), government (LAW
ENFORCEMENT TRAINING NETWORK) and banking (BANKERS TRAINING AND CONSULTING
COMPANY). Its library includes over 100,000 tapes, representing nearly 13,000
hours of programming.
During 1999, the Company closed five unprofitable product lines and recorded
a $22 million related non-recurring charge. Later in 1999, concurrent with its
annual planning process, the Company determined that the estimated future
undiscounted cash flows of PRIMEDIA Workplace Learning were not sufficient to
cover its carrying value. Accordingly, the Company recorded an impairment charge
of approximately $261.5 million to write down its long-lived assets to the
estimated fair value.
PRODUCTION AND FULFILLMENT
Virtually all of the Company's print products are printed and bound by
independent printers. The Company believes that because of its buying power,
outside printing services can be purchased at good prices. The Company provides
most of the content for its electronically delivered products but outsources
technology and production.
The principal raw material used in the Company's products is paper. The
Company has paper supply contracts. The Company believes that even if at some
point in the future paper is in limited supply, its existing arrangements,
providing for the supply of paper, will be adequate. In 1999, 63% and 28% of the
Company's paper purchases were supplied through Lindenmeyr Central and Graphic
Communications, respectively.
Many of the Company's products are packaged and delivered to the U.S. Postal
Service directly by the printer. Other products are sent from warehouses and
other facilities operated by the Company.
In 1999, in order to maximize efficiencies and capitalize on economies of
scale, the Company entered into a sourcing initiative to evaluate suppliers and
purchasing patterns on a company-wide basis.
COMPANY ORGANIZATION
PRIMEDIA was incorporated on November 22, 1991 in the State of Delaware. The
principal executive office of the Company is located at 745 Fifth Avenue, New
York, New York 10151, telephone number (212) 745-0100. Its domain name is
"Primedia.com".
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EXECUTIVE OFFICERS
The following table sets forth certain information regarding the executive
officers of PRIMEDIA:
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NAME AGE POSITION(S)
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Thomas S. Rogers.......................... 45 Chairman of the Board and Chief Executive
Officer and Director
Charles G. McCurdy........................ 44 President and Director
Beverly C. Chell.......................... 57 Vice Chairman, General Counsel, Secretary
and Director
Lawrence R. Rutkowski..................... 41 Executive Vice President and Chief
Financial Officer
David G. Ferm............................. 52 Executive Vice President and President,
Business-to-Business Group
Michaelanne C. Discepolo.................. 47 Senior Vice President, Human Resources
Douglas B. Smith.......................... 39 Senior Vice President and Treasurer
Robert J. Sforzo.......................... 52 Senior Vice President and Controller
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Mr. Rogers is Chairman of the Board, Chief Executive Officer and a Director
of PRIMEDIA. Mr. Rogers joined the Company in October 1999 and before that
served as President of NBC Cable since 1988 and Executive Vice President of NBC
since 1992.
Mr. McCurdy is President and a Director of PRIMEDIA.
Ms. Chell is Vice Chairman, General Counsel, Secretary and a Director of
PRIMEDIA.
Mr. Rutkowski has been Executive Vice President and Chief Financial Officer
of PRIMEDIA since January 2000. Before joining the Company, Mr. Rutkowski was
Senior Vice President and Chief Financial Officer of Business Development and
Strategic Planning for NBC since 1999, and was Vice President, Corporate Finance
and Controller at NBC since 1993.
Mr. Ferm has been Executive Vice President and President of the PRIMEDIA
Business-to-Business Group since February 2000. Before joining the Company, Mr.
Ferm was President of McGraw Hill's Business Week Group since 1999, and was
publisher of BUSINESS WEEK since 1993.
Ms. Discepolo, a Senior Vice President, Human Resources of PRIMEDIA since
December 1999, was previously Vice President, Human Resources.
Mr. Smith, a Senior Vice President of PRIMEDIA since December 1999, has been
a Vice President of PRIMEDIA since May 1997 and Treasurer of PRIMEDIA since
August 1993.
Mr. Sforzo, a Senior Vice President of PRIMEDIA since December 1999, has
been a Vice President and Controller of PRIMEDIA since October 1998. Prior to
that time, he was the Vice President of Internal Audit starting in June 1997.
From September 1994 to June 1997, he was the Executive Vice President and Chief
Financial Officer of The Katharine Gibbs Schools, Inc.
The business address of the above executive officers of the Company is the
address of the principal executive office of PRIMEDIA.
EMPLOYEES
As of December 31, 1999, the Company had approximately 6,700 full and
part-time employees, of whom none were union members. Management considers its
relations with its employees to be good.
ITEM 2. PROPERTIES.
The Company's principal leased properties used by the specialty magazines
segment are located in California, Colorado, Connecticut, Florida, Georgia,
Illinois, Indiana, Kansas, Massachusetts, Michigan,
6
<PAGE>
Minnesota, Mississippi, New York, Pennsylvania, Texas, Vermont and Virginia;
used by the information segment are located in Arizona, California, Florida,
Georgia, Illinois, Maryland, New Jersey, New York, Pennsylvania, Texas and
Virginia; and used by the education segment are located in California, Georgia,
Indiana, Missouri, New Jersey, New York, Tennessee, Texas and West Virginia.
Property is owned by the Company and used in the specialty magazines segment in
California, Illinois, Indiana and Mississippi, in the information segment in New
Jersey and in the education segment in West Virginia. The Company's only
production facilities are small printing operations for Films, broadcast
production facilities for PRIMEDIA Workplace Learning and Channel One and video
duplicating facilities for PRIMEDIA Workplace Learning and Films. The Company's
distribution properties and their capacity is adequate to satisfy the Company's
needs.
ITEM 3. LEGAL PROCEEDINGS.
There are no material pending legal proceedings and no material legal
proceedings including any that were terminated in the fourth quarter of 1999, to
which the Company is or was a party other than ordinary routine litigation
incidental to the business of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders during the
fourth quarter of 1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
PRIMEDIA Common Stock is listed on the New York Stock Exchange, under Ticker
Symbol "PRM". As of February 29, 2000, there were 235 holders of record of
PRIMEDIA Common Stock. The Company has not and has no present intention to pay
dividends on its Common Stock. High, low and closing sales prices for 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
1999 SALES PRICE
---------------------------------------------
QUARTER ENDED HIGH LOW CLOSE
- ------------- ------------- ------------- -------------
<S> <C> <C> <C>
March 31........................................ $14 $11 5/8 $14
June 30......................................... $17 3/4 $13 9/16 $16 15/16
September 30.................................... $17 3/16 $11 $14
December 31..................................... $16 1/2 $10 7/8 $16 1/2
<CAPTION>
1998 SALES PRICE
---------------------------------------------
QUARTER ENDED HIGH LOW CLOSE
- ------------- ------------- ------------- -------------
March 31. $14 7/8 $11 13/16 $14 11/16
<S> <C> <C> <C>
June 30......................................... $15 $12 13/16 $13 9/16
September 30.................................... $13 13/16 $ 9 1/4 $10 7/8
December 31..................................... $11 15/16 $ 9 5/8 $11 7/8
</TABLE>
The closing stock price increased by 39% from December 31, 1998 to
December 31, 1999. From January 1, 2000 through March 23, 2000, the high price
for the stock was $28, the low price was $15.50 and the closing price on
March 23, 2000 was $27 7/16.
7
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The selected consolidated financial data were derived from the audited
consolidated financial statements of the Company. The data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements and the
related notes thereto included herein.
PRIMEDIA INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ----------- ------------ ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Sales, net....................................... $ 1,716,102 $ 1,573,573 $ 1,487,595 $ 1,374,449 $ 1,046,329
Depreciation..................................... 47,653 42,214 37,334 38,233 25,761
Amortization..................................... 176,361 176,755 146,831 152,469 166,515
Other (income) charges(1)........................ 62,208 (7,216) 138,640 -- 50,114
Operating income (loss)(2)....................... 54,332 118,157 (20,793) 85,901 (26,275)
Interest expense................................. 164,909 144,442 136,625 124,601 105,837
Income tax benefit (expense)(3).................. (6,500) -- 1,685 53,300 59,600
Income (loss) before extraordinary charge........ (120,113) (37,736) (157,439) 17,597 (75,435)
Extraordinary charge-extinguishment of debt(4)... -- -- (15,401) (9,553) --
Net income (loss)(2)............................. (120,113) (37,736) (172,840) 8,044 (75,435)
Preferred stock dividends(5)..................... 53,062 63,285 65,073 43,526 28,978
Loss applicable to common shareholders........... (173,175) (101,021) (237,913) (35,482) (104,413)
Basic and diluted loss applicable to common
shareholders per common share(2)(6):
Loss before extraordinary charge............... $ (1.19) $ (.71) $ (1.72) $ (.20) $ (.92)
============ =========== ============ ============ ============
Net loss....................................... $ (1.19) $ (.71) $ (1.84) $ (.27) $ (.92)
============ =========== ============ ============ ============
Basic and diluted common shares outstanding...... 145,418,441 142,529,024 129,304,900 128,781,518 113,218,711
OTHER DATA:
EBITDA(7)........................................ $ 340,554 $ 329,910 $ 302,012 $ 276,603 $ 216,115
Additions to property, equipment and other,
net............................................ 69,488 55,238 31,108 28,790 23,414
Net cash provided by operating activities........ 107,298 140,804 125,360 150,192 64,062
Net cash provided by (used in) investing
activities..................................... 186,081 (609,621) (185,725) (721,709) (318,712)
Net cash provided by (used in) financing
activities..................................... (289,256) 470,377 46,688 580,946 263,644
<CAPTION>
AT DECEMBER 31,
-----------------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ----------- ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................ $ 28,661 $ 24,538 $ 22,978 $ 36,655 $ 27,226
Working capital(8)............................... (200,458) (234,045) (146,245) (44,705) (56,560)
Intangible assets, gross......................... 3,024,955 3,171,598 2,508,650 2,649,805 1,996,564
Less: accumulated amortization............... 1,189,599 914,854 736,597 896,824 762,393
------------ ----------- ------------ ------------ ------------
Intangible assets, net........................... 1,835,356 2,256,744 1,772,053 1,752,981 1,234,171
Total assets..................................... 2,714,552 3,041,074 2,485,990 2,552,215 1,881,416
Long-term debt(9)................................ 1,732,896 1,956,997 1,682,224 1,577,469 1,146,697
Exchangeable preferred stock..................... 559,689 557,841 470,280 442,729 231,606
------------ ----------- ------------ ------------ ------------
Shareholders' equity (deficiency):
Common stock................................. $ 1,483 $ 1,470 $ 1,298 $ 1,283 $ 1,259
Additional paid-in capital................... 986,649 979,720 780,191 772,642 748,194
Accumulated deficit.......................... (1,203,207) (1,030,032) (929,011) (691,098) (655,616)
Accumulated other comprehensive income
(loss)..................................... 87,364 (1,720) (1,543) (1,270) (1,275)
Unearned stock grant compensation............ (15,250) -- -- -- --
Common stock in treasury, at cost............ (1,277) (33,141) (13,158) -- --
------------ ----------- ------------ ------------ ------------
Total shareholders' equity (deficiency).......... $ (144,238) $ (83,703) $ (162,223) $ 81,557 $ 92,562
============ =========== ============ ============ ============
</TABLE>
(See notes on the following page)
8
<PAGE>
NOTES TO SELECTED FINANCIAL DATA
(1) Represents (gain) loss on the sales of businesses and other, net in 1999,
1998, 1997, and 1995, provisions for the impairment of long-lived assets and
product-line closures in 1999 and an other non-recurring provision in 1995.
(2) The adoption of a change in method of accounting for internal use software
costs effective January 1, 1998, resulted in an increase in operating
income, an equal decrease in net loss and a decrease in basic and diluted
loss per common share of approximately $9,000 ($.06 per share) and $12,450
($.09 per share) for the years ended December 31, 1999 and December 31,
1998, respectively.
(3) At December 31, 1999, 1998 and 1997, the Company's management determined
that no adjustment to net deferred income tax assets was required. In prior
years, management determined that a portion of the net deferred income tax
assets would likely be realized and accordingly, the Company recorded an
income tax benefit of $53,300 in 1996 and $59,600 in 1995. For the year
ended December 31, 1997, the Company recorded an income tax carryback claim
of $1,685. In 1999, the Company recorded income tax expense of $6,500
related to a provision for current state and local taxes incurred as a
result of the gain on the sale of the supplemental education group. At
December 31, 1999, the Company had net operating loss carryforwards ("NOLs")
of approximately $752,500 which will be available to reduce future taxable
income. In addition, management estimates that approximately $1,074,000 of
unamortized goodwill and other intangible assets will be available as
deductions from any future taxable income.
(4) Represents the write-off of unamortized deferred financing costs and the
premiums paid on the redemptions of the 10 5/8% Senior Notes.
(5) Includes the premiums paid on the redemptions of the $11.625 Series B
Exchangeable Preferred Stock ("Series B Preferred Stock") and the $2.875
Senior Exchangeable Preferred Stock in 1998 and 1997, respectively. In 1997,
the Company recorded a preferred stock dividend accrual in the amount of
$9,517. Of the total dividend accrual recorded in 1997, the amounts that
relate to prior periods were not material.
(6) Basic and diluted loss per common share, as well as the basic and diluted
common shares outstanding, were computed as described in Note 15 of the
notes to the audited consolidated financial statements included elsewhere in
this Annual Report.
(7) Represents earnings before interest, taxes, depreciation, amortization and
one-time (credits) and charges including an impairment provision for
long-lived assets of $275,788, a provision for product-line closures of
$22,000 and gain on the sales of businesses and other, net of $(235,580) in
1999, (gain) loss on the sales of businesses and other, net of $(7,216),
$138,640 and $35,447 in 1998, 1997 and 1995, respectively, and a provision
for non-recurring charges of $14,667 in 1995 ("EBITDA"). EBITDA is not
intended to represent cash flow from operations and should not be considered
as an alternative to net income (loss) as an indicator of the Company's
operating performance or to cash flows as a measure of liquidity. The
Company believes EBITDA is a standard measure commonly reported and widely
used by analysts, investors and other interested parties in the media
industry. Accordingly, this information has been disclosed herein to permit
a more complete comparative analysis of the Company's operating performance
relative to other companies in its industry. This measure may not be
comparable to similarly titled measures used by other companies.
(8) Includes current maturities of long-term debt and net assets held for sale,
where applicable. Consolidated working capital reflects certain industry
working capital practices and accounting principles, including the expensing
of certain editorial and product development costs when incurred and the
recording of deferred revenue from subscriptions as a current liability.
Advertising costs are expensed when the promotional activities occur except
for certain direct-response advertising costs which are capitalized and
amortized over the estimated period of future benefit.
(9) Excludes current maturities of long-term debt.
9
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS).
INTRODUCTION
The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with the Company's
historical consolidated financial statements and notes thereto included herein.
The Company organizes its businesses into three segments: specialty magazines,
information and education.
Management believes a meaningful comparison of the results of operations for
1999, 1998 and 1997 is obtained by using segment information as well as results
from continuing businesses ("Continuing Businesses") which exclude the results
of the non-core businesses (the "Non-Core Businesses"), which are either sold
businesses or product discontinuances. In 1998, the Company reclassified certain
product lines as Non-Core Businesses and has restated prior periods accordingly.
The Non-Core Businesses include: (i) Krames Communications Incorporated
("Krames"), The Katharine Gibbs Schools, Inc. ("Katharine Gibbs"), NEW WOMAN,
Intertec Mailing Services, Newbridge Communications, Inc. (excluding Films for
the Humanities and Sciences), STAGEBILL, Nelson Information Inc. ("Nelson"), THE
DAILY RACING FORM and certain enthusiast titles which have been divested, and
(ii) the Funk and Wagnalls' products and certain enthusiast titles which have
been discontinued. Management believes that this presentation is the most useful
way to analyze the historical trends of its businesses. In 1998, PRIMEDIA
completed its divestiture program related to the Non-Core Businesses.
Additional selected financial data for the Company organized on the
foregoing basis are presented below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Sales, Net:
Continuing Businesses:
Specialty Magazines................................ $1,051,170 $ 927,501 $ 714,464
Information........................................ 318,922 272,819 228,145
Education.......................................... 346,010 330,790 269,246
---------- ---------- ----------
Subtotal......................................... 1,716,102 1,531,110 1,211,855
Non-Core Businesses.................................... -- 42,463 275,740
---------- ---------- ----------
Total............................................ $1,716,102 $1,573,573 $1,487,595
========== ========== ==========
EBITDA(1):
Continuing Businesses:
Specialty Magazines................................ $ 203,211 $ 187,104 $ 159,462
Information........................................ 72,647 73,969 63,642
Education.......................................... 99,682 90,400 81,833
Corporate.......................................... (34,986) (28,324) (25,545)
---------- ---------- ----------
Subtotal......................................... 340,554 323,149 279,392
Non-Core Businesses.................................... -- 6,761 22,620
---------- ---------- ----------
Total............................................ $ 340,554 $ 329,910 $ 302,012
========== ========== ==========
</TABLE>
(CONTINUED ON FOLLOWING PAGE)
10
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Depreciation, Amortization and Other Charges(2):
Continuing Businesses:
Specialty Magazines................................ $ 116,056 $ 94,152 $ 66,407
Information........................................ 48,863 30,339 33,971
Education.......................................... 125,418 105,542 71,702
Corporate.......................................... (4,115) 1,284 99
---------- ---------- ----------
Subtotal......................................... 286,222 231,317 172,179
Non-Core Businesses.................................... -- (19,564) 150,626
---------- ---------- ----------
Total............................................ $ 286,222 $ 211,753 $ 322,805
========== ========== ==========
Operating Income (Loss):
Continuing Businesses:
Specialty Magazines................................ $ 87,155 $ 92,952 $ 93,055
Information........................................ 23,784 43,630 29,671
Education.......................................... (25,736) (15,142) 10,131
Corporate.......................................... (30,871) (29,608) (25,644)
---------- ---------- ----------
Subtotal......................................... 54,332 91,832 107,213
Non-Core Businesses.................................... -- 26,325 (128,006)
---------- ---------- ----------
Total............................................ 54,332 118,157 (20,793)
Other Income (Expense):
Interest expense....................................... (164,909) (144,442) (136,625)
Amortization of deferred financing costs............... (3,286) (3,046) (3,071)
Other, net............................................. 250 (8,405) 1,365
---------- ---------- ----------
Loss before income tax benefit (expense) and
extraordinary charge................................... (113,613) (37,736) (159,124)
Income tax benefit (expense)............................. (6,500) -- 1,685
---------- ---------- ----------
Loss before extraordinary charge......................... (120,113) (37,736) (157,439)
Extraordinary charge--extinguishment of debt............. -- -- (15,401)
---------- ---------- ----------
Net loss................................................. $ (120,113) $ (37,736) $ (172,840)
========== ========== ==========
</TABLE>
- ------------------------
(1) Represents earnings before interest, taxes, depreciation, amortization and
one-time (credits) and charges including an impairment provision for
long-lived assets of $275,788, a provision for product-line closures of
$22,000 and gain on the sales of businesses and other, net of $(235,580) in
1999, and (gain) loss on the sales of businesses and other, net of $(7,216)
and $138,640 in 1998 and 1997, respectively ("EBITDA"). EBITDA is not
intended to represent cash flow from operations and should not be considered
as an alternative to net income (loss) as an indicator of the Company's
operating performance or to cash flows as a measure of liquidity. The
Company believes EBITDA is a standard measure commonly reported and widely
used by analysts, investors and other interested parties in the media
industry. Accordingly, this information has been disclosed herein to permit
a more complete comparative analysis of the Company's operating performance
relative to other companies in its industry. This measure may not be
comparable to similarly titled measures used by other companies.
(2) Other charges include (gain) loss on the sales of businesses and other, net
in 1999, 1998 and 1997, and provision for the impairment of long-lived
assets and product-line closures in 1999.
11
<PAGE>
RESULTS OF OPERATIONS
1999 COMPARED TO 1998
CONSOLIDATED RESULTS:
Sales from Continuing Businesses increased 12.1% to $1,716,102 in 1999 from
$1,531,110 in 1998, due to sales increases in all segments. Total sales
increased 9.1% to $1,716,102 from $1,573,573 in 1998.
EBITDA from Continuing Businesses increased 5.4% to $340,554 in 1999 from
$323,149 in 1998 due to growth in the specialty magazines and education
segments. Pro forma EBITDA from traditional media operations excluding the
results of the Non-Core Businesses of $6,761 in 1998, pro forma new media
spending of $32,830 and $9,523 in 1999 and 1998, respectively, certain
non-recurring charges relating to the change of senior management of $6,100 in
1999 and results of the recently divested supplemental education group of
$37,606 and $25,948 in 1999 and 1998, respectively, increased 11.5% to $341,878
in 1999. Total EBITDA increased $10,644 or 3.2% to $340,554 in 1999 from
$329,910 in 1998.
Operating income from Continuing Businesses decreased 40.8% to $54,332 in
1999 compared to $91,832 in 1998. This decrease was primarily due to the
provision for the impairment of long-lived assets of $275,788 and the provision
for product-line closures of $22,000 at PRIMEDIA Workplace Learning partially
offset by a gain on the sale of the supplemental education group of $227,710 and
by growth in EBITDA. Total operating income decreased 54.0% to $54,332 in 1999
compared to $118,157 in 1998.
Interest expense increased by $20,467 or 14.2% in 1999 compared to 1998.
This increase is due to increased borrowings outstanding for most of the year to
fund acquisitions made during 1999 and 1998. Approximately $350,000 of the
proceeds from the sale of the supplemental education group were used to repay
borrowings under the Company's bank credit facilities.
The Company's management determined that no adjustment to net deferred
income tax assets was required at December 31, 1999 and 1998. In 1999, the
Company recorded income tax expense of $6,500 related to a provision for current
state and local taxes incurred as a result of the gain on the sale of the
supplemental education group.
SPECIALTY MAGAZINES:
Sales from Continuing Businesses increased 13.3% to $1,051,170 in 1999 from
$927,501 in 1998, due primarily to approximately $103,000 from acquisitions,
such as PRIMEDIA Enthusiast Publications ("PEP", formerly known as Cowles
Enthusiast Media), the Youth Entertainment Group and several
business-to-business titles and trade shows. The Company's consumer titles such
as SEVENTEEN, MODERN BRIDE, AMERICAN BABY and CHICAGO generally benefited from a
positive advertising environment during 1999.
EBITDA from Continuing Businesses increased 8.6% to $203,211 in 1999 from
$187,104 in 1998. The EBITDA margin for Continuing Businesses decreased to 19.3%
in 1999 from 20.2% in 1998. The decrease in the margin is reflective of
increased spending on Internet site development, weakness in certain
business-to-business publications, and increased circulation costs at SEVENTEEN
and the soap opera titles.
Operating income from Continuing Businesses decreased 6.2% to $87,155 in
1999 compared to $92,952 in 1998. The EBITDA growth during the 1999 period was
more than offset by increased amortization and depreciation arising from
acquisitions.
INFORMATION:
Sales from Continuing Businesses increased 16.9% to $318,922 in 1999 from
$272,819 in 1998, due primarily to approximately $25,000 of apartment guides
advertising revenue and distribution revenue growth as well as acquisitions.
12
<PAGE>
EBITDA from Continuing Businesses decreased 1.8% to $72,647 in 1999 from
$73,969 in 1998. The EBITDA margin for Continuing Businesses decreased to 22.8%
in 1999 from 27.1% in 1998. The decrease in the margin is reflective of
increased Internet investment in 1999.
Operating income from Continuing Businesses decreased by 45.5% to $23,784 in
1999 compared to $43,630 in 1998. The decrease was primarily due to a $14,333
long-lived asset impairment charge, the decline in EBITDA and an increase in
depreciation expense.
EDUCATION:
Sales from Continuing Businesses increased 4.6% to $346,010 in 1999 from
$330,790 in 1998, primarily attributable to approximately $19,000 from the
acquisition of American Guidance Service in 1998. This increase was partially
offset by lower sales at PRIMEDIA Workplace Learning where unprofitable product
lines were closed.
EBITDA from Continuing Businesses increased 10.3% to $99,682 in 1999 from
$90,400 in 1998. The EBITDA margin increased to 28.8% in 1999 from 27.3% in
1998. The increase in the margin reflects the positive results of the refocusing
effort at PRIMEDIA Workplace Learning and certain non-recurring integration
costs at American Guidance Service which were incurred in 1998, offset by
increased product development costs at QWIZ and Pictorial.
Operating loss from Continuing Businesses increased 70.0% to $25,736 in 1999
from $15,142 in 1998. This change was due primarily to the provision for
impairment of long-lived assets of $261,455 and the provision for product line
closures of $22,000 at PRIMEDIA Workplace Learning during 1999. These provisions
were partially offset by a gain on the sale of the supplemental education group
of $227,710, by a decrease in amortization expense due to the sale of the
supplemental education group, and by growth in EBITDA.
CORPORATE:
Corporate expenses increased to $34,986 in 1999 from $28,324 in 1998,
primarily due to approximately $6,100 of incremental overhead items related to
the change of senior management. Corporate operating loss increased to $30,871
in 1999 from $29,608 in 1998 primarily due to the increase in corporate overhead
partially offset by a $6,178 realized gain on the sale of a PRIMEDIA Ventures
investment.
INTERNET OPERATIONS:
The following presents actual Internet results adjusted to present these
Internet operations as if they were conducted as stand-alone businesses. Pro
forma adjustments include the allocation of bundled revenues and various
intercompany expenses.
The Company applied standard Internet industry ranges and methodologies to
its historical operating results to calculate pro forma results related to the
following on-line transactions: sales of print products, third-party commerce,
proprietary product sales, subscriptions, display and classified advertisements
and pay-per-use services.
In June 1999, intercompany agreements were put in place and the methodology
utilized in the previous 18 months was consistent with and incorporated into
these agreements. The following pro forma information was prepared as if these
intercompany agreements were in place effective January 1, 1998.
The Company believes the accounting used for the pro forma adjustments
provides a reasonable basis on which to present the pro forma results. The pro
forma adjustments relate to the year ended December 31, 1998 and the period
January 1, 1999 through June 30, 1999. The pro forma Internet information is
provided for informational purposes only, should not be construed to be
indicative of the
13
<PAGE>
historical results had these Internet businesses been operated as stand-alone
operations and is not intended to project future results of operations of the
Internet businesses.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999
----------------------------------
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
-------- ----------- ---------
<S> <C> <C> <C>
INTERNET REVENUES:
Specialty Magazines....................................... $ 3,374 $ -- $ 3,374
Information............................................... 13,838 5,116(1) 18,954
Education................................................. 1,725 -- 1,725
-------- ------- --------
Total................................................. $ 18,937 $ 5,116 $ 24,053
======== ======= ========
INTERNET EBITDA LOSS:
Specialty Magazines....................................... $(10,395) $ (475)(2) $(10,870)
Information............................................... (12,193) (1,431)(2) (13,624)
Education................................................. (4,856) (2,068)(2) (6,924)
Corporate................................................. (1,126) (286)(2) (1,412)
-------- ------- --------
Total................................................. $(28,570) $(4,260) $(32,830)
======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
----------------------------------
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
-------- ----------- ---------
<S> <C> <C> <C>
INTERNET REVENUES:
Specialty Magazines....................................... $ 1,575 $ -- $ 1,575
Information............................................... 3,581 4,627(1) 8,208
Education................................................. 840 -- 840
------- ------- -------
Total................................................. $ 5,996 $ 4,627 $10,623
======= ======= =======
INTERNET EBITDA LOSS:
Specialty Magazines....................................... $(1,577) $ (668)(2) $(2,245)
Information............................................... (287) (1,507)(2) (1,794)
Education................................................. (968) (3,407)(2) (4,375)
Corporate................................................. (575) (534)(2) (1,109)
------- ------- -------
Total................................................. $(3,407) $(6,116) $(9,523)
======= ======= =======
</TABLE>
- ------------------------
(1) Represents the intercompany allocation of the on-line portion of bundled
classified ad sales related to the apartment guides.
(2) Represents intercompany commissions charged by the traditional media
businesses to the Internet businesses primarily for on-line advertising and
subscriptions, intercompany advertising expense as well as general overhead
allocations.
1998 COMPARED TO 1997
CONSOLIDATED RESULTS:
Sales from Continuing Businesses increased 26.3% to $1,531,110 in 1998 from
$1,211,855 in 1997, due to sales increases in all segments. Total sales,
including the Non-Core Businesses, increased by 5.8% in 1998 as compared to the
same period in 1997.
14
<PAGE>
Consolidated EBITDA from Continuing Businesses increased by 15.7% to
$323,149 in 1998 from $279,392 in 1997 mainly as a result of acquisitions in all
segments and sales growth attributable to existing operations in the specialty
magazines and information segments. The sales increases were partially offset by
increased paper costs, the satellite failure at Channel One as well as reduced
margins at SOAP OPERA DIGEST due to the change from a bi-weekly to a weekly
publication.
Operating income from Continuing Businesses decreased 14.3% to $91,832
during 1998 from $107,213 during the same period in 1997. This decrease was
attributable to certain management reorganization costs and the EXEN shutdown
provision. In addition, amortization expense increased due to the write-off of
EXEN's goodwill and other intangible assets as well as acquisitions. Total
operating income (loss) as reported, including the Non-Core Businesses,
increased to $118,157 in 1998 from $(20,793) during the same period in 1997. The
change is primarily due to the $138,640 provision for loss on the sale of
certain Non-Core Businesses recorded during the third quarter of 1997.
Interest expense increased by 5.7% during 1998 as compared to 1997.
Additional interest from increased borrowings to fund acquisitions during the
period was partially mitigated by interest savings associated with the 1998
offerings.
Other expense, net in 1998 primarily represents a final legal settlement
relating to the acquisition of McMullen & Yee.
The Company's management determined that no adjustment to net deferred
income tax assets was required at December 31, 1998 and 1997.
SPECIALTY MAGAZINES:
Sales from Continuing Businesses increased 29.8% to $927,501 in 1998 from
$714,464 in 1997, primarily due to approximately $185,700 from acquisitions as
well as advertising and circulation growth at various specialty consumer and
business-to-business magazines, particularly SEVENTEEN.
EBITDA from Continuing Businesses in the specialty magazines segment
increased 17.3% to $187,104 primarily due to growth from acquisitions and
advertising and circulation growth at SEVENTEEN, partially offset by increased
paper costs, reduced margins at SOAP OPERA DIGEST due to the change from a bi-
weekly to a weekly magazine, weakness in the soap opera market and integration
costs associated with the Cowles acquisition.
Operating income from Continuing Businesses decreased $103 to $92,952 in
1998 from $93,055 in 1997, due to increased goodwill and other intangible
amortization expense resulting from acquisitions as well as certain management
reorganization costs.
Results from Continuing Businesses exclude NEW WOMAN, STAGEBILL, Intertec
Mailing Services and certain enthusiast titles recently sold or discontinued.
INFORMATION:
Sales from Continuing Businesses increased 19.6% to $272,819 in 1998 from
$228,145 in 1997. This increase is primarily attributable to approximately
$22,500 of advertising and distribution revenue growth at the apartment and new
homes guides, as well as strong growth at Bacon's and acquisitions, offset by a
one-time telemarketing write-off at PRIMEDIA Information.
EBITDA from Continuing Businesses in the information segment increased 16.2%
to $73,969 due to sales growth at Haas and Bacon's as well as acquisitions.
Operating income from Continuing Businesses increased 47.0% to $43,630 in
1998 from $29,671 in 1997, due largely to the growth in EBITDA.
Results from Continuing Businesses exclude THE DAILY RACING FORM and Nelson.
15
<PAGE>
EDUCATION:
Sales from Continuing Businesses increased 22.9% to $330,790 in 1998 from
$269,246 in 1997 primarily attributable to approximately $63,300 from
acquisitions, offset by lower revenues at certain PRIMEDIA Workplace Learning
networks. Advertising revenue also declined at Channel One due to the failure of
PanAmSat's Galaxy IV satellite, which interrupted broadcasting for two weeks
during the second quarter.
EBITDA from Continuing Businesses in the education segment increased 10.5%
to $90,400, which is largely attributable to acquisitions offset by losses
associated with certain networks at PRIMEDIA Workplace Learning and the
satellite failure at Channel One.
Operating income (loss) from Continuing Businesses decreased to $(15,142) in
1998 from $10,131 in 1997, due to the EXEN shutdown provision, including the
write-off of goodwill and other intangible assets and certain management
reorganization costs.
Results from Continuing Businesses exclude Krames, Katharine Gibbs,
Newbridge (excluding Films for the Humanities and Sciences) and the Funk and
Wagnalls' products.
CORPORATE:
Corporate expenses increased to $28,324 in 1998 from $25,545 in 1997 and
Corporate operating loss increased to $29,608 in 1998 from $25,644 in 1997,
largely attributable to an increase in corporate headcount which was reflective
of the growth of the Company.
NON-CORE BUSINESSES:
Sales from Non-Core Businesses declined to $42,463 in 1998 from $275,740 in
1997 due to the divestitures of most of the Non-Core Businesses during 1997.
EBITDA from the Non-Core Businesses declined to $6,761 primarily as a result
of the timing of divestitures and product discontinuances most of which occurred
in 1997.
Operating income (loss) from Non-Core Businesses increased to $26,325 in
1998 from $(128,006) in 1997, largely attributable to losses on the sales of
certain Non-Core Businesses in 1997.
LIQUIDITY AND CAPITAL RESOURCES
Consolidated working capital, which includes current maturities of long-term
debt, was $(200,458) at December 31, 1999 compared to $(234,045) at
December 31, 1998. Consolidated working capital reflects certain industry
working capital practices and accounting principles, including the expensing of
certain editorial and product development costs when incurred and the recording
of deferred revenue from subscriptions as a current liability. Advertising costs
are expensed when the promotional activities occur except for certain
direct-response advertising costs which are capitalized and amortized over the
estimated period of future benefit.
1999 COMPARED TO 1998
Net cash provided by operating activities, as reported, during 1999, after
interest payments of $164,956, decreased 23.8% to $107,298 as compared to
$140,804 during the same 1998 period, primarily due to higher interest payments
and increased cash used by operating assets and liabilities reflecting the sale
of SEG during its peak cash generating period. Net capital expenditures
increased 25.8% to $69,488 during 1999 compared to $55,238 during 1998 due
primarily to increased spending on new office space and computer systems,
approximately $5,000 of which related to addressing the year 2000 problem. Net
cash provided by (used in) investing activities during 1999 was $186,081
compared to $(609,621) during 1998 due to lower level of acquisition spending in
1999 and the proceeds received from the sale of SEG. Net
16
<PAGE>
cash provided by (used in) financing activities during 1999 was $(289,256)
compared to $470,377 during 1998. The change was primarily attributable to
greater paydowns of borrowings under the Company's credit facilities in 1999
associated with the use of proceeds received from the sale of SEG. In addition,
there were higher borrowings in 1998 to fund greater acquisition spending.
1998 COMPARED TO 1997
Net cash provided by operating activities, as reported, during 1998, after
interest payments of $139,623, was $140,804, an increase of 12.3% over 1997, due
primarily to EBITDA growth. Net cash used in investing activities, as reported,
increased in 1998 primarily attributable to increased spending on acquisitions.
Payments for acquisitions of $609,602 were made in 1998 as compared to $326,192
in 1997. Net capital expenditures increased by $24,130 or 77.6% to $55,238 in
1998 from 1997 primarily due to increased capitalized software expenditures,
approximately $8,000 of which related to addressing the year 2000 problem. Net
cash provided by financing activities, as reported, increased $423,689 to
$470,377 in 1998 as compared to $46,688 in 1997. The increase was primarily
attributable to increased borrowings associated with acquisitions.
NET OPERATING LOSS CARRYFORWARDS
At December 31, 1999, the Company had NOLs of approximately $752,500 which
will be available to reduce future taxable income. In addition, management
estimates that approximately $1,074,000 of unamortized goodwill and other
intangible assets will be available as deductions from any future taxable
income.
FINANCING ARRANGEMENTS
On March 11, 1999, the Company completed an amendment to and restatement of
its existing credit facility with the Chase Manhattan Bank, the Bank of New
York, Bankers Trust Company and the Bank of Nova Scotia as agents (the "Amended
Credit Facility").
Under the terms of the Amended Credit Facility, the Company entered into a
new 364-day bank revolving credit facility for $150,000, which expired on
December 30, 1999, and borrowed $250,000 under a B Term Loan ("Term Loan B").
The amount borrowed under Term Loan B bears interest at LIBOR plus 2.75% with a
step-down based on reduced leverage levels. The principal amount of Term Loan B
will be repaid semi-annually on June 30 and December 31 of each year, with an
initial payment of $1,250 on June 30, 2000, installments of $1,250 on each
payment date thereafter through December 31, 2003 and a final payment of
$240,000 on July 31, 2004.
On December 30, 1999, the Company completed a Second Amendment to the
Amended Credit Facility ("the Second Amendment"). The Second Amendment increased
the Company's flexibility to make investments, and delayed the tightening of
financial covenants for one year.
As of December 31, 1999, the Company had commitments under its Amended
Credit Facility of $1,560,000 and borrowings outstanding under the Amended
Credit Facility of $1,050,525. As of December 31, 1999, the amounts borrowed
under the Amended Credit Facility bore interest at a weighted average variable
interest rate of 8.34%. Also, at December 31, 1999, the Company had outstanding
$100,000 of 10 1/4% Senior Notes, $300,000 of 8 1/2% Senior Notes, $250,000 of
7 5/8% Senior Notes, 2,000,000 shares of $10.00 Series D Exchangeable Preferred
Stock, 1,250,000 shares of $9.20 Series F Exchangeable Preferred Stock and
2,500,000 shares of $8.625 Series H Exchangeable Preferred Stock.
The above indebtedness, among other things, limits the ability of the
Company to change the nature of its businesses, incur indebtedness, create
liens, sell assets, engage in mergers, consolidations or transactions with
affiliates, make investments in or loans to certain subsidiaries, issue
guarantees and make certain restricted payments including dividend payments on
its common stock in excess of $25,000 in any
17
<PAGE>
given year. Under the Company's most restrictive debt covenants, the Company
must maintain a minimum interest coverage ratio of 1.8 to 1 and a minimum fixed
charge coverage ratio of 1.05 to 1. The Company's maximum allowable debt
leverage ratio is 6.0 to 1. The Company believes it is in compliance with the
financial and operating covenants of its principal financing arrangements.
Borrowings under the above indebtedness are guaranteed by each of the domestic
wholly-owned restricted subsidiaries of the Company. Such guarantees are full,
unconditional and joint and several.
In June 1999, the Company created certain unrestricted subsidiaries to hold
substantially all of its Internet assets and businesses. These entities were
created to enhance the Company's ability to effectively manage its Internet
operations, properly incentivize Internet management and allow for the creation
of separate capital structures in the future. The Company's unrestricted and
foreign subsidiaries are not guarantors of the above indebtedness. The
consolidating condensed financial statements of the Company depicting separately
its domestic subsidiaries, foreign subsidiaries and unrestricted subsidiaries
are presented in Note 23 of the notes to the consolidated financial statements.
The aggregate mandatory reductions of the commitments under the Amended
Credit Facility are $180,000 per year in 2000 through 2003 with a final
reduction of $90,000 in 2004. To the extent that the total revolving credit
loans outstanding exceed the reduced commitment amount, these loans must be paid
down to an amount equal to or less than the reduced commitment amount. However,
if the total revolving credit loans outstanding do not exceed the reduced
commitment amount, then there is no requirement to pay down any of the revolving
credit loans. Term loan payments under the Amended Credit Facility are $102,500
per year in 2000 through 2003 with a final payment of $340,000 in 2004. The
10 1/4% Senior Notes mature in June 2004, the 8 1/2% Senior Notes mature in
February 2006, and the 7 5/8% Senior Notes mature in April 2008. The per annum
principal and interest payments relating to an acquisition obligation are
scheduled to be $19,167 and $8,833 to be made in semi-annual installments in
2000 and 2001, respectively. The Company's aggregate lease obligations for 2000,
2001 and 2002 are expected to be approximately $42,000, $36,000 and $30,000,
respectively. The Company believes its liquidity, capital resources and cash
flow are sufficient to fund planned capital expenditures, working capital
requirements, interest and principal payments on its debt, the payment of
preferred stock dividends and other anticipated expenditures for the foreseeable
future.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which requires that derivative
instruments be measured at fair value and recognized as assets or liabilities in
a company's balance sheet. In June 1999, the FASB issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities--Deferral of the
Effective Date of FASB Statement No. 133--an amendment of FASB Statement 133,"
which defers the effective date of SFAS No. 133 until fiscal years beginning
after June 15, 2000. The Company is currently evaluating the effect that SFAS
No. 133 will have on the Company's consolidated financial statements.
IMPACT OF INFLATION
The impact of inflation was immaterial during 1999, 1998 and 1997. Paper
prices declined through the first six months of 1997. Moderate paper price
increases occurred in July 1997 and in January 1998 for most of the grades of
paper used by the Company. Paper prices began to decline in October 1998, have
continued that trend through the third quarter of 1999 and increased 7% in the
fourth quarter of 1999. During 1999, paper costs represented approximately 8% of
the Company's total operating costs and expenses. Postage for product
distribution and direct mail solicitations is also a significant expense of the
Company. The Company uses the U.S. Postal Service for distribution of many of
its products and marketing materials. Postage costs increased approximately 4%
in January 1999. In the past, the effects of inflation on operating expenses
have substantially been offset by PRIMEDIA's ability to increase selling
18
<PAGE>
prices. No assurances can be given that the Company can pass such cost increases
through to its customers. In addition to pricing actions, the Company is
continuing to examine all aspects of the manufacturing and purchasing processes
to identify ways to offset some of the effects of inflation.
IMPACT OF YEAR 2000
In late 1999, the Company completed its remediation and testing of systems.
The Company expended approximately $5,000 during 1999 for a total of $13,000 in
connection with remediating its systems. These costs were attributable to the
ongoing system improvements of the Company and addressed the year 2000 problem
at the same time. As a result of those planning and implementation efforts, the
Company experienced no significant disruptions in mission critical information
technology and non-information technology systems and believes those systems
successfully responded to the year 2000 date change. The Company is not aware of
any material problems resulting from year 2000 issues, either with its products,
its internal systems, or the products and services of third parties. The Company
will continue to monitor its mission critical computer applications and those of
its suppliers and vendors throughout the year 2000 to ensure that any latent
year 2000 matters that may arise are addressed promptly. Although the Company
believes it has taken appropriate steps to address the year 2000 problem, there
is no guarantee that the Company's efforts will prevent an unanticipated event,
which may have a material adverse impact on the results of operations and
financial condition.
FORWARD-LOOKING INFORMATION
This report contains certain forward-looking statements concerning the
Company's operations, economic performance and financial condition. These
statements are based upon a number of assumptions and estimates which are
inherently subject to uncertainties and contingencies, many of which are beyond
the control of the Company, and reflect future business decisions which are
subject to change. Some of these assumptions may not materialize and
unanticipated events will occur which can affect the Company's results.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is exposed to the impact of changes in interest rates. In the
normal course of business, the Company manages fluctuations in interest rates
through the use of swap agreements to hedge a majority of its floating rate
borrowings. The Company's objective in managing this exposure is to reduce
fluctuations in earnings and cash flows associated with changes in interest
rates.
The following table provides information about our financial instruments
that are sensitive to changes in interest rates, including debt obligations and
interest rate swaps at December 31, 1999 and 1998. For debt obligations, the
table presents mandatory principal reductions, repayment schedules of
outstanding debt and projected weighted average interest rates by expected
maturity dates. For interest rate swaps, the table presents notional amounts and
projected weighted average interest rates by contractual maturity dates. For
variable rate instruments, we have indicated the applicable floating rate index.
19
<PAGE>
AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
FAIR VALUE
2000 2001 2002 2003 2004 THEREAFTER TOTAL AT 12/31/99
-------- -------- ---------- -------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES
Long-Term Debt Including
Current Portion:
Fixed Rate Debt.............. $ 17,561 $ 8,551 $ -- $ -- $100,000 $550,000 $ 676,112 $ 659,617
Average Interest Rate........ 8.49% 8.43% 8.43% 8.43% 8.10% 8.10% 8.61%
Variable Rate Debt........... $ -- $ 55,525 $282,500 $282,500 $430,000 $ -- $1,050,525 $1,050,525
Average Interest
Rate--Forward LIBOR Curve
Plus Determined Spread..... 7.83% 7.87% 7.92% 7.96% 7.78% -- 7.87%
<CAPTION>
FAIR VALUE
2000 2001 AT 12/31/99
-------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST RATE DERIVATIVES
Interest Rate Swaps:
Pay Fixed/Receive
Variable--Notional Amount... $600,000 $200,000 $ 1,563
Average pay rate.............. 6.33% 6.30%
Average receive rate--Forward
LIBOR Curve................. 6.58% 6.99%
</TABLE>
AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
FAIR VALUE
1999 2000 2001 2002 2003 THEREAFTER TOTAL AT 12/31/98
-------- -------- ---------- ---------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES
Long-Term Debt Including
Current Portion:
Fixed Rate Debt............ $ 18,002 $ 17,561 $ 8,616 $ -- $ -- $650,000 $ 694,179 $ 704,679
Average Interest Rate...... 8.61% 8.49% 8.43% 8.43% 8.43% 7.51% 7.90%
Variable Rate Debt......... $ -- $228,236 $280,000 $280,000 $280,000 $190,000 $1,258,236 $1,258,236
Average Interest
Rate--Forward LIBOR Curve
Plus Determined Spread... 6.71% 6.76% 6.86% 6.89% 7.01% 7.24% 6.84%
<CAPTION>
FAIR VALUE
1999 2000 2001 AT 12/31/98
-------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST RATE DERIVATIVES
Interest Rate Swaps:
Pay Fixed/Receive
Variable--Notional
Amount.................... $600,000 $600,000 $200,000 $ 18,519
Average pay rate............ 6.33% 6.33% 6.30%
Average receive
rate--Forward LIBOR
Curve..................... 5.21% 5.63% 5.98%
</TABLE>
20
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
TABLE OF CONTENTS TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
PRIMEDIA INC. AND SUBSIDIARIES
Report of Independent Auditors--Deloitte & Touche LLP..... 22
Statements of Consolidated Operations for the Years Ended
December 31, 1999, 1998 and
1997.................................................... 23
Consolidated Balance Sheets as of December 31, 1999 and
1998.................................................... 24
Statements of Consolidated Cash Flows for the Years Ended
December 31, 1999, 1998 and
1997.................................................... 25
Statements of Shareholders' Equity (Deficiency) for the
Years Ended December 31, 1999, 1998 and 1997............ 26
Notes to Consolidated Financial Statements for the Years
Ended December 31, 1999, 1998 and 1997.................. 28
</TABLE>
21
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of
PRIMEDIA Inc.
New York, New York:
We have audited the accompanying consolidated balance sheets of PRIMEDIA
Inc. and subsidiaries (the "Company") as of December 31, 1999 and 1998, and the
related statements of consolidated operations, shareholders' equity
(deficiency), and consolidated cash flows for each of the three years in the
period ended December 31, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company at December 31,
1999 and 1998, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1999 in conformity with
generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for internal use computer software costs to
conform with Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" of the American Institute of
Certified Public Accountants in 1998.
DELOITTE & TOUCHE LLP
New York, New York
February 2, 2000
22
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
NOTES 1999 1998 1997
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales, net.................................................. 22 $ 1,716,102 $ 1,573,573 $ 1,487,595
Operating costs and expenses:
Cost of goods sold........................................ 392,105 367,466 341,879
Marketing and selling..................................... 315,380 280,323 271,351
Distribution, circulation and fulfillment................. 297,372 260,428 262,151
Editorial................................................. 145,957 145,235 120,952
Other general expenses.................................... 189,748 161,887 163,705
Corporate administrative expenses......................... 20 34,986 28,324 25,545
Depreciation of property and equipment.................... 7, 22 47,653 42,214 37,334
Amortization of intangible assets, excess of purchase
price over net assets acquired and other................ 4, 8 176,361 176,755 146,831
(Gain) loss on the sales of businesses and other, net..... 4, 18 (235,580) (7,216) 138,640
Provision for the impairment of long-lived assets......... 8 275,788 -- --
Provision for product-line closures....................... 4 22,000 -- --
------------ ------------ ------------
Operating income (loss)..................................... 54,332 118,157 (20,793)
Other income (expense):
Interest expense.......................................... (164,909) (144,442) (136,625)
Amortization of deferred financing costs.................. 9 (3,286) (3,046) (3,071)
Other, net................................................ 250 (8,405) 1,365
------------ ------------ ------------
Loss before income tax benefit (expense) and extraordinary
charge.................................................... (113,613) (37,736) (159,124)
Income tax benefit (expense)................................ 12 (6,500) -- 1,685
------------ ------------ ------------
Loss before extraordinary charge............................ (120,113) (37,736) (157,439)
Extraordinary charge--extinguishment of debt................ 11 -- -- (15,401)
------------ ------------ ------------
Net loss.................................................... (120,113) (37,736) (172,840)
Preferred stock dividends:
Cash...................................................... (53,062) (54,144) (54,822)
Non-cash dividends in kind................................ -- -- (4,451)
Preferred stock redemption premiums....................... -- (9,141) (5,800)
------------ ------------ ------------
Loss applicable to common shareholders...................... $ (173,175) $ (101,021) $ (237,913)
============ ============ ============
Basic and diluted loss applicable to common shareholders per
common share: 15
Loss before extraordinary charge.......................... $ (1.19) $ (.71) $ (1.72)
Extraordinary charge...................................... -- -- (.12)
------------ ------------ ------------
Net loss.................................................. $ (1.19) $ (.71) $ (1.84)
============ ============ ============
Basic and diluted common shares outstanding................. 15 145,418,441 142,529,024 129,304,900
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
23
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1999 1998
NOTES ----------- -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 28,661 $ 24,538
Accounts receivable, net.............................. 5 235,565 247,138
Inventories, net...................................... 6 32,709 41,254
Prepaid expenses and other............................ 36,480 34,212
----------- -----------
Total current assets.............................. 333,415 347,142
Property and equipment, net............................. 7 152,343 147,658
Other intangible assets, net............................ 8 619,950 730,241
Excess of purchase price over net assets acquired,
net................................................... 8 1,215,406 1,526,503
Deferred income tax asset, net.......................... 12 176,200 176,200
Other non-current assets................................ 9 217,238 113,330
----------- -----------
$ 2,714,552 $ 3,041,074
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable...................................... $ 102,678 $ 118,637
Accrued interest payable.............................. 19,379 20,451
Accrued expenses and other............................ 10 217,737 220,571
Deferred revenues..................................... 171,339 197,131
Current maturities of long-term debt.................. 11 22,740 24,397
----------- -----------
Total current liabilities......................... 533,873 581,187
----------- -----------
Long-term debt.......................................... 11, 23 1,732,896 1,956,997
----------- -----------
Other non-current liabilities........................... 31,796 25,788
----------- -----------
Commitments and contingencies 19
Exchangeable preferred stock (aggregated liquidation and
redemption values of $575,000 at December 31, 1999 and
1998, respectively)................................... 13 559,689 557,841
----------- -----------
Common stock subject to redemption ($.01 par value,
53,310 shares and 294,119 shares outstanding at
December 31, 1999 and 1998, respectively)............. 14 536 2,964
----------- -----------
Shareholders' deficiency:
Common stock ($.01 par value, 250,000,000 shares
authorized; 148,346,759 shares and 146,966,562
shares issued at December 31, 1999 and 1998,
respectively)....................................... 14, 20 1,483 1,470
Additional paid-in capital............................ 14, 20 986,649 979,720
Accumulated deficit................................... (1,203,207) (1,030,032)
Accumulated other comprehensive income (loss)......... 16 87,364 (1,720)
Unearned stock grant compensation..................... 14 (15,250) --
Common stock in treasury, at cost (101,848 shares and
2,752,300 shares at December 31, 1999 and 1998,
respectively)....................................... 14 (1,277) (33,141)
----------- -----------
Total shareholders' deficiency.................... (144,238) (83,703)
----------- -----------
$ 2,714,552 $ 3,041,074
=========== ===========
</TABLE>
See notes to consolidated financial statements.
24
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss.................................................. $ (120,113) $ (37,736) $ (172,840)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization........................... 227,300 222,015 187,236
Non-cash (gain) loss on the sales of businesses and
other, net............................................ (235,580) (21,291) 138,640
Provision for the impairment of long-lived assets....... 275,788 -- --
Accretion of discount on acquisition obligation,
distribution advance and other........................ 5,474 9,264 7,343
Extraordinary charge - extinguishment of debt........... -- -- 15,401
Non-cash provision for product-line closures............ 8,809 -- --
Other, net.............................................. 976 3,114 (1,090)
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable, net................................ (24,818) (8,601) 7,885
Inventories, net........................................ (4,983) (739) 8,738
Prepaid expenses and other.............................. (9,678) (565) (10,433)
Increase (decrease) in:
Accounts payable........................................ (465) 11,245 (7,366)
Accrued interest payable................................ (1,072) 6,829 (8,528)
Accrued expenses and other.............................. (3,588) (26,500) (16,864)
Deferred revenues....................................... (10,859) (4,853) (17,377)
Other non-current liabilities........................... 107 (11,378) (5,385)
----------- ----------- -----------
Net cash provided by operating activities............... 107,298 140,804 125,360
----------- ----------- -----------
INVESTING ACTIVITIES:
Additions to property, equipment and other, net........... (69,488) (55,238) (31,108)
Proceeds from sales of businesses and other............... 413,433 62,690 171,575
Payments for businesses acquired.......................... (145,567) (609,602) (326,192)
Payments for other investments............................ (12,297) (7,471) --
----------- ----------- -----------
Net cash provided by (used in) investing activities..... 186,081 (609,621) (185,725)
----------- ----------- -----------
FINANCING ACTIVITIES:
Borrowings under credit agreements........................ 862,789 1,014,535 1,028,049
Repayments of borrowings under credit agreements.......... (1,070,500) (975,900) (694,950)
Proceeds from issuance of 7 5/8% Senior Notes, net of
discount................................................ -- 248,562 --
Payments of acquisition obligation........................ (21,166) (14,333) (6,000)
Proceeds from issuances of common stock, net of
redemptions............................................. 9,234 202,020 7,843
Proceeds from issuance of Series E (exchanged into Series
F) Preferred Stock, net of issuance costs............... -- -- 120,434
Proceeds from issuance of Series G (exchanged into Series
H) Preferred Stock, net of issuance costs............... -- 241,911 --
Redemption of Series B Preferred Stock.................... -- (166,739) --
Redemption of Senior Preferred Stock...................... -- -- (105,800)
Redemptions and purchases of 10 5/8% Senior Notes......... -- -- (242,787)
Purchases of common stock for the treasury................ (10,508) (19,983) (13,158)
Dividends paid to preferred stock shareholders............ (53,062) (53,019) (45,305)
Deferred financing costs paid............................. (5,697) (5,321) (1,372)
Other..................................................... (346) (1,356) (266)
----------- ----------- -----------
Net cash provided by (used in) financing activities..... (289,256) 470,377 46,688
----------- ----------- -----------
Increase (decrease) in cash and cash equivalents............ 4,123 1,560 (13,677)
Cash and cash equivalents, beginning of year................ 24,538 22,978 36,655
----------- ----------- -----------
Cash and cash equivalents, end of year...................... $ 28,661 $ 24,538 $ 22,978
=========== =========== ===========
SUPPLEMENTAL INFORMATION:
Businesses acquired:
Fair value of assets acquired........................... $ 204,111 $ 741,847 $ 406,382
Less: Liabilities assumed............................... 36,044 132,245 80,190
Less: Stock consideration for businesses acquired....... 22,500 -- --
----------- ----------- -----------
Cash paid for businesses acquired....................... $ 145,567 $ 609,602 $ 326,192
=========== =========== ===========
Interest paid............................................. $ 164,956 $ 139,623 $ 142,421
=========== =========== ===========
Non-cash investing and financing activities:
Assets acquired under capital lease obligations......... $ 3,052 $ 15,679 $ 15,760
=========== =========== ===========
Preferred stock dividends in kind....................... $ -- $ -- $ 4,451
=========== =========== ===========
Accretion in carrying value of preferred stock.......... $ 1,848 $ 3,733 $ 2,666
=========== =========== ===========
Accretion (reduction) in carrying value of common stock
subject to redemption................................. $ 247 $ (221) $ 755
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
25
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Balance at January 1, 1997.........
Comprehensive loss:
Net loss.......................
Other comprehensive
loss--foreign currency
translation adjustments.......
Comprehensive loss.............
Issuances of common stock, net of
issuance costs...................
Purchases of treasury stock........
Expiration of redemption feature on
common stock subject to
redemption.......................
$11.625 Series B Exchangeable
Preferred Stock--dividends in
kind.............................
$11.625 Series B Exchangeable
Preferred Stock--cash
dividends........................
$2.875 Senior Exchangeable
Preferred Stock--cash
dividends........................
$10.00 Series D Exchangeable
Preferred Stock--cash
dividends........................
$9.20 Series E Exchangeable
Preferred Stock--cash
dividends........................
$2.875 Senior Exchangeable
Preferred Stock Redemption
Premium..........................
Accretion of differences between
carrying value and redemption
value of:
$2.875 Senior Exchangeable
Preferred Stock...............
$11.625 Series B Exchangeable
Preferred Stock...............
$10.00 Series D Exchangeable
Preferred Stock...............
$9.20 Series E Exchangeable
Preferred Stock...............
Common stock subject to
redemption....................
Balance at December 31, 1997.......
Comprehensive loss:
Net loss.......................
Other comprehensive
loss--foreign currency
translation adjustments.......
Comprehensive loss.............
Issuances of common stock, net of
issuance costs...................
Purchases of treasury stock........
Expiration of redemption feature on
common stock subject to
redemption.......................
$11.625 Series B Exchangeable
Preferred Stock--cash
dividends........................
$11.625 Series B Exchangeable
Preferred Stock Redemption
Premium..........................
$10.00 Series D Exchangeable
Preferred Stock--cash
dividends........................
$9.20 Series F Exchangeable
Preferred Stock--cash
dividends........................
$8.625 Series H Exchangeable
Preferred Stock--cash
dividends........................
Reduction (accretion) of
differences between carrying
value and redemption value of:
$11.625 Series B Exchangeable
Preferred Stock...............
$10.00 Series D Exchangeable
Preferred Stock...............
$9.20 Series F Exchangeable
Preferred Stock...............
$8.625 Series H Exchangeable
Preferred Stock...............
Common stock subject to
redemption....................
Balance at December 31, 1998.......
Comprehensive loss:
Net loss.......................
Other comprehensive income:
Unrealized gain on
available-for-sale
securities, net of taxes....
Foreign currency translation
adjustments.................
Comprehensive loss.............
Issuances of common stock, net of
issuance costs...................
Purchases of treasury stock........
Issuance of treasury stock.........
Treasury stock issued for
acquisitions.....................
Stock grant........................
Compensation expense recognized....
Expiration of redemption feature on
common stock subject to
redemption.......................
$10.00 Series D Exchangeable
Preferred Stock--cash
dividends........................
$9.20 Series F Exchangeable
Preferred Stock--cash
dividends........................
$8.625 Series H Exchangeable
Preferred Stock--cash
dividends........................
Accretion of differences between
carrying value and redemption
value of:
$10.00 Series D Exchangeable
Preferred Stock...............
$9.20 Series F Exchangeable
Preferred Stock...............
$8.625 Series H Exchangeable
Preferred Stock...............
Common stock subject to
redemption....................
Balance at December 31, 1999.......
See notes to consolidated financial statements.
26
<PAGE>
<TABLE>
<CAPTION>
ACCUMULATED UNEARNED COMMON STOCK
COMMON STOCK ADDITIONAL OTHER STOCK IN TREASURY
- -------------------------------- PAID-IN ACCUMULATED COMPREHENSIVE GRANT ---------------------
SHARES AMOUNT CAPITAL DEFICIT INCOME (LOSS) COMPENSATION SHARES AMOUNT TOTAL
- --------------------- -------- ---------- ----------- ------------- ------------ ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
128,349,045 $1,283 $772,642 $ (691,098) $ (1,270) $ -- -- $ -- $ 81,557
(172,840) (172,840)
(273) (273)
---------
(173,113)
---------
1,209,693 12 8,404 8,416
1,048,600 (13,158) (13,158)
238,340 3 2,566 2,569
(4,451) (4,451)
(16,794) (16,794)
(11,564) (11,564)
(23,333) (23,333)
(3,131) (3,131)
(5,800) (5,800)
(1,734) (1,734)
(317) (317)
(546) (546)
(69) (69)
(755) (755)
----------- ------ -------- ----------- -------- -------- ---------- -------- ---------
129,797,078 1,298 780,191 (929,011) (1,543) -- 1,048,600 (13,158) (162,223)
(37,736) (37,736)
(177) (177)
---------
(37,913)
---------
17,083,484 171 201,986 202,157
1,703,700 (19,983) (19,983)
86,000 1 1,055 1,056
(4,022) (4,022)
(9,141) (9,141)
(20,000) (20,000)
(11,436) (11,436)
(18,686) (18,686)
(2,317) (2,317)
(546) (546)
(288) (288)
(582) (582)
221 221
----------- ------ -------- ----------- -------- -------- ---------- -------- ---------
146,966,562 1,470 979,720 (1,030,032) (1,720) -- 2,752,300 (33,141) (83,703)
(120,113) (120,113)
88,982 88,982
102 102
---------
(31,029)
---------
1,243,229 12 8,831 8,843
730,237 (10,508) (10,508)
(279) (181,818) 2,279 2,000
(288) (1,818,160) 22,788 22,500
(305) (17,000) (1,380,711) 17,305 --
1,750 1,750
136,968 1 1,065 1,066
(20,000) (20,000)
(11,500) (11,500)
(21,562) (21,562)
(546) (546)
(635) (635)
(667) (667)
(247) (247)
----------- ------ -------- ----------- -------- -------- ---------- -------- ---------
148,346,759 $1,483 $986,649 $(1,203,207) $ 87,364 $(15,250) 101,848 $ (1,277) $(144,238)
=========== ====== ======== =========== ======== ======== ========== ======== =========
</TABLE>
27
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. DESCRIPTION OF BUSINESS
PRIMEDIA Inc. (which together with its subsidiaries is herein referred to as
either "PRIMEDIA" or the "Company" unless the context implies otherwise) is the
authoritative source for specialized information to targeted markets. The
Company's three business segments are specialty magazines, information and
education.
The specialty magazines segment includes PRIMEDIA Consumer Magazines
("PRIMEDIA Magazines"), PRIMEDIA Special Interest Publications, McMullen Argus,
PRIMEDIA Enthusiast Publications and the majority of PRIMEDIA Intertec
("Intertec"). The specialty magazines segment is concentrated primarily on
specialty consumer magazines, and business-to-business magazines. The
information segment includes PRIMEDIA Information, HPC Publications ("Haas"),
Bacon's and a portion of PRIMEDIA Intertec. The information segment produces
consumer and business information products in a variety of formats for decision
makers in business, professional and special interest consumer markets. The
information is compiled and sold as guides, newsletters, CD-ROMs, directories
and via the Internet. The education segment includes Channel One Communications
Corp. ("Channel One"), Films for the Humanities and Sciences ("Films"), Weekly
Reader Corporation ("Weekly Reader"), American Guidance Service, Inc. ("American
Guidance Service"), PRIMEDIA Reference Inc. ("PRIMEDIA Reference"), QWIZ, Inc.,
Pictorial, Inc. and PRIMEDIA Workplace Learning (see Note 4). This segment
specializes in providing educational materials to the classroom learning and
workplace learning markets.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. The consolidated financial statements include the
accounts of PRIMEDIA and its subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the amounts of
assets, liabilities, revenues and expenses reported in the consolidated
financial statements.
Significant accounting estimates used include estimates for sales returns
and allowances, bad debts and estimates for the realization of deferred tax
assets. Management has exercised reasonableness in deriving these estimates.
However, actual results may differ from these estimates.
Certain reclassifications have been made to the prior years' consolidated
financial statements to conform with the presentation used in the current
period.
RECENT ACCOUNTING PRONOUNCEMENTS. In June 1998, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which requires that derivative instruments be measured at fair
market value and recognized as assets or liabilities in a company's balance
sheet. In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of FASB
Statement No. 133--an amendment of FASB Statement No. 133," which defers the
effective date of SFAS No. 133 until fiscal years beginning after June 15, 2000.
The Company is currently evaluating the effect that SFAS No. 133 will have on
the Company's consolidated financial statements.
CASH AND CASH EQUIVALENTS. Management considers all highly liquid
instruments purchased with an original maturity of 90 days or less to be cash
equivalents.
28
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES. Inventories, including paper, purchased manuscripts,
photographs and art, are valued at the lower of cost or market, principally on a
first-in, first-out ("FIFO") basis.
PROPERTY AND EQUIPMENT. Property and equipment, net are stated at cost less
accumulated depreciation and amortization. Depreciation of property and
equipment, and the amortization of leasehold improvements are provided at rates
based on the estimated useful lives or lease terms, if shorter, using primarily
the straight-line method. Improvements are capitalized while maintenance and
repairs are expensed as incurred.
OTHER INVESTMENTS. Investments in which the Company has at least a 20
percent voting interest, but not more than a 50 percent voting interest, are
accounted for under the equity method as the Company has the ability to exercise
significant influence. Investments in companies below 20 percent are accounted
for under the cost method. The fair value of investments in non-marketable
securities approximates cost.
In accordance with the provisions of SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," investments in marketable securities
are classified as available-for-sale and are carried at fair market value, with
the unrealized gains and losses, reported in accumulated other comprehensive
income (loss).
These investments are recorded in other non-current assets on the
accompanying consolidated balance sheets.
EDITORIAL AND PRODUCT DEVELOPMENT COSTS. Editorial costs and product
development costs are generally expensed as incurred. Product development costs
include the cost of artwork, graphics, prepress, plates and photography for new
products.
ADVERTISING AND SUBSCRIPTION ACQUISITION COSTS. Advertising and
subscription acquisition costs are expensed the first time the advertising takes
place, except for certain direct-response advertising, the primary purpose of
which is to elicit sales from customers who can be shown to have responded
specifically to the advertising and that results in probable future economic
benefits. Direct-response advertising consists of product promotional mailings,
catalogues, telemarketing and subscription promotions. These direct-response
advertising costs are capitalized as assets and amortized over the estimated
period of future benefit using a ratio of current period revenues to total
current and estimated future period revenues. The amortization periods range
from 6 months to 2 years subsequent to the promotional event. Amortization of
direct-response advertising costs is included in marketing and circulation
expenses on the accompanying statements of consolidated operations. Advertising
expense was approximately $87,400, $72,200 and $116,400 during the years ended
December 31, 1999, 1998 and 1997, respectively.
DEFERRED FINANCING COSTS. Deferred financing costs are being amortized by
the straight-line method over the terms of the related indebtedness.
DEFERRED WIRING AND INSTALLATION COSTS. Wiring and installation costs
incurred by Channel One and PRIMEDIA Workplace Learning have been capitalized
and are being amortized by the straight-line method over the related estimated
useful lives which range from 5 to 15 years.
$10.00 SERIES D EXCHANGEABLE PREFERRED STOCK ("SERIES D PREFERRED STOCK"),
$9.20 SERIES F EXCHANGEABLE PREFERRED STOCK ("SERIES F PREFERRED STOCK") AND
$8.625 SERIES H EXCHANGEABLE PREFERRED STOCK ("SERIES H
29
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PREFERRED STOCK"). The Series D Preferred Stock, Series F Preferred Stock and
Series H Preferred Stock are stated at fair value on the date of issuance less
issuance costs. The difference between their carrying values and their
redemption values is being amortized (using the interest method) by periodic
charges to additional paid-in capital.
COMMON STOCK SUBJECT TO REDEMPTION. The common stock subject to redemption
is stated at redemption value which is equal to quoted market value. The
difference between the carrying value of such stock and its redemption value is
being amortized by periodic charges to additional paid-in capital.
COMPUTER SOFTWARE. Costs incurred in connection with computer software to
be sold, leased or otherwise marketed, which represent production costs
subsequent to establishing technological feasibility, are reported as other
non-current assets and amortized to cost of goods sold over the estimated period
of future benefit using the straight-line method. In 1998, the Company adopted
the American Institute of Certified Public Accountants' ("AICPA") Statement of
Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use." Under the Company's previous accounting policy,
costs for internal use software, whether developed or obtained, were generally
expensed as incurred. In compliance with SOP 98-1, the Company expenses costs
incurred in the preliminary project stage and, thereafter, capitalizes costs
incurred in the developing or obtaining of internal use software and includes
them in property and equipment, net. Certain costs, such as maintenance and
training, are expensed as incurred. Capitalized costs are amortized over a
period of not more than five years using the straight-line method. In addition,
direct internal and external costs associated with the development of the
features, content and functionality of the Company's websites, incurred during
the application development phase, have been capitalized, and are amortized over
the estimated useful life of three years using the straight-line method.
Capitalized software costs are subject to impairment evaluation in accordance
with the provisions of SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The adoption of
a change in method of accounting for internal use software costs effective
January 1, 1998, resulted in an increase in operating income, an equal decrease
in net loss and a decrease in basic and diluted loss per common share of
approximately $9,000 ($.06 per share) and $12,450 ($.09 per share) for the years
ended December 31, 1999 and December 31, 1998, respectively.
INTEREST RATE SWAP AGREEMENTS. The Company's interest rate swap agreements
are designated and effective as modifications to existing debt obligations to
reduce the impact of changes in the interest rates on its floating rate
borrowings and, accordingly, are accounted for using the settlement method of
accounting. The differentials to be paid or received under the interest rate
swap agreements are accrued as interest rates change and are recognized as
adjustments to interest expense. The Company considers swap terms including the
reference rate, payment and maturity dates and the notional amount in
determining if an interest rate swap agreement is effective at modifying an
existing debt obligation. If the criteria for designation are no longer met or
the underlying instrument matures or is extinguished, the Company will account
for outstanding swap agreements at fair market value and any resulting gain or
loss will be recognized as other income or expense. Any gains or losses upon
early termination of the agreements will be deferred and amortized over the
shorter of the remaining life of the hedged existing debt obligation or the
original life of the interest rate swap agreement.
PURCHASE ACCOUNTING. With respect to the acquisitions, the total purchase
price has been allocated to the tangible and intangible assets and liabilities
based on their respective fair values.
30
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED AND OTHER INTANGIBLE
ASSETS. Other intangible assets are being amortized using both accelerated and
straight-line methods over periods ranging from 1/4 of 1 year to 40 years. The
excess of purchase price over net assets acquired is being amortized on a
straight-line basis over 40 years. The recoverability of the carrying values of
the excess of the purchase price over the net assets acquired and other
intangible assets is evaluated quarterly to determine if an impairment in value
has occurred. An impairment in value will be considered to have occurred when it
is determined that the undiscounted future operating cash flows generated by the
acquired businesses are not sufficient to recover the carrying values of such
intangible assets. If it has been determined that an impairment in value has
occurred, the excess of the purchase price over the net assets acquired and
other intangible assets would be written down to an amount which will be
equivalent to the present value of the future operating cash flows to be
generated by the acquired businesses.
REVENUE RECOGNITION. Advertising revenues for all consumer magazines are
recognized as income at the on-sale date, net of provisions for estimated
rebates, adjustments and discounts. Other advertising revenues are generally
recognized based on the publications' cover dates. Newsstand sales are
recognized as income at the on-sale date for all publications, net of provisions
for estimated returns. Subscriptions are recorded as deferred revenue when
received and recognized as income over the term of the subscription. PRIMEDIA
Workplace Learning's subscription and broadcast fees for satellite and videotape
network services are recognized in the month services are rendered. Sales of
books and other items are recognized as revenue upon shipment, net of an
allowance for returns. Distribution costs charged to customers are recognized as
revenue when the related product is shipped. Channel One advertising revenue,
net of commissions, is recognized as advertisements are aired on the program.
Certain advertisers are guaranteed a minimum number of viewers per advertisement
shown; the revenue recognized is based on the actual viewers delivered not to
exceed the original contract value.
FOREIGN CURRENCY. Realized gains and losses on foreign currency
transactions, which are not significant, have been included in other, net on the
accompanying statements of consolidated operations. The effects of translation
of foreign currency financial statements into U.S. dollars are included in the
accumulated other comprehensive income (loss) account in shareholders' equity
(deficiency) on the accompanying consolidated balance sheets.
3. ACQUISITIONS AND OTHER INVESTMENTS
ACQUISITIONS. The Company acquired certain net assets or stock of:
1997-QWIZ, a provider of interactive, computer-based testing and training
products; a leading electronic automotive cost guide; a publisher of automotive
enthusiast magazines including LOWRIDER, ARTE, LOWRIDER BICYCLE and LOWRIDER
JAPAN; the publisher of REGISTERED REPRESENTATIVE, a trade magazine edited for
and circulated to the retail securities industry in the United States; a
publisher of specialty magazines targeting the professional recording, sound and
music production industry; and the leading provider of highly specialized
training and certification software products for the insurance industry. In
addition to the aforementioned, the Company completed several other smaller
acquisitions during 1997. The 1997 acquisitions, if they had occurred on
January 1 of the year prior to acquisition, would not have had a material impact
on the results of operations.
31
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
3. ACQUISITIONS AND OTHER INVESTMENTS (CONTINUED)
1998-Cowles Enthusiast Media and Cowles Business Media, publishers of 25
enthusiast titles, 11 technical and trade magazines and newsletters including,
FLY FISHERMAN, VEGETARIAN TIMES and CABLE WORLD; American Guidance Service, a
leading publisher of assessments, textbooks and instructional materials for
students with special education needs; and American Trucker, a publisher of 18
regional monthly journals. In addition to the aforementioned, the Company
completed several other smaller acquisitions during 1998. The 1998 acquisitions,
had they occurred on January 1 of the year prior to acquisition, would not have
had a material impact on the results of operations.
1999--Game & Fish, a publisher of 30 state and regional specific game and
fish magazines and a producer of trade shows and publisher of a monthly trade
magazine for the emerging telecom carrier market. In addition to the
aforementioned, the Company completed several other smaller acquisitions during
1999. The 1999 acquisitions, if they had occurred on January 1 of the year prior
to acquisition, would not have had a material impact on the results of
operations. The 1999 acquisitions affected all segments and were primarily
financed through borrowings under the Company's credit agreements. The cash
payments for these acquisitions on an aggregate basis were $145,567, in addition
to the transfer of the Company's common shares valued at $22,500. The payments
were net of liabilities assumed of approximately $36,000 and include certain
immaterial purchase price adjustments. The excess purchase price over net assets
acquired was approximately $164,000.
The acquisitions have been accounted for by the purchase method. The
preliminary purchase cost allocations for the above-mentioned current year's
acquisitions are subject to adjustment when additional information concerning
asset and liability valuations is obtained. The final asset and liability fair
values may differ from those set forth on the accompanying consolidated balance
sheet at December 31, 1999; however, the changes are not expected to have a
material effect on the consolidated financial position of the Company. The
consolidated financial statements include the operating results of these
acquisitions subsequent to their respective dates of acquisition.
OTHER INVESTMENTS. In 1998, the Company created PRIMEDIA Ventures, Inc.
("PRIMEDIA Ventures") to invest in early-stage Internet companies and other
technology opportunities such as e-commerce services, enterprise software
applications and advertising-related technologies. Its investments include
Mypoints, a provider of on-line loyalty and rewards programs and CarsDirect, the
leading direct marketer of new cars and trucks on the Internet as well as an
on-line wedding gift registry service, subscription-based Internet services for
building relationships and an Internet platform for staging live interactive
presentations. In addition, in 1998, PRIMEDIA Intertec made an investment in a
joint venture in China to publish trade magazines in Chinese language editions.
The cost of such investments aggregated $12,297 and $7,471 during 1999 and 1998,
respectively (see Notes 2 and 9).
In 1999, the Company sold one of PRIMEDIA Ventures' investments in
marketable securities and realized a gain of $6,178 which is included in (gain)
loss on the sales of businesses and other, net on the accompanying statement of
consolidated operations. In addition, the Company recorded an unrealized gain of
$88,982 related to the revaluation of its PRIMEDIA Ventures investments meeting
the criteria of SFAS No. 115. This unrealized gain is recorded as a component of
other comprehensive income on the accompanying statement of shareholders' equity
(deficiency) for the year ended December 31, 1999. At December 31, 1999, the
cost and fair value of the investments in Mypoints and InterVU, which are
marketable securities, was $2,807 and $91,789, respectively.
32
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
4. DIVESTITURES, NON-CORE BUSINESSES AND PRODUCT-LINE CLOSURES
During 1996, the Company decided to divest Katharine Gibbs. In 1997, the
Company announced its intention to divest the following non-core business units:
THE DAILY RACING FORM, Newbridge Communications, Inc. (excluding Films for the
Humanities and Sciences), NEW WOMAN magazine, Krames Communications Incorporated
("Krames"), STAGEBILL and Intertec Mailing Services. In 1998, the Company
decided to divest Nelson Information, Inc. ("Nelson") and certain enthusiast
titles as well as discontinue the Funk and Wagnalls' products and certain other
enthusiast titles. These planned divestitures and discontinuances are
collectively referred to as the "Non-Core Businesses" and were part of the
Company's plan to focus on markets that have dynamic growth opportunities.
During the second quarter of 1997, the Company completed the sale of
Katharine Gibbs with proceeds, net of direct selling expenses, approximating
carrying value. During the third quarter of 1997, the Company recorded a
provision aggregating $138,640 for the reduction of the carrying values of
Newbridge Communications, Inc. (excluding Films for the Humanities and
Sciences), THE DAILY RACING FORM, STAGEBILL, Krames, NEW WOMAN magazine and
Intertec Mailing Services to the estimated realizable value of the net assets of
such businesses. During the second half of 1997, the Company completed the sales
of Krames, NEW WOMAN magazine, Intertec Mailing Services, Newbridge Book Clubs,
Newbridge Educational Publishing and STAGEBILL. In connection with these sales,
the Company received aggregate proceeds of $171,575, net of direct selling
expenses.
In 1998, the Company completed its divestiture program with the sales of
Nelson, certain enthusiast titles and THE DAILY RACING FORM. In connection with
these sales, the Company recorded a gain of $19,716 and has received aggregate
proceeds of $61,090, net of direct selling expenses.
The operating results of the Non-Core Businesses are included in the
accompanying statements of consolidated operations up to their date of
disposition for the years ended December 31, 1998 and 1997. Total sales for the
Non-Core Businesses were $42,463 and $275,740 for the years ended December 31,
1998 and 1997, respectively. Excluding the (gain) loss on the sales of
businesses and other, net, operating income for the Non-Core Businesses was
$6,609 and $10,634 for the years ended December 31, 1998 and 1997, respectively
(see Note 22).
On August 1, 1998, the Company also discontinued Executive Education Network
("EXEN"), a PRIMEDIA Workplace Learning network, due to unprofitability and
increased competition in this field. As a result, the Company recorded a $4,000
provision related to discontinuance costs, which is recorded net of gains on the
sales of Nelson and THE DAILY RACING FORM, in (gain) loss on the sales of
businesses and other, net on the accompanying statement of consolidated
operations. In addition, the Company recorded a $5,800 write-down of EXEN's
excess of purchase price over net assets acquired and other intangible assets
which is included in amortization expense (see Note 8).
During the first quarter of 1999, the Company discontinued five unprofitable
PRIMEDIA Workplace Learning product lines, as part of a program to return the
Company's focus to accreditation oriented vocational networks and associated
products. In relation to these discontinuances, the Company recorded a $22,000
charge primarily for approximately $9,000 related to transponder and office site
leases and approximately $9,000 related to the recoverability of related excess
of purchase price over net assets acquired and certain other assets. As of
December 31, 1999, approximately $7,500 of the anticipated cash payments of
approximately $13,200 have been paid. The remaining $5,700 is expected to be
paid during 2000 and 2001.
33
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
4. DIVESTITURES, NON-CORE BUSINESSES AND PRODUCT-LINE CLOSURES (CONTINUED)
On April 22, 1999, the Company announced its intention to divest its
supplemental education group ("SEG"), which is comprised of Weekly Reader,
American Guidance Service and PRIMEDIA Reference and their respective
subsidiaries. At that time, in accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of",
SEG ceased to depreciate its property and equipment and ceased to amortize its
other intangible assets and excess of purchase price over net assets acquired.
On November 17, 1999, the Company completed the sale of stock of SEG to WRC
Media, Inc. for $395,000 in cash. In connection with the sale, the Company
recorded a gain of $227,710. Proceeds from the sale of the group were primarily
used to pay down borrowings under the Company's bank credit facilities. The
Company retained a 5.1% equity interest in SEG which is recorded in other
non-current assets on the accompanying consolidated balance sheet as of
December 31, 1999.
5. ACCOUNTS RECEIVABLE, NET
Accounts receivable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Accounts receivable..................................... $268,311 $284,441
Less: Allowance for doubtful accounts................... 14,644 15,796
Allowance for returns and rebates.................. 18,102 21,507
-------- --------
$235,565 $247,138
======== ========
</TABLE>
6. INVENTORIES, NET
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Finished goods............................................ $10,459 $21,974
Work in process........................................... 315 223
Raw materials............................................. 23,707 22,262
------- -------
34,481 44,459
Less: Allowance for obsolescence.......................... 1,772 3,205
------- -------
$32,709 $41,254
======= =======
</TABLE>
34
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
7. PROPERTY AND EQUIPMENT, NET
Property and equipment, including that held under capital leases, consist of
the following:
<TABLE>
<CAPTION>
DECEMBER 31,
RANGE OF LIVES -------------------
(YEARS) 1999 1998
-------------- -------- --------
<S> <C> <C> <C>
Land....................................... -- $ 2,704 $ 4,160
Buildings and improvements................. .5-40 54,842 53,053
Furniture and fixtures..................... 5-10 35,861 34,748
Machinery and equipment.................... 3-10 118,970 105,594
Internal use software...................... 3-5 26,105 14,091
School equipment........................... 5-10 67,908 63,111
Other...................................... 3-10 13,755 8,533
-------- --------
320,145 283,290
Less: Accumulated depreciation and
amortization............................. 167,802 135,632
-------- --------
$152,343 $147,658
======== ========
</TABLE>
Included in property and equipment are assets which were acquired under
capital leases in the amount of $39,267 and $38,182 with accumulated
amortization of $6,785 and $3,632 at December 31, 1999 and 1998, respectively
(see Note 19). In 1998, the Company replaced its existing satellite capital
lease with a new capital lease.
8. INTANGIBLE ASSETS AND EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED, NET
Other intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
RANGE OF LIVES -----------------------
(YEARS) 1999 1998
-------------- ---------- ----------
<S> <C> <C> <C>
Trademarks.............................. 40 $ 375,373 $ 391,764
Membership, subscriber and customer
lists................................. 2-20 489,411 582,812
Non-compete agreements.................. 1-10 236,835 227,108
Trademark license agreements............ 1-15 2,968 3,721
Copyrights.............................. 10-20 18,303 36,594
Video library........................... 1-7 14,837 14,837
Databases............................... 2-12 9,047 10,577
Advertiser lists........................ .25-20 194,399 200,069
Distribution agreements................. 1-7 11,745 11,525
Other................................... .5-15 26,475 28,994
---------- ----------
1,379,393 1,508,001
Less: Accumulated amortization.......... 759,443 777,760
---------- ----------
$ 619,950 $ 730,241
========== ==========
</TABLE>
The excess of the purchase price over the fair value of the net assets
acquired is net of accumulated amortization of $430,156 and $137,094 at
December 31, 1999 and 1998, respectively (see Note 4).
35
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
8. INTANGIBLE ASSETS AND EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED, NET
(CONTINUED)
In the fourth quarter of 1999, concurrent with its annual planning process,
the Company determined that the estimated future undiscounted cash flows were
not sufficient to cover the carrying value of certain long-lived assets.
Accordingly, the Company recorded an impairment charge of $261,455 to write down
PRIMEDIA Workplace Learning's excess of purchase price over net assets acquired
to the estimated fair value. The estimated fair value was based on anticipated
future operating cash flows to be generated by PRIMEDIA Workplace Learning,
discounted at a rate commensurate with the risk involved. PRIMEDIA Workplace
Learning is part of the education segment. The Company also recorded a $14,333
impairment charge in 1999 to write down certain long-lived assets, primarily the
excess of purchase price over the net assets acquired and other intangible
assets of Microtimes, an acquisition of Haas. Haas is part of the information
segment.
9. OTHER NON-CURRENT ASSETS
Other non-current assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Deferred financing costs, net........................... $ 19,028 $ 16,617
Deferred wiring and installation costs, net............. 45,357 49,822
Direct-response advertising costs, net.................. 18,994 17,466
Prepublication and programming costs, net............... 13,127 12,652
Other investments (see Note 3).......................... 107,594 6,843
Other................................................... 13,138 9,930
-------- --------
$217,238 $113,330
======== ========
</TABLE>
The deferred financing costs are net of accumulated amortization of $9,840
and $7,309 at December 31, 1999 and 1998, respectively. The deferred wiring and
installation costs are net of accumulated amortization of $30,078 and $24,523 at
December 31, 1999 and 1998, respectively. Direct-response advertising costs are
net of accumulated amortization of $86,341 and $70,113 at December 31, 1999 and
1998, respectively. Prepublication and programming costs are net of accumulated
amortization of $17,386 and $11,765 at December 31, 1999 and 1998, respectively.
36
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
10. ACCRUED EXPENSES AND OTHER
Accrued expenses and other current liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Payroll, commissions and related employee benefits...... $ 69,770 $ 68,350
Systems costs........................................... 953 1,357
Rent and lease liabilities.............................. 31,273 29,798
Retail display costs and allowances..................... 20,013 14,042
Promotion costs......................................... 4,088 3,569
Royalties............................................... 3,231 7,053
Circulation costs....................................... 7,132 5,253
Professional fees....................................... 13,215 10,877
Taxes................................................... 22,353 17,290
Customer advances....................................... 1,602 1,448
Deferred purchase price................................. 10,816 10,853
Dividends payable....................................... 10,643 10,641
Other................................................... 22,648 40,040
-------- --------
$217,737 $220,571
======== ========
</TABLE>
11. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
Borrowings under bank credit facilities.............. $1,050,525 $1,258,236
10 1/4% Senior Notes Due 2004........................ 100,000 100,000
8 1/2% Senior Notes Due 2006........................ 299,109 299,001
7 5/8% Senior Notes Due 2008........................ 248,756 248,643
---------- ----------
1,698,390 1,905,880
Obligation under capital leases (see Note 19)........ 31,134 31,335
Acquisition obligation payable....................... 26,112 44,179
---------- ----------
1,755,636 1,981,394
Less: Current maturities of long-term debt........... 22,740 24,397
---------- ----------
$1,732,896 $1,956,997
========== ==========
</TABLE>
The Company has credit facilities with the Chase Manhattan Bank, the Bank of
New York, Bankers Trust Company and the Bank of Nova Scotia as agents. On
March 11, 1999, the Company completed an amendment to and restatement of its
existing credit facility with the Chase Manhattan Bank, the Bank of New York,
Bankers Trust Company and the Bank of Nova Scotia as agents (the "Amended Credit
Facility").
37
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
11. LONG-TERM DEBT (CONTINUED)
Under the terms of the Amended Credit Facility, the Company borrowed
$250,000 under a B Term Loan ("Term Loan B"). The amount borrowed under Term
Loan B bears interest at LIBOR plus 2.75% with a step-down based on reduced
leverage levels.
On December 30, 1999, the Company completed a Second Amendment to the
Amended Credit Facility (the "Second Amendment"). The Second Amendment increased
the Company's flexibility to make investments, and delayed the tightening of
financial covenants for one year.
The Amended Credit Facility consists of a $675,000 Tranche A Revolving Loan
Commitment ("Tranche A Loan Commitment"), a $135,000 Tranche B Revolving Loan
Facility ("Tranche B Loan Commitment"), a $500,000 Term Loan ("Term Loan"), and
a $250,000 Term Loan B. The Tranche A Loan Commitment may be utilized through
the incurrence of Tranche A revolving credit loans, swingline loans which may
not exceed $40,000 in total, Canadian dollar loans which may not exceed the
Canadian dollar equivalent of $40,000 in total or the issuance of letters of
credit which may not exceed $40,000. The Tranche B Loan Commitment may be
utilized through the incurrence of Tranche B revolving credit loans. The
borrowings under the Amended Credit Facility may be used for general corporate
and working capital purposes as well as to finance certain future acquisitions.
The commitments under the Tranche A Loan Commitment and the Tranche B Loan
Commitment are subject to mandatory reductions semi-annually on June 30 and
December 31 with the final reduction on June 30, 2004. The mandatory reductions
for the Tranche A Loan Commitment are as follows:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
- ------------
<S> <C>
2000........................................................ $150,000
2001........................................................ 150,000
2002........................................................ 150,000
2003........................................................ 150,000
2004........................................................ 75,000
--------
$675,000
========
</TABLE>
The mandatory reductions for the Tranche B Loan Commitment are as follows:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
- ------------
<S> <C>
2000........................................................ $ 30,000
2001........................................................ 30,000
2002........................................................ 30,000
2003........................................................ 30,000
2004........................................................ 15,000
--------
$135,000
========
</TABLE>
To the extent that the total revolving credit loans outstanding exceed the
reduced commitment amount, these loans must be paid down to an amount equal to
or less than the reduced commitment amount. However, if the total revolving
credit loans outstanding do not exceed the reduced commitment amount, then there
is no requirement to pay down any of the revolving credit loans.
38
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
11. LONG-TERM DEBT (CONTINUED)
The principal amounts of the Term Loan will be repaid semi-annually on
June 30 and December 31 of each year, with an initial payment of $50,000 on
June 30, 2000, installments of $50,000 on each payment date thereafter through
December 31, 2003 and a final payment of $100,000 on June 30, 2004.
The principal amount of Term Loan B will be repaid semi-annually on June 30
and December 31 of each year, with an initial payment of $1,250 on June 30,
2000, installments of $1,250 on each payment date thereafter through
December 31, 2003 and a final payment of $240,000 on July 31, 2004.
On December 30, 1999, the Company's 364-day credit facility (the "New Credit
Facility") expired. The Company had commitments of $150,000 but had no
borrowings thereunder.
At December 31, 1999, the borrowings under the Amended Credit Facility
consist of $165,525 under the Tranche A Loan Commitment, $135,000 under the
Tranche B Loan Commitment, $500,000 under the Term Loan and $250,000 under the
Term Loan B.
At December 31, 1999, the Company has commitments of $1,560,000.
The amounts borrowed pursuant to the Amended Credit Facility bear interest,
at the Company's option as follows: (i) the higher of: (a) the Federal Funds
Effective Rate as published by the Federal Reserve Bank of New York plus 1/2 of
1% and (b) the prime commercial lending rate announced by the Agent from time to
time (in each case, the "Base Rate"); plus, in each case, an applicable margin
of up to 1/8 of 1% as specified in the Amended Credit Facility, or (ii) the
Eurodollar Rate plus an applicable margin ranging from 1/2 of 1% to 1 1/2% as
specified in the Amended Credit Facility. All swingline loans bear interest at
the Base Rate plus the applicable margin of up to 1/8 of 1% as specified in the
Amended Credit Facility. During 1999 and 1998, the weighted average interest
rate on the Company's bank credit facilities was 6.92% and 6.84%, respectively.
Interest rates on the borrowings outstanding under the Company's bank credit
facilities ranged from 6.40% to 9.22% in 1999 and from 6.35% to 8.50% in 1998.
Interest rates on the borrowings outstanding under the Amended Credit Facility
ranged from 7.66% to 9.22% at December 31, 1999.
Under the Amended Credit Facility, the Company has agreed to pay commitment
fees equal to 3/8 of 1% per annum on the daily average aggregate unutilized
commitment under the Tranche A Loan Commitment and the Tranche B Loan
Commitment. The Company has also agreed to pay certain fees with respect to the
issuance of letters of credit and an annual administration fee. Under the New
Credit Facility, the Company had agreed to pay commitment fees equal to 1/8 of
1% per annum on the daily average aggregate unutilized revolving loan
commitment.
10 5/8% SENIOR NOTES. In 1997, the Company redeemed the 10 5/8% Senior
Notes. The aggregate premium paid and the write-off of related deferred
financing costs are classified as an extraordinary charge and are recorded at an
aggregate value of $15,401 on the accompanying statement of consolidated
operations for the year ended December 31, 1997.
10 1/4% SENIOR NOTES. Interest is payable semi-annually in June and
December at an annual rate of 10 1/4%. The 10 1/4% Senior Notes mature on
June 1, 2004, with no sinking fund requirements. The 10 1/4% Senior Notes are
redeemable at prices ranging from 104.95% with annual reductions to 100% in 2002
plus accrued and unpaid interest.
39
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
11. LONG-TERM DEBT (CONTINUED)
8 1/2% SENIOR NOTES. Interest is payable semi-annually in February and
August at an annual rate of 8 1/2%. The 8 1/2% Senior Notes mature on February
1, 2006, with no sinking fund requirements. The 8 1/2% Senior Notes may not be
redeemed prior to February 1, 2001 other than in connection with a change of
control. Beginning in 2001 and thereafter, the 8 1/2% Senior Notes are
redeemable in whole or in part, at the option of the Company, at prices ranging
from 104.25% with annual reductions to 100% in 2003 plus accrued and unpaid
interest.
7 5/8% SENIOR NOTES. On February 17, 1998, the Company completed a private
offering of $250,000 7 5/8% Senior Notes Due 2008, ("Old 7 5/8% Senior Notes").
The Old 7 5/8% Senior Notes were issued at 99.425% with related issuance costs
of approximately $4,000 and mature on April 1, 2008, with no sinking fund
requirements. Interest on the Old 7 5/8% Senior Notes was payable semi-annually
in April and October at the annual rate of 7 5/8% commencing October 1, 1998. On
June 10, 1998, the Company exchanged the Old 7 5/8% Senior Notes for a new
series of $250,000 7 5/8% Senior Notes Due 2008 ("New 7 5/8% Senior Notes"). The
terms of the New 7 5/8% Senior Notes are the same as the terms of the Old 7 5/8%
Senior Notes except that the New 7 5/8% Senior Notes have been registered under
the Securities Act of 1933. The New 7 5/8% Senior Notes may not be redeemed
prior to April 1, 2003 other than in connection with a change of control.
Beginning on April 1, 2003 and thereafter, the New 7 5/8% Senior Notes are
redeemable in whole or in part, at the option of the Company, at prices ranging
from 103.813% with annual reductions to 100% in 2006 plus accrued and unpaid
interest. Net proceeds from the issuance of the Old 7 5/8% Senior Notes of
approximately $242,000 were primarily used to redeem the Series B Preferred
Stock and to pay down borrowings under the bank credit facilities.
The 10 1/4% Senior Notes, 8 1/2% Senior Notes and the New 7 5/8% Senior
Notes (together referred to as the "Senior Notes"), and the Amended Credit
Facility, all rank senior in right of payment to all subordinated indebtedness
of PRIMEDIA Inc. (a holding company).
The above indebtedness, among other things, limits the ability of the
Company to change the nature of its businesses, incur indebtedness, create
liens, sell assets, engage in mergers, consolidations or transactions with
affiliates, make investments in or loans to certain subsidiaries, issue
guarantees and make certain restricted payments including dividend payments on
its common stock in excess of $25,000 in any given year. Under the Company's
most restrictive debt covenants, the Company must maintain a minimum interest
coverage ratio of 1.8 to 1 and a minimum fixed charge coverage ratio of 1.05 to
1. The Company's maximum allowable debt leverage ratio is 6.0 to 1. The Company
believes it is in compliance with the financial and operating covenants of its
principal financing arrangements. Borrowings under the above indebtedness are
guaranteed by each of the domestic wholly-owned restricted subsidiaries of the
Company. Such guarantees are full, unconditional and joint and several.
The Company's unrestricted and foreign subsidiaries are not guarantors of
the above indebtedness. The consolidating condensed financial statements of the
Company depicting separately its domestic subsidiaries, foreign subsidiaries and
unrestricted subsidiaries are presented in Note 23.
ACQUISITION OBLIGATION. In connection with the acquisition of certain of
the Company's specialty consumer magazine operations and THE DAILY RACING FORM,
an obligation was recorded equivalent to the present value of the principal and
interest payments of the notes payable in the amount of $26,112 at December 31,
1999 and $44,179 at December 31, 1998. The interest rate used in calculating the
present value was 13%, which represents management's estimate of the prevailing
market rate of interest for such
40
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
11. LONG-TERM DEBT (CONTINUED)
obligation at the time of the acquisition. Principal and interest amounts
aggregating $28,000 will be repaid from June 2000 through June 2001.
INTEREST RATE SWAP AGREEMENTS. In May 1995, the Company entered into two,
three-year interest rate swap agreements with an aggregate notional amount of
$200,000 which expired in May 1998. Under these swap agreements, the Company
received a floating rate of interest based on three-month LIBOR, which reset
quarterly, and paid a fixed rate of interest which increased each year during
the terms of the respective agreements. The weighted average variable rate and
weighted average fixed rate were 5.7% and 6.7%, respectively, in 1998, and 5.7%
and 6.5%, respectively, in 1997. Also, in May 1995, the Company entered into a
three-year interest rate cap agreement which expired in May 1998. As a result of
this transaction, the Company had the right to receive payments based on a
notional principal amount of $100,000 to the extent that three-month LIBOR
exceeded 7.75% in year one, 8.75% in year two and 9.75% in year three of the
agreement. Any interest differential received was recognized as an adjustment to
interest expense. The interest rate cap fee was recognized as an adjustment to
interest expense over the life of the interest rate cap agreement.
In the fourth quarter of 1996, the Company entered into six, one-year
interest rate swap agreements with an aggregate notional amount of $600,000.
Under these swap agreements, the Company received a floating rate of interest
based on three-month LIBOR, which reset quarterly, and paid a fixed rate of
interest, each quarter, for the term of the agreements. The weighted average
variable rate and weighted average fixed rate were 5.7% and 5.8%, respectively,
in 1997. These interest rate swap agreements expired during the fourth quarter
of 1997.
In July 1997, the Company entered into four, three-year and two, four-year
interest rate swap agreements, with an aggregate notional amount of $600,000.
Under these new swap agreements, which commenced on January 2, 1998, the Company
receives a floating rate of interest based on three-month LIBOR, which resets
quarterly, and the Company pays a fixed rate of interest, each quarter, for the
terms of the respective agreements. The weighted average variable rate and
weighted average fixed rate were 5.4% and 6.3%, respectively, in 1999 and 5.6%
and 6.3%, respectively, in 1998.
The net interest differential, related to the interest rate swap agreements
and the interest rate cap agreement, charged to interest expense in 1999, 1998
and 1997 was $5,798, $4,674 and $2,048, respectively. The Company is exposed to
credit risk in the event of nonperformance by counterparties to its interest
rate swap agreements. Credit risk is limited by entering into such agreements
with primary dealers only; therefore, the Company does not anticipate that
nonperformance by counterparties will occur. Notwithstanding this, the Company's
treasury department monitors counterparty credit ratings at least quarterly
through reviewing independent credit agency reports. Both current and potential
exposure are evaluated, as necessary, by obtaining replacement cost information
from alternative dealers. Potential loss to the Company from credit risk on
these agreements is limited to amounts receivable, if any. The Company enters
into these agreements solely to hedge its interest rate risk.
12. INCOME TAXES
At December 31, 1999, the Company had aggregate net operating loss
carryforwards ("NOLs") for Federal and state income tax purposes of
approximately $752,500 which will be available to reduce future taxable income.
The utilization of such NOLs is subject to certain limitations under Federal
income tax
41
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
12. INCOME TAXES (CONTINUED)
laws. In certain instances, such NOLs may only be used to reduce future taxable
income of the respective company which generated the NOLs. The NOLs are
scheduled to expire in the following years:
<TABLE>
<S> <C>
2003................................. $ 17,900
2004................................. 60,400
2005................................. 102,800
2006................................. 86,400
2007................................. 47,900
2008................................. 82,700
2009................................. 68,900
2010................................. 156,200
2011................................. 23,100
2012................................. 76,900
2018(*).............................. 29,300
--------
$752,500
========
</TABLE>
- ------------------------
(*) Under the Taxpayer Relief Act of 1997, the carryforward period of NOLs
arising after January 1, 1998 was extended from 15 to 20 years.
Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes, and (b)
operating loss carryforwards. The tax effects of significant items comprising
the Company's net deferred income tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------------
FEDERAL STATE TOTAL
-------- -------- --------
<S> <C> <C> <C>
DEFERRED INCOME TAX ASSETS:
Difference between book and tax basis of inventory.......... $ 555 $ 163 $ 718
Difference between book and tax basis of accrued expenses
and other................................................. 21,687 6,354 28,041
Difference between book and tax basis of other intangible
assets.................................................... 51,029 14,949 65,978
Operating loss carryforwards................................ 226,405 47,153 273,558
Alternative minimum tax credit carryforwards................ 1,356 -- 1,356
-------- ------- --------
Total....................................................... 301,032 68,619 369,651
-------- ------- --------
DEFERRED INCOME TAX LIABILITIES:
Difference between book and tax basis of other intangible
assets.................................................... 55,665 16,307 71,972
Difference between book and tax basis of property and
equipment................................................. 16,577 4,856 21,433
Unrealized gain on investments.............................. 30,209 2,669 32,878
Other....................................................... 12,508 3,664 16,172
-------- ------- --------
Total....................................................... 114,959 27,496 142,455
-------- ------- --------
Net deferred income tax assets.............................. 186,073 41,123 227,196
Less: Valuation allowances.................................. 30,391 20,605 50,996
-------- ------- --------
Net......................................................... $155,682 $20,518 $176,200
======== ======= ========
</TABLE>
42
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
12. INCOME TAXES (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1998
------------------------------
FEDERAL STATE TOTAL
-------- -------- --------
<S> <C> <C> <C>
DEFERRED INCOME TAX ASSETS:
Difference between book and tax basis of inventory.......... $ 452 $ 133 $ 585
Difference between book and tax basis of accrued expenses
and other................................................. 24,298 7,118 31,416
Reserves not currently deductible........................... 499 146 645
Difference between book and tax basis of other intangible
assets.................................................... 47,484 13,911 61,395
Operating loss carryforwards................................ 242,586 46,530 289,116
Capital loss carryforwards.................................. 28,023 1,634 29,657
-------- ------- --------
Total....................................................... 343,342 69,472 412,814
-------- ------- --------
DEFERRED INCOME TAX LIABILITIES:
Difference between book and tax basis of other intangible
assets.................................................... 59,219 17,349 76,568
Difference between book and tax basis of property and
equipment................................................. 9,396 2,753 12,149
Other....................................................... 14,102 4,131 18,233
-------- ------- --------
Total....................................................... 82,717 24,233 106,950
-------- ------- --------
Net deferred income tax assets.............................. 260,625 45,239 305,864
Less: Valuation allowances.................................. 104,943 24,721 129,664
-------- ------- --------
Net......................................................... $155,682 $20,518 $176,200
======== ======= ========
</TABLE>
At December 31, 1999, 1998 and 1997, management of the Company reviewed
recent operating results and projected future operating results. At the end of
each of the respective years, management determined that a portion of the net
deferred income tax assets would likely be realized. The amounts of the net
deferred income tax assets were not adjusted in 1999, 1998 and 1997. The amount
of the net deferred tax asset considered realizable, however, could be reduced
in the near term if estimates of future taxable income during the carryforward
period are reduced. There was a net decrease in the valuation allowances of
$78,668 in 1999 and a net increase of $11,432 in 1998.
A portion of the valuation allowances in the amount of approximately $72,500
at December 31, 1999 relates to net deferred tax assets which were recorded in
accounting for the acquisitions of various entities. The recognition of such
amount in future years will be allocated to reduce the excess of the purchase
price over the net assets acquired and other non-current intangible assets.
In 1999, the Company recorded income tax expense of $6,500 related to a
provision for current state and local taxes incurred as a result of the gain on
the sale of SEG.
43
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
13. EXCHANGEABLE PREFERRED STOCK
Exchangeable Preferred Stock consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
$10.00 Series D Exchangeable Preferred Stock................ $195,588 $195,042
$9.20 Series F Exchangeable Preferred Stock................. 120,941 120,306
$8.625 Series H Exchangeable Preferred Stock................ 243,160 242,493
-------- --------
$559,689 $557,841
======== ========
</TABLE>
$10.00 SERIES D EXCHANGEABLE PREFERRED STOCK. In 1996, the Company
completed an offering of 2,000,000 shares of $.01 par value, Series D Preferred
Stock at $100 per share. Annual dividends of $10.00 per share on the Series D
Preferred Stock are cumulative and payable quarterly, in cash. The liquidation
and redemption value at December 31, 1999 and 1998 was $200,000. On or after
February 1, 2001, the Series D Preferred Stock may be redeemed in whole or in
part, at the option of the Company, at specified redemption prices plus accrued
and unpaid dividends. The Company is required to redeem the Series D Preferred
Stock on February 1, 2008 at a redemption price equal to the liquidation
preference of $100 per share, plus accrued and unpaid dividends. The Series D
Preferred Stock is exchangeable in whole but not in part, at the option of the
Company, on any scheduled dividend payment date, into 10% Class D Subordinated
Exchange Debentures due 2008.
$9.20 SERIES F EXCHANGEABLE PREFERRED STOCK. On September 26, 1997, the
Company completed a private offering of 1,250,000 shares of $.01 par value,
$9.20 Series E Exchangeable Preferred Stock ("Series E Preferred Stock") at $100
per share. Annual dividends of $9.20 per share on the Series E Preferred Stock
were cumulative and payable quarterly, in cash, commencing February 1, 1998. On
February 17, 1998, the Company exchanged the 1,250,000 shares of Series E
Preferred Stock for 1,250,000 shares of $.01 par value, $9.20 Series F
Exchangeable Preferred Stock ("Series F Preferred Stock"). The terms of the
Series F Preferred Stock are the same as the terms of the Series E Preferred
Stock except that the Series F Preferred Stock has been registered under the
Securities Act of 1933. The Series F Preferred Stock is exchangeable into 9.20%
Class F Subordinated Exchange Debentures due 2009, in whole but not in part, at
the option of the Company on any scheduled dividend payment date. Dividends on
the Series F Preferred Stock accrued and were cumulative from the last dividend
payment date on which dividends were paid on shares of the Series E Preferred
Stock. As of December 31, 1999 and 1998, the liquidation and redemption value of
the Series F Preferred Stock was $125,000.
$8.625 SERIES H EXCHANGEABLE PREFERRED STOCK. On February 17, 1998, the
Company completed a private offering of 2,500,000 shares of $.01 par value,
$8.625 Series G Exchangeable Preferred Stock ("Series G Preferred Stock") at
$99.40 per share. Annual dividends of $8.625 per share on the Series G Preferred
Stock were cumulative and payable quarterly, in cash, commencing July 1, 1998.
On June 10, 1998, the Company exchanged the 2,500,000 shares of Series G
Preferred Stock for 2,500,000 shares of $.01 par value, Series H Preferred
Stock. The terms of the Series H Preferred Stock are the same as the terms of
the Series G Preferred Stock except that the Series H Preferred Stock has been
registered under the Securities Act of 1933. Prior to April 1, 2001, the Company
may, at its option, redeem in whole or in part, up to $125,000 of the aggregate
liquidation preference of the Series H Preferred Stock at a price per share of
$108.625 plus accrued and unpaid dividends to the redemption date, with the net
proceeds of one or
44
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
13. EXCHANGEABLE PREFERRED STOCK (CONTINUED)
more public offerings, subject to certain other restrictions. On or after
April 1, 2003, the Series H Preferred Stock may be redeemed in whole or in part,
at the option of the Company, at prices ranging from 104.313% with annual
reductions to 100% in 2006, plus accrued and unpaid dividends. The Company is
required to redeem the Series H Preferred Stock on April 1, 2010 at a redemption
price equal to the liquidation preference of $100 per share, plus accrued and
unpaid dividends. The Series H Preferred Stock is exchangeable, in whole but not
in part, at the option of the Company, on any scheduled dividend payment date
into 8 5/8% Class H Subordinated Exchange Debentures due 2010. As of
December 31, 1999 and 1998, the liquidation and redemption value of the Series H
Preferred Stock was $250,000.
14. COMMON STOCK
STOCK ISSUANCE. On March 18, 1998, KKR 1996 Fund L.P., a Delaware limited
partnership affiliated with Kohlberg Kravis Roberts & Co. L.P. ("KKR"),
purchased 16,666,667 shares of newly issued common stock from the Company for
approximately $200,000 (the "KKR Fund Investment"). The net proceeds (after
issuance costs) from the KKR Fund Investment were used to repay borrowings
outstanding under the Company's bank credit facilities, which amounts may be
reborrowed for general corporate purposes including acquisitions (see Note 20).
SHARE REPURCHASES. Through 1999, the Company's board of directors
authorized the repurchase of up to $30,000 of its outstanding common stock from
time to time in the open market and through privately negotiated transactions.
During 1999, the Company repurchased 730,237 shares of common stock for $10,508
at a weighted average price of $14.39. The 1999 repurchases included 694,637
shares that were repurchased for $10,000 and were not part of the share
repurchase program. During 1998, the Company repurchased 1,703,700 shares of
common stock for $19,983 at a weighted average price of $11.73. During 1997, the
Company repurchased 1,048,600 shares of common stock for $13,158 at a weighted
average price of $12.55. These 1997 repurchases included 523,000 shares that
were repurchased for $6,422 and were not part of the share repurchase program.
All repurchases above are recorded at cost and classified as common stock in
treasury on the accompanying consolidated balance sheets at December 31, 1999
and 1998, respectively.
COMMON STOCK SUBJECT TO REDEMPTION. Under the following circumstances,
employees who purchased shares prior to the Company's initial public offering of
common stock have the right to resell their shares of common stock to the
Company: termination of employment in connection with the sale of the business
for which they work, death, disability or retirement after age 65. The resale
feature expires five years after the effective purchase date of the common
stock. Since inception of the Company, none of the employees has exercised such
resale feature as a result of such sale, death, disability or retirement and the
likelihood of significant resales is considered by management to be remote
because the stock is freely tradeable on the public market.
45
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
14. COMMON STOCK (CONTINUED)
The following summarizes the activity of the common stock subject to
redemption:
<TABLE>
<CAPTION>
SHARES AMOUNT
---------- --------
<S> <C> <C>
Balance at January 1, 1997.................................. 643,310 $ 6,916
Acquisitions of common stock held by management............. (2,320) (19)
Expiration of redemption feature............................ (238,340) (2,569)
Accretion in carrying value................................. -- 755
---------- --------
Balance at December 31, 1997................................ 402,650 5,083
Acquisitions of common stock held by management............. (22,531) (314)
Expiration of redemption feature............................ (86,000) (1,056)
Reduction in carrying value................................. -- (221)
---------- --------
Balance at December 31, 1998................................ 294,119 3,492
Acquisitions of common stock held by management............. (103,841) (1,793)
Expiration of redemption feature............................ (136,968) (1,066)
Accretion in carrying value................................. -- 247
---------- --------
Balance at December 31, 1999................................ 53,310 $ 880
========== ========
</TABLE>
The redemption values of the common stock subject to redemption of $880 and
$3,492 at December 31, 1999 and 1998, respectively, were based on a repurchase
price of $16.50 per share and $11.875 per share, which are the quoted market
values at December 31, 1999 and 1998, respectively. Common stock subject to
redemption is recorded on the accompanying consolidated balance sheets net of
the amounts of notes receivable from employees (related to common stock
issuances) outstanding of $344 and $528 at December 31, 1999 and 1998,
respectively.
STOCK PURCHASE AND OPTION PLAN. The PRIMEDIA Stock Purchase and Option Plan
(the "Plan") authorizes sales of shares of common stock and grants of incentive
awards in the form of, among other things, stock options to key employees and
other persons with a unique relationship with the Company. The Plan has
authorized grants of up to 25,000,000 shares of the Company's common stock or
options to management personnel.
During 1999, the Company granted 1,380,711 shares of common stock from the
treasury, to a senior executive. These shares are restricted shares, will vest
over 3 years and will be recognized ratably as compensation expense. The vesting
period is accelerated upon the achievement of certain stock performance
measures, but not prior to January 1, 2001. At December 31, 1999, unearned stock
grant compensation of $15,250 is recorded on the accompanying consolidated
balance sheet.
The stock options are granted with exercise prices at quoted market value at
time of issuance. The options are exercisable at the rate of 20% per year over a
five-year period commencing on the effective date of the grant; however, some
optionees have received credit for periods of employment with the Company and
its predecessors and subsidiaries prior to the date the options were granted.
All options granted pursuant to the Plan will expire no later than ten years
from the date the option was granted.
During 1999, the Company granted 5,000,000 stock options to a senior
executive. These options will vest over 4 years, with accelerated vesting upon
the achievement of certain stock performance measures.
46
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
14. COMMON STOCK (CONTINUED)
A summary of the status of the Company's stock option plan as of December
31, 1999, 1998 and 1997, and changes during the years ended on those dates is
presented below:
<TABLE>
<CAPTION>
1999 1998 1997
---- ----
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
OPTIONS EXERCISE PRICE PRICE OPTIONS EXERCISE PRICE PRICE OPTIONS
---------- -------------- -------- ---------- -------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Outstanding--
beginning of
year............... 12,229,973 $ 5.00-$14.69 $ 7.16 11,562,930 $ 5.00-$12.00 $ 6.58 13,211,212
Granted............ 6,534,200 $ 8.00-$15.56 $13.02 1,530,590 $12.00-$14.69 $12.68 135,800
Exercised.......... (1,243,229) $ 5.00-$14.25 $ 6.98 (416,817) $ 5.00-$11.13 $ 7.13 (1,209,693)
Forfeited.......... (430,658) $ 5.00-$15.56 $12.15 (446,730) $ 5.44-$12.63 $11.22 (574,389)
---------- ---------- ----------
Outstanding--end of
year............... 17,090,286 $ 5.00-$15.56 $ 9.28 12,229,973 $ 5.00-$14.69 $ 7.16 11,562,930
========== ========== ==========
Exercisable--end of
year............... 9,391,717 $ 5.00-$14.69 $ 6.43 9,369,633 $ 5.00-$12.00 $ 5.97 8,953,280
========== ========== ==========
<CAPTION>
1997
----
WEIGHTED
AVERAGE
EXERCISE
EXERCISE PRICE PRICE
-------------- --------
<S> <C> <C>
Outstanding--
beginning of
year............... $ 5.00-$11.94 $ 6.69
Granted............ $10.88-$12.00 $11.27
Exercised.......... $ 5.00-$11.81 $ 6.96
Forfeited.......... $ 5.00-$11.81 $ 9.22
Outstanding--end of
year............... $ 5.00-$12.00 $ 6.58
Exercisable--end of
year............... $ 5.00-$11.94 $ 5.73
</TABLE>
The weighted-average fair value per option for options granted in 1999, 1998
and 1997 was $8.26, $5.44 and $4.45, respectively.
The following table summarizes information about stock options outstanding
and exercisable at December 31, 1999:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE PRICE EXERCISE PRICE
NUMBER NUMBER WEIGHTED FOR FOR
RANGE OF OUTSTANDING EXERCISABLE AVERAGE REMAINING OUTSTANDING EXERCISABLE
EXERCISE PRICES AT 12/31/99 AT 12/31/99 CONTRACTUAL LIFE OPTIONS OPTIONS
- --------------- ----------- ----------- ----------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
$ 5.00-$ 5.44 6,321,564 6,321,564 2 $ 5.00 $ 5.00
$ 7.00 78,900 78,900 4 $ 7.00 $ 7.00
$ 8.00 2,002,190 1,820,500 6 $ 8.00 $ 8.00
$10.00-$12.00 1,239,480 764,920 7 $11.15 $11.15
$12.31-$15.56 7,448,152 405,833 9 $12.98 $12.58
---------- ----------
17,090,286 9,391,717 6 $ 9.28 $ 6.43
========== ==========
</TABLE>
SFAS No. 123, "Accounting for Stock Based Compensation," provides for a
fair-value based method of accounting for employee options and measures
compensation expense using an option valuation model that takes into account, as
of the grant date, the exercise price and expected life of the option, the
current price of the underlying stock and its expected volatility, expected
dividends on the stock, and the risk-free interest rate for the expected term of
the option. The Company has elected to continue accounting for employee
stock-based compensation under Accounting Principles Board Opinion ("APB") No.
25 and related interpretations. Under APB No. 25, because the exercise price of
the Company's employee stock options equals the market price of the underlying
stock on the date of grant, no compensation expense is recognized.
47
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
14. COMMON STOCK (CONTINUED)
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of SFAS No.
123. The fair value of these options was estimated at the date of grant using
the Black-Scholes option pricing model for options granted in 1999, 1998 and
1997. The following weighted-average assumptions were used for 1999, 1998 and
1997, respectively: risk-free interest rates of 6.21%, 5.63% and 6.65%; dividend
yields of 0.0%, 0.0% and 0.0%; volatility factors of the expected market price
of the Company's common stock of 49.29%, 24.15% and 27.70%; and a
weighted-average expected life of the option of five years. The estimated fair
value of options granted during 1999, 1998 and 1997 was $53,976, $8,332 and
$604, respectively.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the option's vesting period. The Company's
pro forma information is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Pro forma net loss.......................................... $(127,177) $ (42,659) $(176,351)
Pro forma loss applicable to common shareholders............ $(180,239) $(105,944) $(241,424)
Pro forma basic and diluted loss per common share........... $ (1.24) $ (.74) $ (1.87)
</TABLE>
The Company had reserved approximately 4,400,000 shares of the Company's
common stock or options for future grants in connection with the Plan at
December 31, 1999.
15. LOSS PER SHARE
Loss per share has been determined based on loss before extraordinary charge
after preferred stock dividends, divided by the weighted average number of
common shares outstanding for all periods presented.
Options to purchase 17,090,286, 12,229,973 and 11,562,930 shares of common
stock were outstanding at December 31, 1999, 1998 and 1997, respectively, but
were not included in the computation of diluted loss per share because the
effect of their inclusion would be antidilutive.
48
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
16. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive income (loss) consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Foreign currency translation adjustments.................. $(1,618) $(1,720)
Unrealized gain on available-for-sale securities.......... 88,982 --
------- -------
$87,364 $(1,720)
======= =======
</TABLE>
The above amounts are net of income taxes and reversals of the valuation
allowance related to deferred tax assets.
17. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts and the estimated fair values of the Company's
financial instruments for which it is practicable to estimate fair value are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------
1999 1998
--------------------- ---------------------
CARRYING CARRYING
VALUE FAIR VALUE VALUE FAIR VALUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
10 1/4% Senior Notes................................ $100,000 $104,000 $100,000 $106,013
8 1/2% Senior Notes................................. 299,109 295,500 299,001 309,000
7 5/8% Senior Notes................................. 248,756 233,750 248,643 245,000
Acquisition Obligation.............................. 26,112 26,367 44,179 44,666
Series D Preferred Stock............................ 195,588 194,000 195,042 208,500
Series F Preferred Stock............................ 120,941 114,375 120,306 122,813
Series H Preferred Stock............................ 243,160 217,500 242,493 240,625
Interest Rate Swap Agreements....................... 363 1,563 1,528 18,519
</TABLE>
The fair values of the senior notes and preferred stocks were determined
based on the quoted market prices and the fair value of the acquisition
obligation was estimated using discounted cash flow analysis, based on current
incremental borrowing rates for similar types of borrowing arrangements. The
fair value of the interest rate swap agreements was determined using discounted
cash flow models.
For instruments including cash and cash equivalents, accounts receivable and
accounts payable, the carrying amount approximates fair value because of the
short maturity of these instruments. The fair value of floating-rate long-term
debt approximates carrying value because these instruments re-price frequently
at current market prices.
18. RETIREMENT PLANS AND OTHER EMPLOYEE COSTS
RETIREMENT PLANS. Substantially all of the Company's employees are eligible
to participate in defined contribution plans. The expense recognized for all of
these plans was approximately $9,500 in 1999, $7,700 in 1998 and $6,300 in 1997.
49
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
18. RETIREMENT PLANS AND OTHER EMPLOYEE COSTS (CONTINUED)
In addition, the employees at PRIMEDIA Magazines and the non-union employees
at THE DAILY RACING FORM were eligible to participate in a non-contributory
defined benefit pension plan ("Pension Plan"). The benefits paid under the
Pension Plan were based on years of service and compensation amounts for the
highest consecutive five years of service in the most current ten years. The
Pension Plan was funded by means of contributions by the Company to the plan's
trust. The pension funding policy was consistent with the funding requirements
of U.S. Federal and other governmental laws and regulations. Plan assets
consisted primarily of fixed income, equity and other short-term investments.
In January 1998, the Company amended the Pension Plan. The amendment
specifically froze plan participation effective December 31, 1997. The Company
received approval from the Pension Benefit Guarantee Corporation during the
third quarter of 1998 to terminate this plan and distribute all the plan's
assets. In November 1998, the Company terminated this plan and settled all of
its obligations by making lump-sum distributions and purchasing annuity
contracts.
The following tables set forth the Pension Plan's funded status as of
December 31, 1999 and 1998 and amounts recognized in the Company's statement of
operations for the years ended December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION:
Projected benefit obligation at beginning of period....... $ -- $ 18,036
Interest cost........................................... -- 668
Amendments.............................................. -- 4,536
Benefits paid........................................... -- (866)
Curtailment............................................. -- (6,448)
Settlement.............................................. -- (15,926)
------- --------
Projected benefit obligation at end of period............. -- --
------- --------
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of period.......... 150 13,391
Actual return on plan assets............................ -- 1,692
Employer contributions.................................. -- 1,859
Benefits paid........................................... -- (866)
Settlement.............................................. (150) (15,926)
------- --------
Fair value of plan assets at end of period................ -- 150
------- --------
Prepaid pension cost........................................ $ -- $ 150
======= ========
</TABLE>
50
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
18. RETIREMENT PLANS AND OTHER EMPLOYEE COSTS (CONTINUED)
The amendment included in the change in benefit obligation represents the
Pension Plan termination during the year ended December 31, 1998.
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31,
Discount rate............................................... N/A 7.00%
Expected return on plan assets.............................. N/A N/A
Rate of compensation increases.............................. N/A N/A
</TABLE>
The components of net periodic pension (income) expense for 1999, 1998 and
1997 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Service cost.............................................. $ -- $ -- $ 1,387
Interest cost............................................. -- 668 1,073
Expected return on plan assets............................ -- (978) (1,763)
Amortization of initial obligation........................ -- -- 274
Amortization of prior service cost........................ -- -- (159)
Amortization of net actuarial loss........................ -- -- 830
Curtailment gain.......................................... -- (5,301) --
Settlement loss........................................... -- 3,823 --
------ ------- -------
Net periodic pension (income) expense..................... $ -- $(1,788) $ 1,642
====== ======= =======
</TABLE>
In 1998, the Company acquired American Guidance Service. American Guidance
Service sponsored a defined benefit pension plan (the "AGS Plan") for the
benefit of its employees. The allocation of the purchase price of American
Guidance Service included a liability of approximately $792 related to this
plan. The benefits to be paid under the AGS Plan were based on years of service
and compensation amounts for the average of the highest five consecutive plan
years. The AGS Plan was funded by means of contributions by the Company to the
plan's trust. The pension funding policy was consistent with the funding
requirements of U.S. Federal and other governmental laws and regulations. Plan
assets consisted primarily of fixed income, equity and other short-term
investments. The following tables set forth the AGS Plan's funded status as of
November 17, 1999 (date of divestiture) and December 31, 1998 and the
51
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
18. RETIREMENT PLANS AND OTHER EMPLOYEE COSTS (CONTINUED)
amounts recognized in the Company's statement of operations for the period
January 1, 1999 through November 17, 1999 and the year ended December 31, 1998.
<TABLE>
<CAPTION>
JANUARY 1, 1999- YEAR ENDED
NOVEMBER 17, 1999 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION:
Projected benefit obligation at beginning of period......... $ 9,458 $ 8,682
Service cost.............................................. 593 318
Interest cost............................................. 529 287
Actuarial loss (gain)..................................... (1,836) 308
Benefits paid............................................. (289) (137)
Divestiture............................................... (8,455) --
------- -------
Projected benefit obligation at end of period............... -- 9,458
------- -------
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of period............ 7,785 8,198
Actual return on plan assets.............................. 1,025 (276)
Benefits paid............................................. (289) (137)
Divestiture............................................... (8,521) --
------- -------
Fair value of plan assets at end of period.................. -- 7,785
------- -------
Funded status............................................... -- (1,673)
Unrecognized net actuarial loss............................. -- 637
------- -------
Accrued pension cost........................................ $ -- $(1,036)
======= =======
COMPONENTS OF NET PERIODIC PENSION EXPENSE:
Service cost.............................................. $ 593 $ 318
Interest cost............................................. 529 287
Expected return on plan assets............................ (600) (361)
Recognized actuarial loss................................. 3 --
------- -------
Net periodic pension expense................................ $ 525 $ 244
======= =======
WEIGHTED-AVERAGE ASSUMPTIONS:
Discount rate............................................... 6.50% 6.50%
Expected return on plan assets.............................. 9.00% 9.00%
Rate of compensation increases.............................. 4.50% 4.50%
</TABLE>
OTHER EMPLOYEE COSTS. During the third quarter of 1998, the Company
recorded management reorganization costs of approximately $8,500, which
primarily represented severance costs related to approximately fifty
individuals. Through December 31, 1999, approximately $6,800 of related cash
payments have been made. The remaining $1,700 is expected to be paid during
2000. This charge is recorded in the caption (gain) loss on the sales of
businesses and other, net on the accompanying statement of consolidated
operations.
52
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
19. COMMITMENTS AND CONTINGENCIES
COMMITMENTS. Total rent expense under operating leases was $38,099, $36,282
and $36,844 for the years ended December 31, 1999, 1998 and 1997, respectively.
Certain leases are subject to escalation clauses and certain leases contain
renewal options. Minimum rental commitments under noncancelable operating leases
are as follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
- -------------------------
<S> <C>
2000.................................................. $ 36,412
2001.................................................. 30,837
2002.................................................. 24,838
2003.................................................. 20,953
2004.................................................. 19,230
Thereafter............................................ 53,101
--------
$185,371
========
</TABLE>
Future minimum lease payments under capital leases (see Notes 7 and 11) are
as follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
- -------------------------
<S> <C>
2000.................................................. $ 6,068
2001.................................................. 5,582
2002.................................................. 4,786
2003.................................................. 4,423
2004.................................................. 3,982
Thereafter............................................ 21,133
-------
45,974
Less: Amount representing interest.................... 14,840
-------
Present value of net minimum lease payments........... 31,134
Less: Current portion................................. 3,573
-------
Long-term obligations (included in long-term debt).... $27,561
=======
</TABLE>
CONTINGENCIES. The Company is involved in ordinary and routine litigation
incidental to its business. In the opinion of management, there is no pending
legal proceeding that would have a material adverse affect on the consolidated
financial statements of the Company.
At December 31, 1999, the Company had letters of credit outstanding of
approximately $16,700 (see Note 11).
20. RELATED PARTY TRANSACTIONS
During each of the years ended December 31, 1999, 1998 and 1997, the Company
paid administrative and other fees to KKR, an affiliated party, of $1,000.
During the years ended December 31, 1999, 1998 and 1997, the Company paid
directors' fees to certain partners of KKR aggregating $285, $180 and $180,
respectively. In 1998, a partnership affiliated with KKR purchased 16,666,667
shares of newly issued common stock from the Company for approximately $200,000
(see Note 14).
53
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
21. UNAUDITED QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED
DECEMBER 31, 1999:
Sales, net............... $ 411,136 $ 426,313 $ 423,005 $ 455,648 $ 1,716,102
Operating income
(loss)................. (3,324) 35,781 26,729 (4,854) 54,332
Net loss................. (45,994) (4,884) (17,097) (52,138) (120,113)
Loss applicable to common
shareholders........... (59,259) (18,150) (30,362) (65,404) (173,175)
Basic and diluted loss
applicable to common
shareholders per common
share.................. $(.41) $(.12) $(.21) $(.45) $(1.19)
Basic and diluted common
shares outstanding..... 144,597,905 145,371,502 145,055,347 146,649,011 145,418,441
FOR THE YEAR ENDED
DECEMBER 31, 1998:
Sales, net............... $ 344,986 $ 390,050 $ 392,296 $ 446,241 $ 1,573,573
Operating income......... 24,282 28,414 29,783 35,678 118,157
Net loss................. (9,732) (7,225) (9,184) (11,595) (37,736)
Loss applicable to common
shareholders........... (33,217) (20,427) (22,517) (24,860) (101,021)
Basic and diluted loss
applicable to common
shareholders per common
share.................. $(.25) $(.14) $(.15) $(.17) $(.71)
Basic and diluted common
shares outstanding..... 134,686,401 145,659,940 145,238,934 144,530,821 142,529,024
</TABLE>
During the first quarter of 1999, the Company recorded a $22,000 provision
for product-line closures. During the fourth quarter of 1999, the Company
recorded a provision for the impairment of long-lived assets of $275,788 and
gain on the sale of businesses and other, net of $235,580.
During the second and third quarters of 1998, the Company recorded a gain on
the sales of businesses and other, net of $1,849 and $5,367, respectively (see
Note 4 and Note 18).
22. BUSINESS SEGMENT INFORMATION
The Company's operations have been classified into three business segments:
specialty magazines, information and education (see Note 1). The Company has
segregated the Non-Core Businesses from the aforementioned segments because the
Company's chief decision maker views these businesses separately when evaluating
and making decisions regarding ongoing operations (see Note 4). Information as
to the operations of the Company in different business segments is set forth
below based on the nature of the products offered. PRIMEDIA evaluates
performance based on several factors, of which the primary financial measure is
business segment earnings before interest, taxes, depreciation, amortization and
provisions for one-time charges ("EBITDA"). The accounting policies of the
business segments are the same as those described in the summary of significant
accounting policies (see Note 2). There were no material intersegment sales
between the reported segments.
54
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
22. BUSINESS SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
SALES, NET:
Specialty Magazines.................... $1,051,170 $ 927,501 $ 714,464
Information............................ 318,922 272,819 228,145
Education.............................. 346,010 330,790 269,246
Other:
Non-Core Businesses.................. -- 42,463 275,740
---------- ---------- ----------
Total.................................. $1,716,102 $1,573,573 $1,487,595
========== ========== ==========
EBITDA (1):
Specialty Magazines.................... $ 203,211 $ 187,104 $ 159,462
Information............................ 72,647 73,969 63,642
Education.............................. 99,682 90,400 81,833
Other:
Corporate............................ (34,986) (28,324) (25,545)
Non-Core Businesses.................. -- 6,761 22,620
---------- ---------- ----------
Total.................................. $ 340,554 $ 329,910 $ 302,012
========== ========== ==========
DEPRECIATION OF PROPERTY AND EQUIPMENT:
Specialty Magazines.................... $ 17,679 $ 12,518 $ 6,256
Information............................ 6,942 4,001 2,675
Education.............................. 21,517 24,323 23,553
Other:
Corporate............................ 1,515 1,314 1,031
Non-Core Businesses.................. -- 58 3,819
---------- ---------- ----------
Total.................................. $ 47,653 $ 42,214 $ 37,334
========== ========== ==========
TOTAL ASSETS:
Specialty Magazines.................... $1,489,269 $1,437,530 $ 977,947
Information............................ 377,654 377,355 328,574
Education.............................. 546,919 1,047,462 968,690
Other:
Corporate............................ 300,710 178,518 166,988
Non-Core Businesses.................. -- 209 43,791
---------- ---------- ----------
Total.................................. $2,714,552 $3,041,074 $2,485,990
========== ========== ==========
ADDITIONS TO PROPERTY, EQUIPMENT AND
OTHER, NET:
Specialty Magazines.................... $ 29,885 $ 20,303 $ 9,085
Information............................ 9,478 8,187 2,563
Education.............................. 28,962 21,918 11,583
Other:
Corporate............................ 1,163 3,782 1,740
Non-Core Businesses.................. -- 1,048 6,137
---------- ---------- ----------
Total.................................. $ 69,488 $ 55,238 $ 31,108
========== ========== ==========
</TABLE>
- ------------------------
(1) EBITDA represents operating income before interest, taxes, depreciation,
amortization and one-time
55
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
22. BUSINESS SEGMENT INFORMATION (CONTINUED)
(credits) and charges including an impairment provision for long-lived
assets of $275,788, a provision for product-line closures of $22,000 and
gain on the sales of businesses and other, net of $(235,580) in 1999 and
(gain) loss on the sales of businesses and other, net of $(7,216) and
$138,640 in 1998 and 1997, respectively.
The following is a reconciliation of EBITDA to operating income (loss).
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Total EBITDA................................ $ 340,554 $ 329,910 $ 302,012
Depreciation of property and equipment...... (47,653) (42,214) (37,334)
Amortization of intangible assets, excess of
purchase price over net assets acquired
and other................................. (176,361) (176,755) (146,831)
Gain (loss) on the sales of businesses and
other, net................................ 235,580 7,216 (138,640)
Provision for the impairment of long-lived
assets.................................... (275,788) -- --
Provision for product-line closures......... (22,000) -- --
--------- --------- ---------
Operating income (loss)..................... $ 54,332 $ 118,157 $ (20,793)
========= ========= =========
</TABLE>
23. FINANCIAL INFORMATION FOR GUARANTORS OF THE COMPANY'S DEBT
As discussed in Note 11, the Amended Credit Facility and the Senior Notes
are guaranteed by all existing and future directly or indirectly wholly-owned
domestic restricted subsidiaries of the Company ("the Guarantors"). The
Guarantors irrevocably and unconditionally, fully, jointly and severally,
guarantee the performance and payment when due, of all obligations under the
Amended Credit Facility and the Senior Notes. In 1997 and 1998, the financial
statements of the guarantor subsidiaries were omitted because the Company
believed the separate financial statements would not be material to the
shareholders and potential investors. The total assets, revenues, income or
equity of non-guarantor subsidiaries, both individually and on a combined basis
were inconsequential in relation to the total assets, revenues, income or equity
of the Company. In June 1999, the Company created certain unrestricted
subsidiaries to hold substantially all of its Internet assets and businesses.
These entities were created to enhance the Company's ability to effectively
manage its Internet operations, properly incentivize Internet management and
allow for the creation of separate capital structures in the future. The
Company's unrestricted and foreign subsidiaries are not guarantors of the
Company's indebtedness.
The information that follows presents condensed consolidating financial
information as of and for the year ended December 31, 1999 for: a) PRIMEDIA Inc.
(as the Issuer), b) the Guarantors, c) the foreign non-guarantor subsidiaries,
d) the unrestricted Internet non-guarantor subsidiaries, e) elimination entries
and f) the Company on a consolidated basis.
Results for the unrestricted Internet non-guarantor subsidiaries are for the
six-month period ended December 31, 1999.
The condensed consolidating financial information includes certain
allocations based on management's best estimates and should be read in
connection with the consolidated financial statements of the Company.
56
<PAGE>
23. FINANCIAL INFORMATION FOR GUARANTORS OF THE COMPANY'S DEBT (CONTINUED)
PRIMEDIA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
FOR THE YEAR ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
UNRESTRICTED
FOREIGN INTERNET PRIMEDIA INC.
GUARANTOR NON-GUARANTOR NON-GUARANTOR AND
PRIMEDIA INC. SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
--------------- ------------ -------------- -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Sales, net.................... $ -- $ 1,711,650 $ 6,341 $ 13,384 $ (15,273) $ 1,716,102
Operating costs and expenses:
Cost of goods sold.......... -- 384,645 1,999 14,395 (8,934) 392,105
Marketing and selling....... -- 306,270 1,761 7,349 -- 315,380
Distribution, circulation
and fullfilment........... -- 290,508 950 5,914 -- 297,372
Editorial................... -- 145,284 673 -- -- 145,957
Other general expenses...... -- 179,630 1,012 9,106 -- 189,748
Corporate administrative
expenses.................. 34,216 770 -- -- -- 34,986
Depreciation of property and
equipment................. 1,515 44,885 116 1,137 -- 47,653
Amortization of intangible
assets, excess of purchase
price over net assets
acquired and other........ 473 175,055 605 228 -- 176,361
Gain on the sales of
businesses and other,
net....................... -- (229,402) -- (6,178) -- (235,580)
Provision for the impairment
of long-lived assets...... -- 275,788 -- -- -- 275,788
Provision for product-line
closures.................. -- 22,000 -- -- -- 22,000
--------- ----------- ------- -------- --------- -----------
Operating income (loss)....... (36,204) 116,217 (775) (18,567) (6,339) 54,332
Other income (expense):
Interest expense............ (158,055) (6,495) (357) (2) -- (164,909)
Amortization of deferred
financing costs........... (143) (3,139) (2) (2) -- (3,286)
Equity in losses of
subsidiaries.............. (123,001) -- -- -- 123,001 --
Intercompany income......... 196,019 -- -- -- (196,019) --
Intercompany expense........ -- (196,004) (15) -- 196,019 --
Other, net.................. 1,271 (329) (414) (278) -- 250
--------- ----------- ------- -------- --------- -----------
Loss before income tax
expense..................... (120,113) (89,750) (1,563) (18,849) 116,662 (113,613)
Income tax expense............ -- (6,500) -- -- -- (6,500)
--------- ----------- ------- -------- --------- -----------
Net loss...................... (120,113) (96,250) (1,563) (18,849) 116,662 (120,113)
Other comprehensive income
(loss):
Unrealized gain on
available-for-sale
securities................ -- -- -- 88,982 -- 88,982
Foreign currency translation
adjustments............... -- 198 (96) -- -- 102
--------- ----------- ------- -------- --------- -----------
Comprehensive income (loss)... $(120,113) $ (96,052) $(1,659) $ 70,133 $ 116,662 $ (31,029)
========= =========== ======= ======== ========= ===========
</TABLE>
57
<PAGE>
23. FINANCIAL INFORMATION FOR GUARANTORS OF THE COMPANY'S DEBT (CONTINUED)
PRIMEDIA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
UNRESTRICTED
FOREIGN INTERNET PRIMEDIA INC.
GUARANTOR NON-GUARANTOR NON-GUARANTOR AND
PRIMEDIA INC. SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
--------------- ------------ -------------- -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash
equivalents............. $ 11,521 $ 13,765 $ 2,971 $ 404 $ -- $ 28,661
Accounts receivable,
net..................... 67 231,506 965 3,027 -- 235,565
Intercompany
receivables............. 866,999 96,850 5,283 1,317 (970,449) --
Inventories, net.......... -- 30,585 8 2,116 -- 32,709
Prepaid expenses and
other................... 1,576 33,822 95 987 -- 36,480
---------- ----------- -------- -------- ----------- ----------
Total current assets.... 880,163 406,528 9,322 7,851 (970,449) 333,415
Property and equipment,
net....................... 7,603 133,287 216 11,237 -- 152,343
Investment in
subsidiaries.............. 1,199,731 -- -- -- (1,199,731) --
Other intangible assets,
net....................... 3,048 612,198 3,009 1,695 -- 619,950
Excess of purchase price
over net assets acquired,
net....................... (13,437) 1,216,901 7,380 4,562 -- 1,215,406
Deferred income tax asset,
net....................... 176,200 -- -- -- -- 176,200
Other non-current assets.... 8,666 101,673 12 106,887 -- 217,238
---------- ----------- -------- -------- ----------- ----------
$2,261,974 $ 2,470,587 $ 19,939 $132,232 $(2,170,180) $2,714,552
========== =========== ======== ======== =========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable.......... $ 3,442 $ 97,801 $ 497 $ 938 $ -- $ 102,678
Intercompany payables..... 150,938 737,129 15,828 66,554 (970,449) --
Accrued interest
payable................. 19,379 -- -- -- -- 19,379
Accrued expenses and
other................... 56,597 156,951 287 3,902 -- 217,737
Deferred revenues......... -- 167,579 678 3,082 -- 171,339
Current maturities of
long-term debt.......... 7,280 15,460 -- -- -- 22,740
---------- ----------- -------- -------- ----------- ----------
Total current
liabilities........... 237,636 1,174,920 17,290 74,476 (970,449) 533,873
---------- ----------- -------- -------- ----------- ----------
Long-term debt.............. 1,695,715 31,656 5,525 -- -- 1,732,896
---------- ----------- -------- -------- ----------- ----------
Intercompany notes
payable................... -- 2,250,568 697 -- (2,251,265) --
---------- ----------- -------- -------- ----------- ----------
Other non-current
liabilities............... -- 29,684 254 1,858 -- 31,796
---------- ----------- -------- -------- ----------- ----------
Exchangeable preferred
stock..................... 559,689 -- -- -- -- 559,689
---------- ----------- -------- -------- ----------- ----------
Common stock subject to
redemption................ 536 -- -- -- -- 536
---------- ----------- -------- -------- ----------- ----------
Shareholders' equity
(deficiency):
Common stock.............. 1,483 -- -- -- -- 1,483
Additional paid-in
capital................. 986,649 -- -- -- -- 986,649
Accumulated deficit....... (1,203,207) (1,014,505) (3,945) (33,084) 1,051,534 (1,203,207)
Accumulated other
comprehensive income
(loss).................. -- (1,736) 118 88,982 -- 87,364
Unearned stock grant
compensation............ (15,250) -- -- -- -- (15,250)
Common stock in treasury,
at cost................. (1,277) -- -- -- -- (1,277)
---------- ----------- -------- -------- ----------- ----------
Total shareholders'
equity (deficiency)... (231,602) (1,016,241) (3,827) 55,898 1,051,534 (144,238)
---------- ----------- -------- -------- ----------- ----------
</TABLE>
58
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
UNRESTRICTED
FOREIGN INTERNET PRIMEDIA INC.
GUARANTOR NON-GUARANTOR NON-GUARANTOR AND
PRIMEDIA INC. SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
--------------- ------------ -------------- -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
$2,261,974 $ 2,470,587 $ 19,939 $132,232 $(2,170,180) $2,714,552
========== =========== ======== ======== =========== ==========
</TABLE>
59
<PAGE>
23. FINANCIAL INFORMATION FOR GUARANTORS OF THE COMPANY'S DEBT (CONTINUED)
PRIMEDIA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
UNRESTRICTED
FOREIGN INTERNET PRIMEDIA INC.
GUARANTOR NON-GUARANTOR NON-GUARANTOR AND
PRIMEDIA INC. SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
--------------- ------------ -------------- -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss.................... $ (120,113) $ (96,250) $(1,563) $(18,849) $ 116,662 $ (120,113)
Adjustments to reconcile net
loss to net cash provided
by (used in) operating
activities:
Depreciation and
amortization............ 2,131 223,079 723 1,367 -- 227,300
Non-cash gain on the sales
of businesses and other,
net..................... -- (229,402) -- (6,178) -- (235,580)
Provision for the
impairment of long-lived
assets.................. -- 275,788 -- -- -- 275,788
Accretion of discount on
acquisition obligation,
distribution advance and
other................... 1,340 4,134 -- -- -- 5,474
Equity in losses of
subsidiaries............ 123,001 -- -- (123,001) --
Intercompany income....... (196,019) (15,273) -- -- 211,292 --
Intercompany expense...... -- 197,309 15 7,629 (204,953) --
Non-cash provision for
product-line closures... -- 8,809 -- -- -- 8,809
Other, net................ 1,710 (336) (398) -- -- 976
Changes in operating assets
and liabilities:
(Increase) decrease in:
Accounts receivable,
net..................... 140 (25,395) (70) 507 -- (24,818)
Inventories, net.......... -- (2,952) 7 (2,038) -- (4,983)
Prepaid expenses and
other................... (3,183) (5,416) 73 (1,152) -- (9,678)
Increase (decrease) in:
Accounts payable.......... 3,175 (3,995) 349 6 -- (465)
Accrued interest
payable................. (1,072) -- -- -- -- (1,072)
Accrued expenses and
other................... (1,959) (3,143) (38) 1,552 -- (3,588)
Deferred revenues......... -- (10,301) 77 (635) -- (10,859)
Other non-current
liabilities............. -- 88 12 7 -- 107
----------- ----------- ------- -------- ----------- -----------
Net cash provided by
(used in) operating
activities............ (190,849) 316,744 (813) (17,784) -- 107,298
----------- ----------- ------- -------- ----------- -----------
INVESTING ACTIVITIES:
Additions to property,
equipment and other,
net....................... (1,163) (58,559) (70) (9,696) -- (69,488)
Intercompany asset
transfers................. (7) 7 -- -- -- --
Proceeds from sales of
businesses and other...... -- 406,292 -- 7,141 -- 413,433
Payments for businesses
acquired.................. -- (142,902) -- (2,665) -- (145,567)
Payments for other
investments............... -- (4,630) -- (7,667) -- (12,297)
----------- ----------- ------- -------- ----------- -----------
Net cash provided by
(used in) investing
activities............ $ (1,170) $ 200,208 $ (70) $(12,887) $ -- $ 186,081
----------- ----------- ------- -------- ----------- -----------
</TABLE>
59
<PAGE>
23. FINANCIAL INFORMATION FOR GUARANTORS OF THE COMPANY'S DEBT (CONTINUED)
PRIMEDIA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
UNRESTRICTED
FOREIGN INTERNET PRIMEDIA INC.
GUARANTOR NON-GUARANTOR NON-GUARANTOR AND
PRIMEDIA INC. SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
--------------- ------------ -------------- -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
FINANCING ACTIVITIES:
Intercompany activity..... $ 470,219 $ 1,039,107 $ 1,647 $ 30,994 $(1,541,967) $ --
Borrowings under credit
agreements.............. 862,500 1 288 -- -- 862,789
Repayments of borrowings
under credit
agreements.............. (1,070,500) -- -- -- -- (1,070,500)
Payments of acquisition
obligation.............. (7,931) (13,235) -- -- -- (21,166)
Proceeds from issuances of
common stock, net of
redemptions............. 9,234 -- -- -- -- 9,234
Increase (decrease) in
subsidiary capital
stock................... -- (1,541,967) -- -- 1,541,967 --
Purchases of common stock
for the treasury........ (10,508) -- -- -- -- (10,508)
Dividends paid to
preferred stock
shareholders............ (53,062) -- -- -- -- (53,062)
Deferred financing costs
paid.................... (2,023) (3,672) (2) -- -- (5,697)
Other..................... 16 (359) -- (3) -- (346)
----------- ----------- ------- -------- ----------- -----------
Net cash provided by
(used in) financing
activities............ 197,945 (520,125) 1,933 30,991 -- (289,256)
----------- ----------- ------- -------- ----------- -----------
Increase (decrease) in cash
and cash equivalents........ 5,926 (3,173) 1,050 320 -- 4,123
Cash and cash equivalents,
beginning of period......... 5,595 16,938 1,921 84 -- 24,538
----------- ----------- ------- -------- ----------- -----------
Cash and cash equivalents, end
of period................... $ 11,521 $ 13,765 $ 2,971 $ 404 $ -- $ 28,661
=========== =========== ======= ======== =========== ===========
</TABLE>
60
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None
PART III
Items 10, 11, 12 and 13 are omitted, except for information as to Executive
Officers set forth in Part I, Item 1, as the proxy statement is incorporated by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(a) Documents filed as part of this report:
1. Index to Financial Statements
See Table of Contents to Financial Statements included in Part II, Item 8
of this report.
2. Index to Financial Statement Schedules
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
PRIMEDIA Inc. and Subsidiaries
For the Year Ended December 31, 1999............... S-1
For the Year Ended December 31, 1998............... S-2
For the Year Ended December 31, 1997............... S-3
Independent Auditors' Report on Schedules--Deloitte &
Touche LLP............................................ S-4
</TABLE>
All schedules, except those set forth above, have been omitted since the
information required to be submitted has been included in the Consolidated
Financial Statements or Notes thereto or has been omitted as not applicable or
not required.
(b)--Reports on Form 8-K
PRIMEDIA Inc. filed its Current Report on Form 8-K on December 2, 1999
including information required by Items 2 and 7. This report, dated
November 17, 1999, included the unaudited pro forma statements of consolidated
operations of PRIMEDIA Inc. and Subsidiaries for the nine months ended
September 30, 1999 and for the year ended December 31, 1998 and an unaudited pro
forma consolidated balance sheet at September 30, 1999, along with a description
of all pro forma adjustments. This Current Report was filed in connection with
PRIMEDIA Inc.'s sale of the Supplemental Education Group, comprised of Weekly
Reader Corporation, PRIMEDIA Reference, Inc., American Guidance Service, Inc.
and their respective subsidiaries.
(c)--Exhibits
<TABLE>
<S> <C> <C>
3.1 --Certificate of Incorporation of K-III. (7)
3.2 --Certificate of Amendment to Certificate of Incorporation
of K-III (changing name from K-III to PRIMEDIA Inc.) (14)
3.3 --Certificate of Designations of the Series D Preferred
Stock. (11)
3.4 --Certificate of Designations of the Series F Preferred
Stock. (13)
3.5 --Certificate of Designations of the Series H Preferred
Stock. (15)
</TABLE>
61
<PAGE>
<TABLE>
<S> <C> <C>
3.6 --Amended and Restated By-laws of K-III. (7)
3.7 --Certificate of Incorporation of Intertec Publishing
Corporation. (2)
3.8 --Certificate of Amendment to Certificate of Incorporation
of Intertec Publishing Corporation (changing name to
PRIMEDIA Intertec Corporation) (16)
3.9 --Certificate of Amendment to Certificate of Incorporation
of Intertec Publishing Corporation (changing name from
PRIMEDIA Intertec Corporation to Intertec Publishing
Corporation) (*)
3.10 --Amended and Restated By-laws of Intertec Publishing
Corporation. (2)
3.11 --Certificate of Incorporation of Newbridge Communications,
Inc. (2)
3.12 --Certificate of Amendment to Certificate of Incorporation
of Newbridge Communications, Inc. (changing name to Films
for the Humanities and Sciences, Inc.) (14)
3.13 --By-laws of Newbridge Communications, Inc. (2)
3.14 --Certificate of Incorporation of K-III Directory
Corporation (1)
3.15 --Certificate of Amendment to Certificate of Incorporation
of K-III Directory Corporation (changing name to PRIMEDIA
Information Inc.) (14)
3.16 --By-laws of K-III Directory Corporation (1)
3.17 --Certificate of Incorporation of R.E.R. Publishing
Corporation. (2)
3.18 --Amended and Restated By-laws of R.E.R. Publishing
Corporation. (2)
3.19 --Certificate of Incorporation of Intermodal Publishing
Company, Ltd. (2)
3.20 --Amended and Restated By-laws of Intermodal Publishing
Company, Ltd. (2)
3.21 --Certificate of Incorporation of K-III Magazine
Corporation. (2)
3.22 --Certificate of Amendment to Certificate of Incorporation
of K-III Magazine Corporation (changing name to PRIMEDIA
Magazines Inc.) (14)
3.23 --By-laws of K-III Magazine Corporation. (2)
3.24 --Certificate of Incorporation of K-III Magazine Finance
Corporation. (2)
3.25 --Certificate of Amendment to Certificate of Incorporation
of K-III Magazine Finance Corporation (changing name to
PRIMEDIA Magazines Finance Inc.) (14)
3.26 --By-laws of K-III Magazine Finance Corporation. (2)
3.27 --Certificate of Incorporation of K-III Holdings Corporation
III. (2)
3.28 --Certificate of Amendment to Certificate of Incorporation
of K-III Holdings Corporation III (changing name to
PRIMEDIA Holdings III Inc.) (14)
3.29 --By-laws of K-III Holdings Corporation III. (2)
3.30 --Certificate of Incorporation of Haas Publishing Companies,
Inc. (5)
3.31 --By-laws of Haas Publishing Companies, Inc. (5)
3.32 --Certificate of Incorporation of Channel One Communications
Corporation. (8)
3.33 --By-laws of Channel One Communications Corporation. (8)
3.34 --Certificate of Incorporation of Bacon's Information, Inc.
(9)
</TABLE>
62
<PAGE>
<TABLE>
<S> <C> <C>
3.35 --By-laws of Bacon's Information, Inc. (9)
3.36 --Certificate of Incorporation of PJS Publications, Inc. (8)
3.37 --Certificate of Amendment to Certificate of Incorporation
of PJS Publications, Inc. (changing name to PRIMEDIA
Special Interest Publications Inc.) (14)
3.38 --By-laws of PJS Publications, Inc. (8)
3.39 --Certificate of Incorporation of Symbol of Excellence
Publishers, Inc. (8)
3.40 --By-laws of Symbol of Excellence Publishers, Inc. (8)
3.41 --Certificate of Incorporation of American Heat Video
Productions, Inc. (12)
3.42 --By-laws of American Heat Video Productions, Inc. (12)
3.43 --Certificate of Incorporation of Bankers Consulting
Company (12)
3.44 --By-laws of Bankers Consulting Company (12)
3.45 --Certificate of Incorporation of Industrial Training
Systems Corporation (12)
3.46 --By-laws of Industrial Training Systems Corporation (12)
3.47 --Certificate of Incorporation of Law Enforcement Television
Network, Inc. (TX) (12)
3.48 --By-laws of Law Enforcement Television Network, Inc.
(TX) (12)
3.49 --Certificate of Incorporation of Lockert Jackson &
Associates, Inc. (12)
3.50 --By-laws of Lockert Jackson & Associates, Inc. (12)
3.51 --Certificate of Incorporation of TI-IN Acquisition
Corporation (12)
3.52 --By-laws of TI-IN Acquisition Corporation (12)
3.53 --Certificate of Incorporation of Westcott Communications,
Inc. (12)
3.54 --Certificate of Amendment to Certificate of Incorporation
of Westcott Communications, Inc. (changing name to
PRIMEDIA Workplace Learning, Inc.) (14)
3.55 --By-laws of Westcott Communications, Inc. (12)
3.56 --Certificate of Incorporation of Westcott Communications
Michigan, Inc. (12)
3.57 --By-laws of Westcott Communications Michigan, Inc. (12)
3.58 --Certificate of Incorporation of Westcott ECI, Inc. (12)
3.59 --By-laws of Westcott ECI, Inc. (12)
3.60 --Certificate of Incorporation of McMullen Argus Publishing,
Inc. (12)
3.61 --By-laws of McMullen Argus Publishing, Inc. (12)
3.62 --Certificate of Incorporation of The Apartment Guide of
Nashville, Inc. (14)
3.63 --By-laws of The Apartment Guide of Nashville, Inc. (14)
3.64 --Certificate of Incorporation of Cardinal Business Media,
Inc. (14)
3.65 --By-laws of Cardinal Business Media, Inc. (14)
3.66 --Certificate of Incorporation of Cardinal Business Media
Holdings, Inc. (14)
</TABLE>
63
<PAGE>
<TABLE>
<S> <C> <C>
3.67 --By-laws of Cardinal Business Media Holdings, Inc. (14)
3.68 --Certificate of Formation of Cover Concepts Marketing
Services, LLC (14)
3.69 --Limited Liability Company Agreement of Cover Concepts
Marketing Services, LLC (14)
3.70 --Certificate of Incorporation of CSK Publishing Company
Incorporated (14)
3.71 --By-laws of CSK Publishing Company Incorporated (14)
3.72 --Certificate of Incorporation of GO LO Entertainment,
Inc. (14)
3.73 --By-laws of GO LO Entertainment, Inc. (14)
3.74 --Certificate of Incorporation of Guinn Communications,
Inc. (14)
3.75 --By-laws of Guinn Communications, Inc. (14)
3.76 --Certificate of Incorporation of IntelliChoice, Inc. (14)
3.77 --By-laws of IntelliChoice, Inc. (14)
3.78 --Certificate of Incorporation of Little Rock Apartment
Guide, Inc. (14)
3.79 --By-laws of Little Rock Apartment Guide, Inc. (14)
3.80 --Certificate of Incorporation of Memphis Apartment Guide,
Inc. (14)
3.81 --By-laws of Memphis Apartment Guide, Inc. (14)
3.82 --Certificate of Incorporation of Low Rider Publishing
Group, Inc. (14)
3.83 --By-laws of Low Rider Publishing Group, Inc. (14)
3.84 --Certificate of Incorporation of Pictorial, Inc. (14)
3.85 --By-laws of Pictorial, Inc. (14)
3.86 --Certificate of Incorporation of Plaza Communications,
Inc. (14)
3.87 --By-laws of Plaza Communications, Inc. (14)
3.88 --Certificate of Incorporation of QWIZ, Inc. (14)
3.89 --By-laws of QWIZ, Inc. (14)
3.90 --Certificate of Incorporation of Bowhunter Magazine,
Inc. (14)
3.91 --By-laws of Bowhunter Magazine, Inc. (14)
3.92 --Certificate of Incorporation of Canoe & Kayak, Inc. (14)
3.93 --By-laws of Canoe & Kayak, Inc. (14)
3.94 --Certificate of Incorporation of Climbing, Inc. (14)
3.95 --By laws of Climbing, Inc. (14)
3.96 --Certificate of Amendment to Certificate of Incorporation
of Cowles Enthusiast Media, Inc. (changing name to
PRIMEDIA Enthusiast Publications, Inc.) (16)
3.97 --Certificate of Incorporation of Cowles Enthusiast Media,
Inc. (14)
3.98 --By-laws of Cowles Enthusiast Media, Inc. (14)
3.99 --Certificate of Incorporation of Cowles History Group,
Inc. (14)
</TABLE>
64
<PAGE>
<TABLE>
<S> <C> <C>
3.100 --By-laws of Cowles History Group, Inc. (14)
3.101 --Certificate of Incorporation of Cowles/Simba Information,
Inc. (14)
3.102 --Certificate of Amendment to Certificate of Incorporation
of Cowles/Simba Information, Inc. (changing name to Simba
Information) (16)
3.103 --By-laws of Cowles/Simba Information, Inc. (14)
3.104 --Certificate of Incorporation of Cumberland Publishing,
Inc. (14)
3.105 --By-laws of Cumberland Publishing, Inc. (14)
3.106 --Certificate of Incorporation of Horse & Rider, Inc. (14)
3.107 --By-laws of Horse & Rider, Inc. (14)
3.108 --Certificate of Incorporation of Kitplanes Acquisition
Company (14)
3.109 --By-laws of Kitplanes Acquisition Company (14)
3.110 --Certificate of Incorporation of RetailVision, Inc. (14)
3.111 --By-laws of RetailVision, Inc. (14)
3.112 --Certificate of Incorporation of The Virtual Flyshop,
Inc. (14)
3.113 --By-laws of The Virtual Flyshop, Inc. (14)
3.114 --Certificate of Incorporation of Cambridge Research Group,
Ltd. (16)
3.115 --By-laws of Cambridge Research Group, Ltd. (16)
3.116 --Certificate of Formation of CommCorp. LLC (16)
3.117 --Amendment to Limited Liability Company Operating Agreement
of
CommCorp. LLC (16)
3.118 --Certificate of Incorporation of Maddux Publishing,
Inc. (16)
3.119 --By-laws of Maddux Publishing, Inc. (16)
3.120 --Certificate of Amendment of Articles of Incorporation of
Miramar
Communications, Inc. (16)
3.121 --By-laws of Miramar Communications, Inc. (16)
3.122 --Certificate of Incorporation for TSECRP, Inc. (16)
3.123 --By-laws of TSECRP, Inc. (16)
3.124 --Certificate of Incorporation of Calibre Press, Inc. (*)
3.125 --By-Laws of Calibre Press, Inc. (*)
3.126 --Certificate of Incorporation of Communication Concepts,
Inc. (*)
3.127 --By-Laws of Communication Concepts, Inc. (*)
3.128 --Certificate of Incorporation of Game & Fish Merger
Subsidiary, Inc. (*)
3.129 --By-Laws of Game & Fish Merger Subsidiary, Inc. (*)
3.130 --Certificate of Incorporation of Meridian Education
Corporation (*)
3.131 --By-Laws of Meridian Education Corporation (*)
</TABLE>
65
<PAGE>
<TABLE>
<S> <C> <C>
4.1 --10 1/4% Senior Note Indenture (including form of note and
form of guarantee). (8)
4.2 --8 1/2% Senior Note Indenture (including forms of note and
guarantee). (9)
4.3 --Form of Class D Subordinated Debenture Indenture
(including form of debenture). (11)
4.4 --Form of Class F Subordinated Debenture Indenture
(including form of debenture). (13)
4.5 --Form of Class H Subordinated Debenture Indenture
(including form of debenture). (15)
4.6 --7 5/8% Senior Note Indenture (including form of note and
form of guarantee). (15)
10.1 --$150,000 Credit Facility with The Chase Manhattan Bank,
The Bank of New York, Bankers Trust Company and The Bank
of Nova Scotia, as agents (including forms of Guaranty and
Contribution Agreements). (16)
10.2 --Second Amendment and Consent to the $1,500,000,000 Credit
Facility with The Chase Manhattan Bank, The Bank of New
York, Bankers Trust Company and the Bank of Nova Scotia,
as agents, for the Amended and Restated Credit Agreement,
dated as of May 24, 1996 and amended and restated as of
March 11, 1999. (*)
10.3 --Second Amendment and Consent to the $1,500,000,000 Credit
Facility with The Chase Manhattan Bank, The Bank of New
York, Bankers Trust Company and the Bank of Nova Scotia,
as agents, for the Amended and Restated Credit Agreement,
dated as of May 24, 1996. (*)
+10.4 --Form of Amended and Restated K-III 1992 Stock Purchase and
Option Plan. (7)
+10.5 --Amendment No. 1 to the 1992 Stock Purchase and Option Plan
Amended and Restated as of March 5, 1997. (12)
+10.6 --Form of Common Stock Purchase Agreement between K-III and
senior management. (2)
+10.7 --Form of Common Stock Purchase Agreement between K-III and
various purchasers. (2)
+10.8 --Form of Non-Qualified Stock Option Agreement between K-III
and various employees. (2)
10.9 --Form of Common Stock Purchase Agreement between K-III and
senior management. (2)
10.10 --Form of Common Stock Purchase Agreement between K-III and
various purchasers. (2)
10.11 --Form of Securities Purchase Agreement between PRIMEDIA
Inc. and KKR 1996 Fund L.P. (16)
+10.12 --Form of Non-Qualified Stock Option Agreement between K-III
and various employees. (2)
10.13 --Amended Registration Rights Agreement dated as of
February 5, 1998 among PRIMEDIA Inc., KKR 1996 Fund L.P.,
MA Associates, L.P., FP Associates, L.P., Magazine
Associates, L.P., Publishing Associates, L.P., Channel One
Associates, L.P. and KKR Partners II, L.P. with respect to
common stock of K-III. (16)
</TABLE>
66
<PAGE>
<TABLE>
<S> <C> <C>
+10.14 --Free Cash Flow Long-Term Plan. (1)
+10.15 --Executive Incentive Compensation Plan. (8)
+10.16 --Pension Plan. (1)
+10.17 --1995 Restoration Plan. (8)
+10.18 --Agreement, dated as of December 24, 1996, between K-III
Communications Corporation and Jack L. Farnsworth (12)
+10.19 Agreement, dated as of November 30, 1999, between PRIMEDIA
Inc. and William F. Reilly(*)
+10.20 Agreement, dated as of October 27, 1999, between PRIMEDIA
Inc. and Thomas S. Rogers and Amendment I dated as of
October 27, 1999(*)
21 --Subsidiaries of K-III. (*)
23 --Independent Auditors' Consent(*)
27 --1999 Financial Data Schedule
</TABLE>
- ------------------------
(1) Incorporated by reference to K-III Communications Corporation's Annual
Report on Form 10-K for the year ended December 31, 1992. File No. 1-11106.
(2) Incorporated by reference to K-III Communications Corporation's Registration
Statement on Form S-1, File No. 33-46116.
(3) Incorporated by reference to K-III Communications Corporation's Registration
Statement on Form S-1, File No. 33-60786.
(4) Incorporated by reference to K-III Communications Corporation's Annual
Report on Form 10-K for the year ended December 31, 1993. File No. 1-11106.
(5) Incorporated by reference to K-III Communications Corporation's Registration
Statement on Form S-1, File No. 33-77520.
(6) Incorporated by reference to K-III Communications Corporation's Current
Report on Form 8-K dated September 30, 1994.
(7) Incorporated by reference to K-III Communications Corporation's Registration
Statement on Form S-1, File No. 33-96516.
(8) Incorporated by reference to K-III Communications Corporation Annual Report
on Form 10-K for the year ended December 31, 1994, File No. 1-11106.
(9) Incorporated by reference to K-III Communications Corporation's Form 10-K
for the year ended December 31, 1995, File No. 1-11106.
(10) Incorporated by reference to K-III Communications Corporation's Form 10-Q
for the quarter ended March 31, 1996.
(11) Incorporated by reference to K-III Communications Corporation's
Registration Statement on Form S-4, File No. 333-03691.
(12) Incorporated by reference to K-III Communications Corporation's Annual
Report on Form 10-K for the year ended December 31, 1996, File No. 1-11106.
(13) Incorporated by reference to K-III Communications Corporation's
Registration Statement on Form S-4, File No. 333-38451.
(14) Incorporated by reference to K-III Communications Corporation's Annual
Report on Form 10-K for the year ended December 31, 1997,
File No. 1-11106.
(15) Incorporated by reference to PRIMEDIA Inc.'s Registration Statement on
Form S-4, File No. 333-51891.
(16) Incorporated by reference to K-III Communications Corporation's Annual
Report on Form 10-K for the year ended December 31, 1998, File No. 1-11106.
+ Executive contract or compensation plan or arrangement.
(*) Filed herewith.
67
<PAGE>
SUPPLEMENTAL INFORMATION
The foregoing information is being provided to comply with the annual report
requirements of the New York Stock Exchange.
The Company's Board of Directors is:
<TABLE>
<S> <C>
Thomas S. Rogers Chairman of the Board and Chief Executive Officer,
PRIMEDIA Inc.
Beverly C. Chell Vice Chairman, General Counsel and Secretary,
PRIMEDIA Inc.
Meyer Feldberg Professor and Dean, Columbia University Graduate
School of Business
Perry Golkin General Partner, KKR Associates; member of the
limited liability company which serves as the general
partner of KKR
H. John Greeniaus Former Chairman and Chief Executive Officer of
Nabisco, Inc.
Henry R. Kravis Founding Partner, Kohlberg Kravis Roberts & Co. L.P.;
managing member of the Executive Committee of the
limited liability company which serves as the general
partner of KKR
Charles G. McCurdy President, PRIMEDIA Inc.
George R. Roberts Founding Partner, Kohlberg Kravis Roberts & Co. L.P.;
managing member of the Executive Committee of the
limited liability company which serves as the general
partner of KKR
Michael T. Tokarz General Partner, KKR Associates; member of the
limited liability company which serves as the general
partner of KKR
</TABLE>
Messrs. Rogers, Golkin, Kravis and Tokarz are members of the Executive
Committee. Messrs. Feldberg and Greeniaus are members of the Audit Committee.
Messrs. Golkin, Kravis and Tokarz are members of the Compensation Committee.
The Company's Registrar and Transfer Agent for the Common Stock is the Bank
of New York.
68
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this Annual Report on Form 10-K to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York on March 28, 2000.
PRIMEDIA INC.
By /S/ BEVERLY C. CHELL
...................................
(Beverly C. Chell)
VICE CHAIRMAN AND SECRETARY
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this Annual Report on Form 10-K has been signed below by the following persons
in the capacities indicated on March 28, 2000.
<TABLE>
<CAPTION>
SIGNATURES TITLE
- --------------------------------------------------- ------------------------------------------------
<S> <C>
/s/ THOMAS S. ROGERS Chairman, Chief Executive Officer and Director
................................................... (Principal Executive Officer)
(Thomas S. Rogers)
/s/ CHARLES G. MCCURDY President and Director
...................................................
(Charles G. McCurdy)
/s/ BEVERLY C. CHELL Vice Chairman, Secretary and Director
...................................................
(Beverly C. Chell)
Director
...................................................
(Meyer Feldberg)
/s/ PERRY GOLKIN Director
...................................................
(Perry Golkin)
Director
...................................................
(H. John Greeniaus)
Director
...................................................
(Henry Kravis)
Director
...................................................
(George R. Roberts)
/s/ MICHAEL T. TOKARZ Director
...................................................
(Michael T. Tokarz)
/s/ LAWRENCE R. RUTKOWSKI Executive Vice President and Principal Financial
................................................... Officer
(Lawrence R. Rutkowski)
/s/ ROBERT J. SFORZO Senior Vice President and Principal Accounting
................................................... Officer
(Robert J. Sforzo)
</TABLE>
69
<PAGE>
SCHEDULE II
PRIMEDIA INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ----------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Accounts receivable
Allowance for doubtful
accounts................... $ 15,796 $ 14,440 $ 2,177 (1) $(16,056)(2) $ 14,644
$ (1,713)(3)
Allowance for sales returns
and
rebates.................... $ 21,507 $ 17,445 $ 370 (1) $(17,221)(2) $ 18,102
$ (3,999)(3)
Inventory
Allowance for obsolescence... $ 3,205 $ 2,756 $ (2,766)(3) $ (1,423)(2) $ 1,772
Accumulated amortization
Goodwill..................... $137,094 $331,997 $ (25,580)(3) $(13,355)(2) $430,156
Other intangibles............ $777,760 $112,763 $(128,935)(3) $ (2,145)(2) $759,443
Deferred financing costs..... $ 7,309 $ 3,286 $ (674)(3) $ (81)(2) $ 9,840
Deferred wiring and
installation costs......... $ 24,523 $ 7,195 $ -- $ (1,640)(2) $ 30,078
Prepublication and
programming costs.......... $ 11,765 $ 7,367 $ (415)(3) $ (1,331)(2) $ 17,386
Direct-response advertising
costs...................... $ 70,113 $ 35,487 $ (8,118)(3) $(11,141)(2) $ 86,341
</TABLE>
- ------------------------
Notes:
(1) Increases in related valuation account result from the recovery of amounts
previously written off.
(2) Deductions from related valuation account result from write-offs and actual
returns.
(3) Deductions from related valuation account result from reclassifications and
write-offs related to net divestitures.
S-1
<PAGE>
SCHEDULE II
PRIMEDIA INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ----------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Accounts receivable
Allowance for doubtful
accounts................... $ 10,521 $ 12,584 $ 2,629 (1) $(14,911)(3) $ 15,796
$ 5,314 (2)
$ (341)(4)
Allowance for sales returns
and
rebates.................... $ 27,009 $ 22,556 $ 1,328 (1) $(28,474)(3) $ 21,507
$ (912)(4)
Inventory
Allowance for obsolescence... $ 2,482 $ 595 $ 1,621 (1) $ (1,472)(3) $ 3,205
$ (21)(4)
Accumulated amortization
Goodwill..................... $ 94,735 $ 42,623 $ 364 (1) $ (57)(3) $137,094
$ (571)(4)
Other intangibles............ $641,862 $127,099 $12,854 (1) $ (1,721)(3) $777,760
$(2,334)(4)
Deferred financing costs..... $ 5,093 $ 3,046 $ (215)(4) $ (615)(3) $ 7,309
Deferred wiring and
installation costs......... $ 18,718 $ 7,033 $ -- $ (1,228)(3) $ 24,523
Prepublication and
programming costs.......... $ 6,843 $ 5,759 $ -- $ (837)(3) $ 11,765
Direct-response advertising
costs...................... $ 53,840 $ 33,354 $ (235)(4) $(16,846)(3) $ 70,113
</TABLE>
- ------------------------
Notes:
(1) Increases in related valuation account result from acquisitions.
(2) Increases in related valuation account result from the recovery of amounts
previously written off.
(3) Deductions from related valuation account result from write-offs and actual
returns.
(4) Deductions from related valuation account result from reclassifications and
write-offs related to divestitures.
S-2
<PAGE>
SCHEDULE II
PRIMEDIA INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ----------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Accounts receivable
Allowance for doubtful
accounts................... $ 15,418 $ 20,904 $ 850 (1) $ (21,982)(3) $ 10,521
$ 1,732 (2)
$ (6,401)(4)
Allowance for sales returns
and rebates................ $ 24,098 $ 83,438 $ (3,378)(4) $ (77,149)(3) $ 27,009
Inventory
Allowance for obsolescence... $ 8,703 $ 5,674 $ 218 (2) $ (4,837)(3) $ 2,482
$ (7,276)(4)
Accumulated amortization
Goodwill..................... $ 82,763 $ 29,024 $ (17,026)(4) $ (26)(3) $ 94,735
Other intangibles............ $814,061 $110,799 $(282,911)(4) $ (87)(3) $641,862
Deferred financing costs..... $ 9,794 $ 3,071 $ -- $ (7,772)(3) $ 5,093
Deferred wiring and
installation costs......... $ 12,850 $ 7,008 $ (7)(4) $ (1,133)(3) $ 18,718
Prepublication and
programming costs.......... $ 7,968 $ 4,491 $ (3,489)(4) $ (2,127)(3) $ 6,843
Direct-response advertising
costs...................... $ 70,661 $ 42,659 $ (49,320)(4) $ (10,160)(3) $ 53,840
</TABLE>
- ------------------------
Notes:
(1) Increases in related valuation account result from acquisitions.
(2) Increases in related valuation account result from the recovery of amounts
previously written off.
(3) Deductions from related valuation account result from write-offs and actual
returns.
(4) Deductions from related valuation account result from reclassifications and
write-offs related to net assets held for sale.
S-3
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SCHEDULES
To the Shareholders and Board of Directors of
PRIMEDIA Inc.
New York, New York:
We have audited the consolidated balance sheets of PRIMEDIA Inc. and
subsidiaries as of December 31, 1999 and 1998, and the related statements of
consolidated operations, shareholders' equity (deficiency) and consolidated cash
flows for each of the three years in the period ended December 31, 1999, and
have issued our report thereon dated February 2, 2000; such consolidated
financial statements and report are included elsewhere in this Form 10-K. Our
audits also included the financial statement schedules of PRIMEDIA Inc. and
subsidiaries, listed in Item 14. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such financial statement schedules,
when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
New York, New York
February 2, 2000
S-4
<PAGE>
Exhibit 3.9
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "PRIMEDIA INTERTEC CORPORATION", CHANGING ITS NAME FROM "PRIMEDIA INTERTEC
CORPORATION" TO "INTERTEC PUBLISHING CORPORATION", FILED IN THIS OFFICE ON THE
NINTH DAY OF APRIL, A.D. 1999, AT 4 O'CLOCK P.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDED OF DEEDS.
2198100 8100 [SEAL] /s/ Edward J. Freel
----------------------------------------
991141227 Edward J. Freel, Secretary of State
AUTHENTICATION: 9682453
DATE: 04-13-99
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
PRIMEDIA Intertec Corporation, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation").
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation duly adopted
resolutions setting forth and declaring advisable a proposed amendment to the
Certificate of Incorporation of said Corporation:
RESOLVED, that the Certificate of Incorporation of this Corporation
be amended by changing the First Article so that, as amended, said Article
shall be and read as follows: "The name of the Corporation is Intertec
Publishing Corporation".
SECOND: That by written consent, filed with the minutes of the
Corporation, the sole stockholder approved said amendment in accordance with the
provisions of Section 228 of the General Corporation Law of the State of
Delaware.
THIRD: That the aforesaid amendment to the Corporation's Certificate of
Incorporation was duly adopted in accordance with the applicable provisions of
Section 242 and Section 228 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said PRIMEDIA Intertec Corporation has caused this
Certificate to be executed by Beverly C. Chell its authorized officer, on this
8th day of April, 1999.
By: /s/ Beverly C. Chell
----------------------------
Beverly C. Chell
Secretary
<PAGE>
Exhibit 3.124
Certificate No. 61574
STATE OF ILLINOIS
OFFICE OF THE SECRETARY OF STATE
[GRAPHIC OMITTED]
To all to whom these Presents Shall Come, Greeting:
Whereas, ARTICLES OF INCORPORATION, duly signed and verified of CALIBRE PRESS,
INC. incorporated under the laws of the State of ILLINOIS have been filed in the
Office of the Secretary of State, as provided by The "Business Corporation Act"
of Illinois, in force July 13, A.D. 1933.
Now Therefore, I, JIM EDGAR, Secretary of State of the State of Illinois, by
virtue of the powers vested in me by law, do hereby issue this certificate and
attach hereto a copy of the Application of the aforesaid corporation.
In Testimony Whereof, I hereto set my hand and cause to be affixed the
Great Seal of the State of Illinois, done at the City of Springfield, this 17th
day of February A.D. 1981 and of the Independence of the United States the two
hundred and 5th.
[SEAL OF THE STATE OF ILLINOIS]
/s/ Jim Edgar
---------------------------------
SECRETARY OF STATE
<PAGE>
------------------------------
File FORM BCA-47 (Do not write in this space)
in
Duplicate ARTICLES OF INCORPORATION Date Paid 2/17/81
Initial License Fee $ .50
Franchise Tax $ 35.42
Filing Fee $ 75.00
--------
Clerk [Illegible] 110.92
------------------------------
TO: ALAN J. DIXON, Secretary of State
The name and address of the incorporators are as follows:
Name Number Street City State Zip Code
- --------------------------------------------------------------------------------
Dennis Anderson, 3411 C. North Kennicott, Arlington Heights, Il. 6000
- --------------------------------------------------------------------------------
Charles A. Remsberg, 1521 Kirk St., Evanston, Il. 60202
- --------------------------------------------------------------------------------
The above named incorporators, being one or more natural persons of the age of
twenty-one years or more or a corporation, and having subscribed to the shares
of the corporation to be organized pursuant hereto, for the purpose of forming a
corporation under "The Business Corporation Act" of the State of Illinois, do
hereby adopt the following Articles of Incorporation:
ARTICLE ONE
The name of the corporation hereby incorporated is: Calibre Press, Inc.
ARTICLE TWO
The name and address of the initial registered agent and registered office are:
Registered agent Dennis Anderson
Registered office 1521 Kirk Street
City, Zip code, County Evanston, Ill. 60202
ARTICLE THREE
The duration of the corporation is |X| perpetual OR _____________ years
ARTICLE FOUR
The purposes for which the corporation is organized are: To design,
create, publish, print and distribute all types of printed matter, including but
not limited to, books, magazines, pamphlets and educational text material; to
create, design, produce, use and distribute audio/visual media and associated
printed material; to render consulting services, lecture and seminar services
for educational and training purposes, and generally to conduct the business of
creation, production and distribution of audio/visual or printed informational
or educational materials of all kinds.
ARTICLE FIVE
Paragraph 1: The class, number of shares, the par value, if any, of each class
which the corporation is authorized to issue, the number the corporation
proposes to issue without further report to the Secretary of State, and the
consideration (expressed in dollars) to be received by the corporation therefor,
are:
<TABLE>
<CAPTION>
*Par Value Number of shares Number of shares Total consideration
Class Series per share authorized to be issued to be received therefor
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
common None without par 1,000 1000 $1,000.00
- ------------------------------------------------------------------------------------------------
value
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
================================================================================================
Total $1,000.00
----------------
</TABLE>
<PAGE>
Paragraph 2: The preferences, qualifications, limitations, restrictions and the
special or relative rights in respect of the shares of each class are:
Without preference
ARTICLE SIX
The corporation will not commence business until at least one thousand dollars
has been received as consideration for the issuance of shares.
ARTICLE SEVEN
The number of directors to be elected at the first meeting of the shareholders
is 4
ARTICLE EIGHT
Paragraph 1: It is estimated that the value of all property to be owned by the
corporation for the following year wherever located will be $ ______________
Paragraph 2: It is estimated that the value of the property to be located within
the State of Illinois during the following year will be $ ______________
Paragraph 3: It is estimated that the gross amount of business which will be
transacted by the corporation during the following year will be $ ______________
Paragraph 4: It is estimated that the gross amount of business which will be
transacted at or from places of business in the State of Illinois during the
following year will be $ ________________
NOTE: If all the property of the corporation is to be located in this
State and all of its business is to be transacted at or from places of business
in this State, or if the incorporators elect to pay the initial franchise tax on
the basis of its entire stated capital and paid-in surplus, then the information
called for in Article Eight need not be stated. The basis for computation of
franchise taxes payable by domestic corporations is set forth in Section 132 of
the Business Corporation Act.
Signatures of incorporators:
/s/ Dennis Anderson
----------------------------
Dennis Anderson
/s/ Charles Remsberg
----------------------------
Charles Remsberg
NOTE: If a corporation acts as incorporator the name of the corporation and the
state of incorporation shall be shown and the execution must be by its President
or Vice-President and verified by him, and the corporate seal shall be affixed
and attested by its Secretary or an Assistant Secretary.
As an incorporator, I declare that this document has been examined by me and is,
to the best of my knowledge and belief, true, correct and complete.
MAIL TO: MAR-2 -81 415328 25791455 [ILLEGIBLE]
RUSSELL ENGBER
1893 SHERIDAN RD
HIGHLAND PARK
IL 60035
RETURN TO:
Corporation Department
Secretary of State
Springfield, Illinois 62756
Telephone (217) 782-7880
FORM BCA-47
================================================================================
ARTICLES OF INCORPORATION
The following fees are required to be paid at the time of issuing Certificate of
Incorporation: Filing fee $75.00. Initial license fee of 50(cent) per $1,000.00
or 1/20th of 1% of the amount of stated capital and paid in surplus the
corporation proposes to issue without further report (Article Five); Initial
franchise tax of 1/10th of 1% of the issued, as above noted. However, the
minimum initial franchise tax is $25.00 and varies monthly on $25,000, or less,
as follows: January, $37.50; February, $35.42; March, $33.33; April, $31.25;
May, $29.17; June, $27.08; July, $25.00; August, $22.92; September, $20.83;
October, $18.75; November, $16.67; December, $14.58; (See Sec. 133 BCA).
In excess of $25,000, the franchise tax per $1,000.00 is as follows: Jan.,
$1.50; Feb., $1.4167; March, $1.3334; April, $1.25; May, $1.1667; June, $1.0834;
July, $1.00; Aug., $.9167; Sept., $.8334; Oct., $.75; Nov., $.6667; Dec.,
$.5834.
All shares issued in excess of the amount mentioned in article Five of this
application must be reported within 60 days from date of issuance thereof, and
franchise tax and license fee paid thereon; otherwise, the corporation is
subject to a penalty of 1% for each month on the amount until reported and
subject to a fine of not to exceed $500.00.
The same fees are required for a subsequent issue of shares except the filing
fee is $5.00 instead of $75.00.
FILED
FEB 17 1981
JIM EDGAR
Secretary of State
C-162.2
<PAGE>
Exhibit 3.125
BY-LAWS
OF
CALIBRE PRESS, INC.
ARTICLE I
OFFICES
The corporation shall continuously maintain in the State of Illinois a
registered office and a registered agent whose office is identical with such
registered office, and may have other offices within or without the state.
ARTICLE II
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. An annual meeting of the shareholders shall be
held on the first Tuesday in March of each year for the purpose of electing
directors and for the transaction of such other business as may come before the
meeting. If the day fixed for the annual meeting shall be a legal holiday, such
meeting shall be held on the next succeeding business day.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders may be
called either by the president, by the board of directors or by the holders of
not less than one-fifth of all the outstanding shares of the corporation, for
the purpose or purposes stated in the call of the meeting.
SECTION 3. PLACE OF MEETING. The board of directors may designate any
place, as the place of meeting for any annual meeting or for any special meeting
called by the board of directors. If no designation is made, or if a special
meeting be otherwise called, the place of meeting shall be at
<PAGE>
SECTION 4. NOTICE QF MEETINGS. Written notice stating the place, date, and
hour of the meeting, and in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than ten
nor more than forty days before the date of the meeting, or in the case of a
merger or consolidation not less than twenty nor more than forty days before the
meeting, either personally or by mail, by or at the direction of the president,
or the secretary, or the officer or persons calling the meeting, to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail,
addressed to the shareholder at his address as it appears on the records of the
corporation, with postage thereon prepaid. When a meeting is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken.
SECTION 5. FIXING OF RECORD DATE. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or to receive payment of any dividend, or other distribution
or allotment of any rights, or to exercise any rights in respect of any change,
conversion or exchange of shares or for the purpose of any other lawful action,
the board of directors of the corporation may fix in advance a record date which
shall not be more than sixty days and, for a meeting of shareholders, not less
than ten days, or in the case of a merger or consolidation not less than twenty
days, before the date of such meeting. If no record date is fixed, the record
date for the determination of shareholders entitled to notice of or to vote at a
meeting of shareholders shall be the date on which notice of the meeting is
mailed, and the record date for the determination of shareholders for any other
purpose shall be the date on which the board of directors adopts the resolution
relating thereto. A determination of shareholders of record entitled to notice
of or to vote at a meeting of shareholders shall apply to any adjournment of the
meeting.
SECTION 6. VOTING LISTS. The officer or agent having charge of the
transfer books for shares of the corporation shall make, at least ten days
before each meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting, arranged in alphabetical order, showing the
address of and the number of shares registered in the name of the shareholder,
which list, for a period of ten days prior to such meeting, shall be kept on
file at the registered office of the corporation and shall be open to inspection
by any shareholder for any purpose germane to the meeting, at any time during
usual business hours. Such list shall also be produced and kept open at the time
and place of the meeting and may be inspected by any shareholder during the
whole time of the meeting. The original share ledger or transfer book, or a
duplicate thereof kept in this State, shall be prima facie evidence as to who
are the shareholders entitled to examine such list or share ledger or transfer
book or to vote at any meeting of shareholders.
<PAGE>
SECTION 7. QUORUM. The holders of a majority of the outstanding shares of
the corporation, present in person or represented by proxy, shall constitute a
quorum at any meeting of shareholders; provided that if less than a majority of
the outstanding shares are represented at said meeting, a majority of the shares
so represented may adjourn the meeting at any time without further notice. If a
quorum is present, the affirmative vote of the majority of the shares
represented at the meeting shall be the act of the shareholders, unless the vote
of a greater number or voting by classes is required by The Business Corporation
Act, the articles of incorporation or these by-laws. At any adjourned meeting at
which a quorum shall be present, any business may be transacted which might have
been transacted at the original meeting. Withdrawal of shareholders from any
meeting shall not cause failure of a duly constituted quorum at that meeting.
SECTION 8. PROXIES. Each shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy, but no such proxy shall be valid after eleven months from the date of its
execution, unless otherwise provided in the proxy.
SECTION 9. VOTING OF SHARES. Each outstanding share, regardless of class,
shall be entitled to one vote upon each matter submitted to vote at a meeting of
shareholders.
SECTION 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the
name of another corporation, domestic or foreign, may be voted by such officer,
agent, or proxy as the by-laws of such corporation may prescribe, or, in the
absence of such provision, as the board of directors of such corporation may
determine.
Shares standing in the name of a deceased person, a minor ward or an
incompetent person, may be voted by his administrator, executor, court appointed
guardian, or conservator, either in person or by proxy without a transfer of
such shares into the name of such administrator, executor, court appointed
guardian, or conservator. Shares standing in the name of a trustee may be voted
by him, either in person or by proxy.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority so to do be
contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Any number of shareholders may create a voting trust for the purpose of
conferring upon a trustee or trustees the right to vote or otherwise represent
their share, for a period not to exceed ten years, by entering
<PAGE>
into a written voting trust agreement specifying the terms and conditions of the
voting trust, and by transferring their shares to such trustee or trustees for
the purpose of the agreement. Any such trust agreement shall not become
effective until a counterpart of the agreement is deposited with the corporation
at its registered office. The counterpart of the voting trust agreement so
deposited with the corporation shall be subject to the same right of examination
by a shareholder of the corporation, in person or by agent or attorney, as are
the books and records of the corporation, and shall be subject to examination by
any holder of a beneficial interest in the voting trust, either in person or by
agent or attorney, at any reasonable time for any proper purpose.
Shares of its own stock belonging to this corporation shall not be voted,
directly or indirectly, at any meeting and shall not be counted in determining
the total number of outstanding shares at any given time, but shares of its own
stock held by it in a fiduciary capacity may be voted and shall be counted in
determining the total number of outstanding shares at any given time.
SECTION 11. CUMULATIVE VOTING. In all elections for directors, every
shareholder shall have the right to vote, in person or by proxy, the number of
shares owned by him, for as many persons as there are directors to be elected,
or to cumulate said shares, and give one candidate as many votes as the number
of directors multiplied by the number of his shares shall equal, or to
distribute them on the same principle among as many candidates as he shall see
fit.
SECTION 12. INSPECTORS. At any meeting of shareholders, the presiding
officer may, or upon the request of any shareholder shall appoint one or more
persons as inspectors for such meeting.
Such inspectors shall ascertain and report the number of shares
represented at the meeting, based upon their determination of the validity and
effect of proxies; count all votes and report the results; and do such other
acts as are proper to conduct the election and voting with impartiality and
fairness to all the shareholders.
Each report of an inspector shall be in writing and signed by him or by a
majority of them if there be more than one inspector acting at such meeting. If
there is more than one inspector, the report of a majority shall be the report
of the inspectors. The report of the inspector or inspectors on the number of
shares represented at the meeting and the results of the voting shall be prima
facie evidence thereof.
SECTION 13. INFORMAL ACTION BY SHAREHOLDERS. Any action required to be
taken at a meeting of the shareholders, or any other action which may be taken
at a meeting of the shareholders, may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
shareholders entitled to vote with respect to the subject matter thereof.
<PAGE>
SECTION 14. VOTING BY BALLOT. Voting on any question or in any election
may be by voice unless the presiding officer shall order or any shareholder
shall demand that voting be by ballot.
ARTICLE III
DIRECTORS
SECTION 1. GENERAL POWERS. The business of the corporation shall be
managed by its board of directors.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors of
the corporation shall be 3 . Each director shall hold office until the next
annual meeting of shareholders or until his successor shall have been elected
and qualified. Directors need not be residents of Illinois or shareholders of
the corporation. The number of directors may be increased or decreased from time
to time by the amendment of this section; but no decrease shall have the effect
of shortening the term of any incumbent director.
SECTION 3. REGULAR MEETINGS. A regular meeting of the board of directors
shall be held without other notice than this by-law, immediately after the
annual meeting of shareholders. The board of directors may provide, by
resolution, the time and place for the holding of additional regular meetings
without other notice than such resolution.
SECTION 4. SPECIAL MEETINGS. Special meetings of the board of directors
may be called by or at the request of the president or any two directors. The
person or persons authorized to call special meetings of the board of directors
may fix any place as the place for holding any special meeting of the board of
directors called by them.
SECTION 5. NOTICE. Notice of any special meeting shall be given at least
___ days previous thereto by written notice to each director at his business
address. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail so addressed, with postage thereon prepaid. If notice
be given by telegram, such notice shall be deemed to be delivered when the
telegram is delivered to the telegram company. The attendance of a director at
any meeting shall constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board of directors need be specified in the
notice or waiver of notice of such meeting.
SECTION 6. QUORUM. A majority of the number of directors fixed by these
by-laws shall constitute a quorum for transaction of business at any meeting of
the board of directors, provided that if less than a majority of such number of
directors are present at said meeting, a majority of the directors present may
adjourn the meeting at any time without further notice.
<PAGE>
SECTION 7. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors, unless the act of a greater number is required by statute, these
by-laws, or the articles of incorporation.
SECTION 8. VACANCIES. Any vacancy occurring in the board of directors and
any directorship to be filled by reason of an increase in the number of
directors, may be filled by election at an annual meeting or at a special
meeting of shareholders called for that purpose.
SECTION 9. ACTION WITHOUT A MEETING. Unless specifically prohibited by the
articles of incorporation or by-laws, any action required to be taken at a
meeting of the board of directors, or any other action which may be taken at a
meeting of the board of directors, or of any committee thereof may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all the directors entitled to vote with respect to the
subject matter thereof, or by all the members of such committee, as the case may
be. Any such consent signed by all the directors or all the members of the
committee shall have the same effect as a unanimous vote, and may be stated as
such in any document filed with the Secretary of State or with anyone else.
Section 10. COMPENSATION. The board of directors, by the affirmative vote
of a majority of directors then in office, and irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors for services to the corporation as directors,
officers, or otherwise. By resolution of the board of directors the directors
may be paid their expenses, if any, of attendance at each meeting of the board.
No such payment previously mentioned in this section shall preclude any director
from serving the corporation in any other capacity and receiving compensation
therefor.
SECTION 11. PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the board of directors at which action on any corporate
matter is taken shall be conclusively presumed to have assented to the action
taken unless his dissent shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the person acting
as the secretary of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the secretary of the corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
SECTION 12. EXECUTIVE COMMITTEE. The board of directors, by resolution
adopted by a majority of the number of directors fixed by the by-laws or
otherwise, may designate two or more directors to constitute an executive
committee, which committee, to the extent provided in such resolution, shall
have and exercise all of the authority of the board of directors in the
management of the corporation, except as otherwise required by law. Vacancies
in the membership of the committee shall be filled by the board of directors at
a regular or special meeting of the board of directors. The executive committee
shall keep regular minutes of its proceedings and report the same to the board
when required.
<PAGE>
ARTICLE IV
OFFICERS
SECTION 1. NUMBER. The officers of the corporation shall be a president,
one or more vice-presidents, a treasurer, a secretary, and such other officers
as may be elected or appointed by the board of directors. Any two or more
offices may be held by the same person, except the offices of president and
secretary: provided, however, that in cases where all of the shares of a
corporation are owned of record by one shareholder and the articles of
incorporation or by-laws provide that the number of directors shall be one, the
offices of president and secretary may be held by the same person.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the corporation
shall be elected annually by the board of directors at the first meeting of the
board of directors held after each annual meeting of shareholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as conveniently may be. Vacancies may be filled or new
offices created and filled at any meeting of the board of directors. Each
officer shall hold office until his successor shall have been duly elected and
shall have qualified or until his death or until he shall resign or shall have
been removed in the manner hereinafter provided. Election of an officer shall
not of itself create contract rights.
SECTION 3. REMOVAL. Any officer elected or appointed by the board of
directors may be removed by the board of directors whenever in its judgment the
best interests of the corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
SECTION 4. PRESIDENT. The president shall be the principal executive
officer of the corporation. Subject to the direction and control of the board of
directors, he shall be in charge of the business of the corporation; he shall
see that the resolutions and directions of the board of directors are carried
into effect except in those instances in which that responsibility is
specifically assigned to some other person by the board of directors; and, in
general, he shall discharge all duties incident to the office of president and
such other duties as may be prescribed by the board of directors from time to
time. He shall preside at all meetings of the shareholders and of the board of
directors. Except in those instances in which the authority to execute is
expressly delegated to another officer or agent of the corporation or a
different Mode of execution is expressly prescribed by the board of directors or
these by-laws, he may execute for the corporation certificates for its shares,
and any contracts, deeds, mortgages, bonds, or other instruments which the board
of directors has authorized to be executed, and he may accomplish such execution
either under or without the seal of the corporation and either individually or
with the secretary, any assistant secretary, or any other officer thereunto
authorized by the board of directors, according to the requirements of the form
of the instrument. He may vote all securities which the corporation is entitled
to vote except as and to the extent such authority shall be vested in a
different officer or agent of the corporation by the board of directors.
<PAGE>
SECTION 5. THE VICE-PRESIDENTS. The vice-president (or in the event there
be more than one vice-president, each of the vice-presidents) shall assist the
president in the discharge of his duties as the president may direct and shall
perform such other duties as from time to time may be assigned to him by the
president or by the board of directors. In the absence of the president or in
the event of his inability or refusal to act, the vice-president (or in the
event there be more than one vice-president, the vice-presidents in the order
designated by the board of directors, or by the president if the board of
directors has not made such a designation, or in the absence of any designation,
then in the order of seniority of tenure as vice-president) shall perform the
duties of the president, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the president. Except in those instances in
which the authority to execute is expressly delegated to another officer or
agent of the corporation or a different mode of execution is expressly
prescribed by the board of directors or these by-laws, the vice-president (or
each of them if there are more than one) may execute for the corporation
certificates for its shares and any contracts, deeds, mortgages, bonds or other
instruments which the board of directors has authorized to be executed, and he
may accomplish such execution either under or without the seal of the
corporation and either individually or with the secretary, any assistant
secretary, or any other officer thereunto authorized by the board of directors,
according to the requirements of the form of the instrument.
SECTION 6. THE TREASURER. The treasurer shall be the principal accounting
and financial officer of the corporation. He shall: (a) have charge of and be
responsible for the maintenance of adequate books of account for the
corporation; (b) have charge and custody of all funds and securities of the
corporation, and be responsible therefor and for the receipt and disbursement
thereof; and (c) perform all the duties incident to the office of treasurer and
such other duties as from time to time may be assigned to him by the president
or by the board of directors. If required by the board of directors, the
treasurer shall give a bond for the faithful discharge of his duties in such sum
and with such surety or sureties as the board of directors may determine.
SECTION 7. THE SECRETARY. The secretary shall: (a) record the minutes of
the shareholders' and of the board of directors' meetings in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these by-laws or as required by law; (c) be custodian of
the corporate records and of the seal of the corporation; (d) keep a register of
the post-office address of each shareholder which shall be furnished to the
secretary by such shareholder; (e) sign with the president, or a vice-president,
or any other officer thereunto authorized by the board of directors,
certificates for shares of the corporation, the issue of which shall have been
authorized by the board of directors, and any contracts, deeds, mortgages,
bonds, or other instruments which the board of directors has authorized to be
executed, according to the requirements of the form of the instrument, except
when a different mode of execution is expressly prescribed by the board of
directors or these by-laws; (f) have general charge of the stock transfer books
of the corporation; (g) perform all duties incident to the office of secretary
and such other duties as from time to time may be assigned to him by the
president or by the board of directors.
<PAGE>
SECTION 8. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The assistant
treasurers and assistant secretaries shall perform such duties as shall be
assigned to them by the treasurer or the secretary, respectively, or by the
president or the board of directors. The assistant secretaries may sign with the
president, or a vice-president, or any other officer thereunto authorized by the
board of directors, certificates for shares of the corporation, the issue of
which shall have been authorized by the board of directors, and any contracts,
deeds, mortgages, bonds, or other instruments which the board of directors has
authorized to be executed, according to the requirements of the form of the
instrument, except when a different mode of execution is expressly prescribed by
the board of directors or these by-laws. The assistant treasurers shall
respectively, if required by the board of directors, give bonds for the faithful
discharge of their duties in such sums and with such sureties as the board of
directors shall determine.
SECTION 9. SALARIES. The salaries of the officers shall be fixed from time
to time by the board of directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS. The board of directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the board of directors. Such authority may be
general or confined to specific instances.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation, shall be signed by such officer or officers, agent or agents of
the corporation and in such manner as shall from time to time be determined by
resolution of the board of directors.
SECTION 4. DEPOSITS. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositaries as the board of directors may
select.
<PAGE>
ARTICLE VI
CERTIFICATES FOR SHARES AND
THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of
the corporation shall be signed by the president or a vice-president or by such
officer as shall be designated by resolution of the board of directors and by
the secretary or an assistant secretary, and shall be sealed with the seal or a
facsimile of the seal of the corporation. If both of the signatures of the
officers be by facsimile, the certificate shall be manually signed by or on
behalf of a duly authorized transfer agent or clerk. Each certificate
representing shares shall be consecutively numbered or otherwise identified, and
shall also state the name of the person to whom issued, the number and class of
shares (with designation of series, if any), the date of issue, that the
corporation is organized under Illinois law, and the par value or a statement
that the shares are without par value. If the corporation is authorized and does
issue shares of more than one class or of series within a class, the certificate
shall also contain such information or statement as may be required by law.
The name and address of each shareholder, the number and class of shares
held and the date on which the certificates for the shares were issued shall be
entered on the books of the corporation. The person in whose name shares stand
on the books of the corporation shall be deemed the owner thereof for all
purposes as regards the corporation.
SECTION 2. LOST CERTIFICATES. If a certificate representing shares has
allegedly been lost or destroyed the board of directors may in its discretion,
except as may be required by law, direct that a new certificate be issued upon
such indemnification and other reasonable requirements as it may impose.
SECTION 3. TRANSFERS OF SHARES. Transfers of shares of the corporation
shall be recorded on the books of the corporation and, except in the case of a
lost or destroyed certificate, on surrender for cancellation of the certificate
for such shares. A certificate presented for transfer must be duly endorsed and
accompanied by proper guaranty of signature and other appropriate assurances
that the endorsement is effective.
ARTICLE VII
FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
board of directors.
<PAGE>
ARTICLE VIII
DIVIDENDS
The board of directors may from time to time declare, and the corporation
may pay, dividends on its outstanding shares in the manner and upon the terms
and conditions provided by law and its articles of incorporation.
ARTICLE IX
SEAL
The corporate seal shall have inscribed thereon the name of the
corporation and the words "Corporate Seal, Illinois". The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in any manner
reproduced.
ARTICLE X
WAIVER OF NOTICE
Whenever any notice is required to be given under the provisions of these
by-laws or under the provisions of the articles of incorporation or under the
provisions of The Business Corporation Act of the State of Illinois, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
ARTICLE XI
AMENDMENTS
The power to make, alter, amend, or repeal the by-laws of the corporation
shall be vested in the board of directors, unless reserved to the shareholders
by the articles of incorporation. The by-laws may contain any provisions for the
regulation and management of the affairs of the corporation not inconsistent
with law or the articles of incorporation.
<PAGE>
The chairman called for the nomination of officers. Thereupon the
following persons were nominated for officers of the corporation, to serve for
the term provided in the by-laws:
President Charles Remsberg
Vice-President Dennis Anderson
Secretary Ann Anderson
Treasurer Ann Anderson
No further nomination being made the nominations were closed and the
directors proceeded to vote on the nominees. All of the directors present at the
meeting having voted and the vote having been counted, the chairman announced
the aforesaid nominees had been duly elected to the offices set before their
respective names, by the affirmative vote of all directors of the corporation
present at the meeting, to serve for the term provided in the by-laws.
The secretary of the meeting then presented a corporate seal conforming to
the provisions of the by-laws, said seal making the following impression:
[SEAL]
Thereupon, on motion duly made and seconded, the following resolution was
unanimously adopted:
RESOLVED that the seal presented to this meeting be and it hereby is
adopted as the seal of this corporation.
<PAGE>
The secretary then presented to the meeting a form of certificate
representing shares of the corporation.
Thereupon, on motion duly made and seconded, the following resolution was
unanimously adopted:
RESOLVED that the certificates to represent the shares of this
corporation shall be in the form of the specimen certificate presented to
this meeting, and said specimen certificate shall be inserted in the
minute book of this corporation immediately following the minutes of this
meeting.
The chairman then stated to the meeting that prior to the filing of the
articles of incorporation in the office of the Secretary of State, subscriptions
to the shares of the corporation had been executed as follows:
Name Address Number Amount
of Shares Subscribed
Charles Remsberg 500 $500.00
Dennis Anderson and 500 500.00
Ann Anderson as joint tenants
w/r/o/s
The chairman stated further that he was advised that under the laws of the
State of Illinois, the filing of the articles of incorporation by the Secretary
of State constituted acceptance by the corporation of all existing subscriptions
to its shares, and that it was in order for the board of directors to determine
the time and manner of payment of such subscriptions.
Thereupon, on motion duly made and seconded, the following resolutions
were unanimously adopted:
<PAGE>
RESOLVED that the subscribers to shares of this corporation be and
they are hereby requested to make full payment forthwith to the treasurer
of the corporation for their shares.
FURTHER RESOLVED that the treasurer be and he is hereby directed to
give notice of this action of the board of directors to all subscribers.
FURTHER RESOLVED that the shares subscribed for shall be issued for
the consideration stated in the subscription agreement, and that when and
as any subscriber shall make full payment to the treasurer of this
corporation for the shares subscribed by him in accordance with the
subscription agreement heretofore accepted, the shares of said subscriber
shall be deemed full paid and non-assessable.
FURTHER RESOLVED that, when and as any subscriber shall make full
payment for his shares to the treasurer of this corporation, the proper
officers of this corporation, as provided in the by-laws, shall execute
and deliver to said subscriber a certificate or certificates representing
said shares.
Thereupon, on motion duly made and seconded, the following resolution
was unanimously adopted:
RESOLVED that the officers of this corporation be and they are
hereby authorized and directed to pay all organization expenses of this
corporation out of the funds of this corporation.
<PAGE>
Next, on Motion made and seconded, the following resolution was
unanimously adopted:
BE IT RESOLVED that the fiscal year of the corporation shall end
February 28th.
The meeting next considered the establishment of initial salaries
for officers of the corporation. Thereupon after discussion, on Motion
duly made and seconded, the following resolution was unanimously adopted
by the meeting:
BE IT RESOLVED that the following officers shall receive as full
compensation for their services as said officers of the corporation the
amount set opposite their respective names and office:
President $4,000.00 per month
Vice President $4,000.00 per month
Secretary-Treasurer $1,200.00 per month,
all subject to usual payroll deductions and until further action of the
Board of Directors.
The meeting next considered the lease of office premises for
corporate purposes of premises at 666 Dundee Road, Suite 1607, Northbrook,
Illinois 60062. After discussion, the execution and delivery on behalf of
this corporation of a lease leasing to the corporation office premises at
a monthly rental of $1687.95, plus expenses and utilities for a two year
term commencing May 1, 1981,
<PAGE>
was ratified and affirmed and the proper officers of the corporation
authorized to pay on behalf of the corporation sums due under said lease.
<PAGE>
There being no further or other business to come before the meeting,
on motion duly made, seconded and carried, the meeting adjourned.
[ILLEGIBLE]
-------------------------------
Secretary of the Meeting
APPROVED:
[ILLEGIBLE]
- ---------------------------------
[ILLEGIBLE]
- ---------------------------------
[ILLEGIBLE]
- ---------------------------------
- ---------------------------------
- ---------------------------------
- ---------------------------------
<PAGE>
WRITTEN CONSENT TO
RECORDING OF COMMUNICATIONS
On this 2nd day of March , 19 81, the undersigned, directors of an
Illinois corporation, herewith respectively consent in writing to the holding of
meetings of the Board of Directors of said corporation or of any committee of
such Board of Directors at which members of the Board of Directors or of any
such committee may participate in and act at any meeting of the Board or
committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other and to the recording of such communications in accordance with and
pursuant to the provisions of Section 37 of the Illinois Business Corporation
Act.
[ILLEGIBLE]
---------------------------------
[ILLEGIBLE]
---------------------------------
[ILLEGIBLE]
---------------------------------
<PAGE>
Exhibit 3.126
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
DEC 07 1994
CHERYL A. LAU SECRETARY OF STATE
/s/ Cheryl A. Lau
No. 19132-94
-----------------------------
ARTICLES OF INCORPORATION OF
COMMUNICATION CONCEPTS, INC.
ARTICLE I. NAME:
The name of the Corporation shall be:
COMMUNICATION CONCEPTS, INC.
ARTICLE II. RESIDENT AGENT
The resident agent of the Corporation shall be located in the State of
Nevada, County of Clark, City of Las Vegas at the following address:
ACORN CORPORATE SERVICES, INC.
2001 E. FLAMINGO RD, SUITE 100G, LAS VEGAS, NV 89119
ARTICLE III. NATURE OF BUSINESS
The nature of the business shall be to engage in any lawful activities
under the laws of the State of Nevada.
ARTICLE IV. DURATION:
The duration of the Corporation's life shall be perpetual.
ARTICLE V. STOCK:
The total authorized capital stock of the corporation shall be Twenty-Four
Million (24,000,000) shares of Common stock with $0.001 par value, and One
Million (1,000,000) shares of Preferred stock with $0.001 par value.
ARTICLE VI. BOARD OF DIRECTORS:
The Governing Board of the Corporation shall be denominated the "Board of
Directors" therefore, and shall initially be composed of the following
individuals, each whom shall be denominated a "Director" of the Corporation,
residing at the addresses listed herein:
Joseph Calzon, 583 Radwick Drive, Las Vegas, NV 89110
<PAGE>
ARTICLE VII. POWERS OF GOVERNING BOARD:
The Governing Board of the Corporation is specifically granted by these
Articles of Incorporation all powers permitted to be vested in the Governing
Board of the Corporation by the provisions of Nevada Revised Statutes 78.195,
including, but not limited to, the powers to fix and determine and designations,
rights (with respect to voting redemption, sale, or otherwise), or other
variations of each class or series within each class or series within each class
of stock issued by the corporation; to issue rights, options, or warrants to
purchase shares of any class or series within any class of the capital stock of
the Corporation at any time under any terms and conditions deemed proper by said
Governing Board: the fixed dividends and to determine their proper distribution
(and order of distribution) among the holders of the various classes of capital
stock of the Corporation; to require the redemption of fractional shares of
stock of any class, or to permit a holder of a fractional share to retain such
interest; to permit conversion of any class or series of stock into stock of any
other consideration deemed to be appropriate or with no consideration at all; to
make any share belonging to a Special or Preferred class or series of stock
subject to redemption at such times and prices, or issued in such series with
such designation, preferences, and relative, participating, optionals, or other
special rights, or qualifications, limitations, or restrictions thereof, as
shall be determined by the Governing Board; to change the par value of the
shares of any class or series, so long as the change is accompanied by at the
filing of appropriate amendments with Nevada and Clark County authorities; to
change the form of Common stock voting for the Governing Board from
non-cumulative, which shall be the form of voting at the outset, to cumulative;
to exchange shares of any class or series of voting at the outset, to
cumulative; to exchange shares of any class or series at anytime for shares,
assets, or business of any other Corporation, or for the assets or business of
any private company however organized; to authorize and issue dividends at any
time in any form, including, but not limited to, warrants, options, or rights to
purchase shares of any class or series of stock as authorized by the Governing
Board, cash, shares of any class or series, or ownership (however denominated);
in any Company or Corporation "spun-off" by this Corporation without regard to
its business purpose; to authorize acquisition of or merger with any business or
Company, however organized, on any terms determined to be prudent by the
Governing Board; or, within the limitations of State and Federal law, to permit
or restrict the free-tradeability of the shares of any class or series of shares
at the time of the issuance thereof.
<PAGE>
ARTICLE VIII. NON-ASSESSABILITY FOR CORPORATION DEBTS:
After the amount of the subscription, price, the purchase price, or
the par value of the stock of any class or series is paid into the Corporation,
owners or holders of shares of any stock in the Corporation may never be
assessed to pay the debts of the Corporation.
ARTICLE IX. INCORPORATOR:
The name and address of the Incorporator of this Corporation is as
follows:
J. Scott Scheuerman, 24837 104th Ave. SE, Suite 201, Kent, WA 98031
ARTICLE X. CORPORATE POWERS:
The Corporation wishes to assert all possible powers exercisable by it as
a Corporation or as an individual under the laws of the State of Nevada,
including, but not limited to, any powers to create, define, limit, or regulate
in any permitted area; any powers to own, trademark, patent, or govern its own
business products or affairs; any powers to act in any business name under which
it may legally operate; and any powers to accrue, automatically such additional
or new powers as may be prescribed by any Federal or State Statute which may be
enacted now or in the future.
ARTICLE VI. LIABILITY OF DIRECTORS:
As fully as possible under the laws of the State of Nevada as they now
exist and as they may from time to time be revised, the Corporation intends that
its Directors be protected from legal action by stockholders or to other persons
(natural or otherwise) on account of service as Directors of the Corporation. A
Director shall not be liable for damages for actions of the Corporation to
stockholders or to any other person (natural or otherwise) unless such Director
engaged in personal fraud affecting such action or actions of the Corporation.
<PAGE>
IN WITNESS WHEREOF, the incorporator hereof does set his/her hand this 6
day of Dec, 1994.
/s/ J. Scott Scheuerman
-----------------------
J. SCOTT SCHEUERMAN
STATE OF WASHINGTON }
}
COUNTY OF KING }
On this 6th day of December, 1994, before me, the undersigned Notary Public,
J.Scott Scheuerman personally appeared to me known to be the individual
described in and who executed the foregoing instrument, and acknowledged that
he executed the same as his free act and deed.
Robin Anderson
---------------------------
NOTARY PUBLIC
expires 11-9-97
[NOTARY PUBLIC SEAL]
<PAGE>
- --------------------------------------------------------------------------------
STATE OF NEVADA
Department of
State
I hereby certify that this is a true and complete copy of the document as filed
in this office.
DATED: DEC 07 1994
-------------------
/s/ Cheryl A. Lau
CHERYL A. LAU
Secretary of State
By Margaret M [ILLEGIBLE]
-----------------------
- --------------------------------------------------------------------------------
<PAGE>
FILE NUMBER
19132-94
SIXTY DAY LIST OF OFFICERS, DIRECTORS AND AGENT OF
COMMUNICATION CONCEPTS, INC.
A NEVADA CORPORATION. FOR THE FILING PERIOD DECEMBER 1994 TO DECEMBER 1995
The Corporation's duly appointed Resident Agent in charge of said principal
office in the State of Nevada upon whom process can be served is:
- --------------------------------------------------------------------------------
ACORN CORPORATE SERVICES, INC.
2001 E. FLAMINGO RD., STE. 100G
LAS VEGAS, NV 89119
Resident Agency & Principal Place of Business - Do not change information in
this area before reading #5 below.
- --------------------------------------------------------------------------------
- --FOR OFFICE USE ONLY-----------------------------------------------------------
FILED (DATE)__________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
- --------------------------------------------------------------------------------
INSTRUCTIONS-Please read instructions before returning this form. TO AVOID
DELAYS, RETURNS AND LATE CHARGES.
1. Names and mailing addresses for all officers and directors. A
President, Secretary, Treasurer and Directors must be named.
2. An officer's signature at the bottom of this form.
3. Returned the complete form with the $85.00 filing fee. A $15.00
penalty must be added if this form isn't filed within 60 days from
the date of incorporation.
4. Make your check payable to the Secretary of State. If you need a
receipt, enclose a self-addressed stamped envelope.
5 If you have changed the resident agent or principal place of
business, please contact our office for the proper forms to make the
change before filing this 60 day li[ILLEGIBLE]
6. Return this form to: SECRETARY OF STATE, Capitol Complex, Carson
City, NV 89710 (702) 687-5105
FILING FEE: $85.00 LATE PENALTY: $15.00
--------------------------------------------
THIS FORM MUST BE FILED 60 DAYS FROM THE DATE OF INCORPORATION
--------------------------------------------------------------
- --------------------------------------------------------------------------------
NAME TITLE(S)
Joseph Calzon PRESIDENT
- ------------------------------------------ -----------------------------------
- ------------------- ------------------- ------ ---------- ----- --------
P.O. BOX STREET ADDRESS CITY ST. ZIP
- ------------------- ------------------- ------ ---------- ----- --------
583 Radwick Las Vegas NV 89110
- --------------------------------------------------------------------------------
NAME TITLE(S)
Richard Convertito SECRETARY
- ------------------------------------------ -----------------------------------
- ------------------- ------------------- ------ ---------- ----- --------
P.O. BOX STREET ADDRESS CITY ST. ZIP
- ------------------- ------------------- ------ ---------- ----- --------
196 Yale Lane Seal Beach CA 90740
- --------------------------------------------------------------------------------
NAME TITLE(S)
Richard Convertito TREASURER
- ------------------------------------------ -----------------------------------
- ------------------- ------------------- ------ ---------- ----- --------
P.O. BOX STREET ADDRESS CITY ST. ZIP
- ------------------- ------------------- ------ ---------- ----- --------
196 Yale Lane Seal Beach CA 90740
- --------------------------------------------------------------------------------
NAME TITLE(S)
Joseph Calzon DIRECTOR
- ------------------------------------------ -----------------------------------
- ------------------- ------------------- ------ ---------- ----- --------
P.O. BOX STREET ADDRESS CITY ST. ZIP
- ------------------- ------------------- ------ ---------- ----- --------
583 Radwick Las Vegas NV 89110
- --------------------------------------------------------------------------------
NAME TITLE(S)
DIRECTOR
- ------------------- ------------------- ------ ---------- ----- --------
P.O. BOX STREET ADDRESS CITY ST. ZIP
- ------------------- ------------------- ------ ---------- ----- --------
- --------------------------------------------------------------------------------
NAME TITLE(S)
DIRECTOR
- ------------------- ------------------- ------ ---------- ----- --------
P.O. BOX STREET ADDRESS CITY ST. ZIP
- ------------------- ------------------- ------ ---------- ----- --------
- --------------------------------------------------------------------------------
/s/ Richard Convertito Secretary 12-12-96
Signature of officer Title(s) Date
CERTIFICATE STATE OF NEVADA - SECRETARY OF STATE FILE NUMBER
I, Cheryl A. Lau, the duly qualified Secretary of State of Nevada do
hereby certify that the above corporation after having paid the annual fee of
$85,00 for filing in this office a list of its officers and directors and
designation of resident agent for the above filing period, together with penalty
in the sum of ___ and having also filed the aforesaid list as required by Nevada
Revised Statutes Section 78.150 - 78.165 and 80.110 - 80.140, as amended, is
hereby authorized to transact and conduct its business within this state for the
aforesaid period.
THIS CERTIFICATE BECOMES A RECEIPT UPON BEING VALIDATED BY THE OFFICE OF
SECRETARY OF STATE
/s/ Cheryl A. Lau
CHERYL A. LAU
Secretary of State
<PAGE>
Exhibit 3.127
BY-LAWS
OF
COMMUNICATION CONCEPTS, INC.
ARTICLE I - OFFICES
The principal office of the corporation in the State of Nevada shall be
located in the City of Las Vegas of County of Las Vegas. The corporation may
have such other offices, either within or without the State of incorporation as
the board of directors may designate or as the business of the corporation may
from time to time require.
ARTICLE II - STOCKHOLDERS
1. ANNUAL MEETING.
The annual meeting of the stockholders shall be held on the 12th day of
December in each year, beginning with the year 1995 at the hour 10 o'clock
A.M., for the purpose of electing directors and for the transaction of such
other business as may come before the meeting. If the day fixed for the annual
meeting shall be a legal holiday such meeting shall be held on the next
succeeding business day.
2. SPECIAL MEETINGS.
Special meetings of the stockholders, for any purpose or purposes, unless
otherwise prescribed by statute, may be called by the president or by the
directors, and shall be called by the president at the request of the holders of
not less than 75 per cent of all the outstanding shares of the corporation
entitled to vote at the meeting.
3. PLACE OF MEETING.
The directors may designate any place, either within or without the State
unless otherwise prescribed by statute, as the place of meeting for any annual
meeting or for any special meeting called by the directors. A waiver of notice
signed by all stockholders entitled to vote at a meeting may designate
By-Laws 1
<PAGE>
any place, either within or without the state unless otherwise prescribed by
statute, as the place for holding such meeting. If no designation is made, or if
a special meeting be otherwise called, the place of meeting shall be the
principal office of the corporation.
4. NOTICE OF MEETING.
Written or printed notice stating the place, day and and hour of the
meeting and, in case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than 10 nor more than 20 days
before the date of the meeting, either personally or by mail, by or at the
direction of the president, or the secretary, or the officer or persons calling
the meeting, to each stockholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, addressed to the stockholder at his address as it appears on the
stock transfer books of the corporation, with postage thereon prepaid.
5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.
For the purpose of determining stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, or stockholders
entitled to receive payment of any dividend, or in order to make a determination
of stockholders for any other proper purpose, the directors of the corporation
may provide that the stock transfer books shall be closed for a stated period
but not to exceed, in any case, 10 days. If the stock transfer books shall be
closed for the purpose of determining stockholders entitled to notice of or to
vote at a meeting of stockholders, such books shall be closed for at least 10
days immediately preceding such meeting. In lieu of closing the stock transfer
books, the directors may fix in advance a date as the record date for any such
determination of stockholders, such date in any case to be not more than 15 days
and, in case of a meeting of stockholders, not less than 10 days prior to the
date on which the particular action requiring such determination of stockholders
is to be taken. If the stock transfer books are not closed and no record date is
fixed for the determination of stockholders entitled to notice of or to vote at
a meeting of stockholders, or stockholders entitled to receive payment of a
dividend, the date on which notice of the meeting is mailed or the date on which
the resolution of the directors declaring such dividend is adopted, as the case
may be, shall be the record date for such determination of stockholders. When a
determination of stockholders entitled to vote at any meeting of stockholders
By-Laws 2
<PAGE>
has been made as provided in this section, such determination shall apply to any
adjournment thereof.
6. VOTING LISTS.
The officer or agent having charge of the stock transfer books for shares
of the corporation shall make, at least 30 days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting, or any adjournment thereof, arranged in alphabetical order, with the
address of and the number of shares held by each, which list, for a period of 30
days prior to such meeting, shall be kept on file at the principal office of the
corporation and shall be subject to inspection by any stockholder at any time
during usual business hours. Such list shall also be produced and kept open at
the time and place of the meeting and shall be subject to the inspection of any
stockholder during the whole time of the meeting. The original stock transfer
book shall be prima facie evidence as to who are the stockholders entitled to
examine such list or transfer books or to vote at the meeting of stockholders.
7. QUORUM.
At any meeting of stockholders 75 per cent of the outstanding shares of
the corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If less than said number of
the outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. The stockholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough stockholders to leave less than a quorum.
8. PROXIES.
At all meetings of stockholders, a stockholder may vote by proxy executed
in writing by the stockholder or by his duly authorized attorney in fact. Such
proxy shall be filed with the secretary of the corporation before or at the time
of the meeting.
9. VOTING.
Each stockholder entitled to vote in accordance with the terms and
provisions of the certificate of incorporation and these by-laws shall be
entitled to one vote, in person or by
By-Laws 3
<PAGE>
proxy, for each share of stock entitled to vote held by such stockholders. Upon
the demand of any stockholder, the vote for directors and upon any question
before the meeting shall be by ballot. All elections for directors shall be
decided by plurality vote; all other questions shall be decided by majority vote
except as otherwise provided by the Certificate of Incorporation or the laws of
this State.
10. ORDER OF BUSINESS.
The order of business at all meetings of the stockholders, shall be as
follows:
1. Roll Call.
2. Proof of notice of meeting or waiver of notice.
3. Reading of minutes of preceding meeting.
4. Reports of Officers.
5. Reports of Committees.
6. Election of Directors.
7. Unfinished Business.
8. New Business.
11. INFORMAL ACTION BY STOCKHOLDERS.
Unless otherwise provided by law, any action required to be taken at a
meeting of the shareholders, or any other action which may be taken at a meeting
of the shareholders, may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by all of the shareholders
entitled to vote with respect to the subject matter thereof.
By-Laws 4
<PAGE>
ARTICLE III - BOARD OF DIRECTORS
1. GENERAL POWERS.
The business and affairs of the corporation shall be managed by its board
of directors. The directors shall in all cases act as a board, and they may
adopt such rules and regulations for the conduct of their meetings and the
management of the corporation, as they may deem proper, not inconsistent with
these by-laws and the laws of this State.
2. NUMBER, TENURE AND QUALIFICATIONS.
The number of directors of the corporation shall be one (1). Each director
shall hold office until the next annual meeting of stockholders and until his
successor shall have been elected and qualified.
3. REGULAR MEETINGS.
A regular meeting of the directors, shall be held without other notice
than this by-law immediately after, and at the same place as, the annual meeting
of stockholders. The directors may provide, by resolution, the time and place
for the holding of additional regular meetings without other notice than such
resolution.
4. SPECIAL MEETINGS.
Special meetings of the directors may be called by or at the request of
the president or any two directors. The person or persons authorized to call
special meetings of the directors may fix the place for holding any special
meeting of the directors called by them.
5. NOTICE.
Notice of any special meeting shall be given at least days previously
thereto by written notice delivered personally, or by telegram or mailed to each
director at his business address. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail so addressed, with postage
thereon prepaid. If notice be given by telegram, such notice shall be deemed to
be delivered when the telegram is delivered to the telegraph company. The
attendance of a director at a meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened.
By-Laws 5
<PAGE>
6. QUORUM.
At any meeting of the directors one (1) shall constitute a quorum for the
transaction of business, but if less than said number is present at a meeting, a
majority of the directors present may adjourn the meeting from time to time
without further notice.
7. MANNER OF ACTING.
The act of the majority of the directors present at a meeting at which a
quorum is present shall be the act of the directors.
8. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Newly created directorships resulting from an increase in the number of
directors and vacancies occurring in the board for any reason except the removal
of directors without cause may be filled by a vote of a majority of the
directors then in office, although less than a quorum exists. Vacancies
occurring by reason of the removal of directors without cause shall be filled by
vote of the stockholders. A director elected to fill a vacancy caused by
resignation, death or removal shall be elected to hold office for the unexpired
term of his predecessor.
9. REMOVAL OF DIRECTORS.
Any or all of the directors may be removed for cause by vote of the
stockholders or by action of the board. Directors may be removed without cause
only by vote of the stockholders.
10. RESIGNATION.
A director may resign at any time by giving written notice to the board,
the president or the secretary of the corporation. Unless otherwise specified in
the notice, the resignation shall take effect upon receipt thereof by the board
or such officer, and the acceptance of the resignation shall not be necessary to
make it effective.
11. COMPENSATION.
No compensation shall be paid to directors, as such, for their services,
but by resolution of the board a fixed sum and expenses for actual attendance at
each regular or special meeting of the board may be authorized. Nothing herein
contained shall be construed to preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
By-Laws 6
<PAGE>
12. PRESUMPTION OF ASSENT.
A director of the corporation who is present at a meeting of the directors
at which action on any corporate matter is taken shall be presumed to have
assented to the action taken unless his dissent shall be entered in the minutes
of the meeting or unless he shall file his written dissent to such action with
the person acting as the secretary of the meeting before the adjournment thereof
or shall forward such dissent by registered mail to the secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
13. EXECUTIVE AND OTHER COMMITTEES.
The board, by resolution, may designate from among its members an
executive committee and other committees, each consisting of three or more
directors. Each such committee shall serve at the pleasure of the board.
By-Laws 7
<PAGE>
ARTICLE IV - OFFICERS
1. NUMBER.
The officers of the corporation shall be a president, a vice-president, a
secretary and a treasurer, each of whom shall be elected by the directors. Such
other officers and assistant officers as may be deemed necessary may be elected
or appointed by the directors.
2. ELECTION AND TERM OF OFFICE.
The officers of the corporation to be elected by the directors shall be
elected annually at the first meeting of the directors held after each annual
meeting of the stockholders. Each officer shall hold office until his successor
shall have been duly elected and shall have qualified or until his death or
until he shall resign or shall have been removed in the manner hereinafter
provided.
3. REMOVAL.
Any officer or agent elected or appointed by the directors may be removed
by the directors whenever in their judgment the best interests of the
corporation would be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed.
4. VACANCIES.
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the directors for the unexpired
portion of the term.
5. PRESIDENT.
The president shall be the principal executive officer of the corporation
and, subject to the control of the directors, shall in general supervise and
control all of the business and affairs of the corporation. He shall, when
present, preside at all meetings of the stockholders and of the directors. He
may sign, with the secretary or, any other proper officer of the corporation
thereunto authorized by the directors, certificates for shares of the
corporation, any deeds, mortgages, bonds, contracts, or other instruments which
the directors have authorized to be executed, except in cases where the signing
and execution thereof shall be expressly delegated by the directors or by these
by-laws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general shall
By-Laws 8
<PAGE>
perform all duties incident to the office of president and such other duties as
may be prescribed by the directors from time to time.
6. VICE-PRESIDENT.
In the absence of the president or in event of his death, inability or
refusal to act, the vice-president shall perform the duties of the president,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the president. The vice-president shall perform such other
duties as from time to time may be assigned to him by the President or by the
directors.
7. SECRETARY.
The secretary shall keep the minutes of the stockholders' and of the
directors' meetings in one or more books provided for that purpose, see that all
notices are duly given in accordance with the provisions of these by-laws or as
required, be custodian of the corporate records and of the seal of the
corporation and keep a register of the post office address of each stockholder
which shall be furnished to the secretary by such stockholder, have general
charge of the stock transfer books of the corporation and in general perform all
duties incident to the office of secretary and such other duties as from time to
time may be assigned to him by the president or by the directors.
8. TREASURER.
If required by the directors, the treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or sureties as
the directors shall determine. He shall have charge and custody of and be
responsible for all funds and securities of the corporation; receive and give
receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with these by-laws and in general perform all of the duties incident to the
office of treasurer and such other duties as from time to time may be assigned
to him by the president or by the directors.
9. SALARIES.
The salaries of the officers shall be fixed from time to time by the
directors and no officer shall be prevented from receiving such salary by reason
of the fact that he is also a director of the corporation.
By-Laws 9
<PAGE>
ARTICLE V - CONTRACTS, LOANS, CHECKS AND DEPOSITS
1. CONTRACTS.
The directors may authorize any officer or officers, agent or agents, to
enter into any contract or execute and deliver any instrument in the name of and
on behalf of the corporation, and such authority may be general or confined to
specific instances.
2. LOANS.
No loans shall be contracted on behalf of the corporation and no evidences
of indebtedness shall be issued in its name unless authorized by a resolution of
the directors. Such authority may be general or confined to specific instances.
3. CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for the payment of money, notes or
other evidences of indebtedness issued in the name of the corporation, shall be
signed by such officer or officers, agent or agents of the corporation and in
such manner as shall from time to time be determined by resolution of the
directors.
4. DEPOSITS.
All funds of the corporation not otherwise employed shall be deposited
from time to time to the credit of the corporation in such banks, trust
companies or other depositaries as the directors may select.
ARTICLE VI - CERTIFICATES FOR SHARES AND THEIR TRANSFER
1. CERTIFICATES FOR SHARES.
Certificates representing shares of the corporation shall be in such form
as shall be determined by the directors. Such certificates shall be signed by
the president and by the secretary or by such other officers authorized by law
and by the directors. All certificates for shares shall be consecutively
numbered or otherwise identified. The name and address of the stockholders, the
number of shares and date of issue, shall be entered on the stock transfer books
of the corporation. All certificates surrendered to the corporation for transfer
shall be canceled and no new certificate shall be issued until the
By-Laws 10
<PAGE>
former certificate for a like number of shares shall have been surrendered and
canceled, except that in case of a lost, destroyed or mutilated certificate a
new one may be issued therefor upon such terms and indemnity to the corporation
as the directors may prescribe.
2. TRANSFERS OF SHARES.
(a) Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, and cancel the old certificate; every such transfer shall be entered on
the transfer book of the corporation which shall be kept at its principal
office.
(b) The corporation shall be entitled to treat the holder of record of any
share as the holder in fact thereof, and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of this state.
ARTICLE VII - FISCAL YEAR
The fiscal year of the corporation shall begin on the 1st day of January
in each year.
ARTICLE VIII - DIVIDENDS
The directors may from time to time declare, and the corporation may pay,
dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law.
ARTICLE IX - SEAL
The directors shall provide a corporate seal which shall be circular in
form and shall have inscribed thereon the name of the corporation, the state of
incorporation, year of incorporation and the words, "Corporate Seal".
By-Laws 11
<PAGE>
ARTICLE X - WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be
given to any stockholder or director of the corporation under the provisions of
these by-laws or under the provisions of the articles of incorporation, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
ARTICLE XI - AMENDMENTS
These by-laws may be altered, amended or repealed and new by-laws may be
adopted by a vote of the stockholders representing a majority of all the shares
issued and outstanding, at any annual stockholders' meeting or at any special
stockholders' meeting when the proposed amendment has been set out in the notice
of such meeting.
By-Laws 12
<PAGE>
Exhibit 3.128
Secretary of State CONTROL NUMBER: K942649
Corporations Division EFFECTIVE DATE: 10/15/1999
315 West Tower COUNTY : FULTON
#2 Martin Luther King, Jr. Dr. REFERENCE : 0091
Atlanta, Georgia 30334-1530 PRINT DATE : 10/15/1999
FORM NUMBER : 311
JANET E. TAYLOR
KING & SPALDING
191 PEACHTREE STREET
ATLANTA, GA 30303
CERTIFICATE OF INCORPORATION
I, Cathy Cox, the Secretary of State and the Corporations Commissioner of the
State of Georgia, do hereby certify under the seal of my office that
GAME & FISH MERGER SUBSIDIARY, INC.
A DOMESTIC PROFIT CORPORATION
has been duly incorporated under the laws of the State of Georgia on the
effective date stated above by the filing of articles of incorporation in the
Office of the Secretary of State and by the paying of fees as provided by Title
14 of the official Code of Georgia Annotated.
WITNESS my hand and official seal in the City of Atlanta and the State of
Georgia on the date set forth above.
[SEAL OF THE STATE OF GEORGIA] /s/ Cathy Cox
Cathy Cox
Secretary of State
<PAGE>
ARTICLES OF INCORPORATION
OF
GAME AND FISH MERGER SUBSIDIARY, INC.
1.
The name of the Corporation is Game and Fish Merger Subsidiary, Inc.
2.
The Corporation is authorized to issue one thousand shares of stock,
designated as "Common Stock." Each share of Common Stock shall have one vote on
each matter submitted to a vote of the shareholders of the Corporation. The
holders of shares of Common Stock shall be entitled to receive, in proportion to
the number of shares of Common Stock held, the net assets of the Corporation
upon dissolution.
3.
The initial Board of Directors of the Corporation shall consist of
three members, whose names and addresses are as follows:
Beverly C. Chell
745 5th Avenue, New York, NY 10151
Charles McCurdy
745 5th Avenue, New York, NY 10151
Thomas Rogers
745 5th Avenue, New York, NY 10151
<PAGE>
4.
The street address and county of the initial registered office of
the Corporation in the State of Georgia is 1201 Peachtree Street, Atlanta,
Georgia, Fulton County 30361. The initial registered agent of the Corporation at
such address is CT Corporation System.
5.
The name and address of the Incorporator are Janet E. Taylor, King
and Spalding, 191 Peachtree Street, Atlanta Georgia, 30303.
6.
The mailing address of the initial principal office of the
Corporation is 745 5th Avenue, New York, NY 10151.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation.
/s/ Janet E. Taylor
-------------------------------
Janet E. Taylor
Incorporator
SECRETARY OF STATE
Oct 15 9 46 AM '99
[ILLEGIBLE]
-3-
<PAGE>
Exhibit 3.129
BYLAWS
OF
GAME & FISH MERGER SUBSIDIARY, INC.
ARTICLE I
OFFICES
The Corporation will at all times maintain a registered office in the
State of Georgia and a registered agent at that address but may have other
offices located within or outside the State of Georgia as the Board of Directors
may determine.
ARTICLE II
SHAREHOLDERS' MEETINGS
2.1 Annual Meeting. A meeting of Shareholders of the Corporation shall be
held annually. The annual meeting shall be held at such time and place and on
such date as the Directors shall determine from time to time and as shall be
specified in the notice of the meeting.
2.2 Special Meeting. Special meetings of the Shareholders may be called at
any time by the Board of Directors, the President or any holder or holders of at
least twenty-five percent (25%) of the outstanding capital stock of the
Corporation. Special meetings shall be held at such a time and place and on such
date as shall be specified in the notice of the meeting.
2.3 Place. Annual or special meetings of Shareholders may be held within
or without the State of Georgia.
2.4 Notice. Notice of annual or special Shareholders meetings stating the
place, day and hour of the meeting shall be given in writing not less than ten
(10) nor more than sixty (60) days before the date of the meeting, either mailed
to the last known address or personally given to each Shareholder. Notice of a
meeting may be waived by an instrument in writing executed before or after the
meeting. The waiver need not specify the purpose of the meeting or the business
transacted, unless one of the purposes of the meeting concerns a plan of merger
or consolidation, in which event the waiver shall comply with the further
requirements of law concerning such waivers. Attendance at such meeting in
person or by proxy shall constitute a waiver of notice thereof. Notice of any
special meeting of Shareholders shall state the purpose or purposes for which
the meeting is called. The notice of any meeting at which amendments to or
restatements of the articles of incorporation, merger or consolidation of the
Corporation, or the disposition of corporate assets requiring Shareholder
approval are to be considered shall state such purposes, and further comply with
all requirements of law.
<PAGE>
2.5 Quorum. At all meetings of Shareholders a majority of the outstanding
shares of stock shall constitute a quorum for the transaction of business, and
no resolution or business shall be transacted without the favorable vote of the
holders of a majority of the shares represented at a meeting where a quorum is
present and entitled to vote. When a quorum is once present to organize a
meeting of the Shareholders, the Shareholders may continue to do business at the
meeting or at any adjournment thereof notwithstanding the withdrawal of enough
Shareholders to leave less than a quorum. The holders of a majority of the
voting shares represented at a meeting, whether or not a quorum is present, may
adjourn such meeting from time to time.
2.6 Action in Lieu of Meeting. Any action to be taken at a meeting of the
Shareholders of the Corporation, or any action that may be taken at a meeting of
the Shareholders, may be taken without a meeting if a consent in writing setting
forth the action so taken shall be signed by the holders of all of the shares
entitled to vote with respect to the subject matter thereof, or by the holders
of such lesser number of shares as may be required in accordance with any lawful
provision of the Articles of Incorporation, and any further requirements of law
pertaining to such consents have been complied with.
ARTICLE III
DIRECTORS
3.1 Management. Subject to these by-laws, the Articles of Incorporation,
any restrictions imposed by law or any lawful agreement between the
Shareholders, the full and entire management of the affairs and business of the
Corporation shall be vested in the Board of Directors, which shall have and may
exercise all of the powers that may be exercised or performed by the
Corporation.
3.2 Number of Directors; Quorum. The Shareholders shall fix by resolution
the precise number of members of the Board of Directors, provided that the Board
of Directors shall consist of not fewer than one (1) nor more than ten (10)
members. Directors shall be elected at each annual meeting of the Shareholders
and shall serve for a term of one (1) year and until their successors are
elected. A majority of Directors shall constitute a quorum for the transaction
of business. All resolutions adopted and all business transacted by the Board of
Directors shall require the affirmative vote of a majority of the Directors
present at a meeting where a quorum is present.
3.3 Vacancies. The Directors may fill the place of any Director which may
become vacant prior to the expiration of his term, such appointment by the
Directors to continue until the expiration of the term of the Director whose
place has become vacant, or may fill any directorship created by reason of an
increase in the number of Directors, such appointment by the Directors to
continue for a term of office until the next election of Directors by the
Shareholders and until the election of the successor.
3.4 Meetings. The Directors shall meet annually, without notice, following
the annual meeting of the Shareholders. Special meetings of the Directors may be
called at any time by the President or by any two Directors if the Board has
three or more Directors, or by any Director if the
<PAGE>
Board has less than three members, on two days' written notice to each Director,
which notice shall specify the time and place of the meeting. Notice of any such
meeting may be waived by an instrument in writing executed before or after the
meeting. Directors may attend and participate in meetings either in person or by
means of conference telephones or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting by means of such communication equipment shall
constitute presence in person at any meeting. Attendance in person at such
meeting shall constitute a waiver of notice thereof.
3.5 Action in Lieu of Meeting. Any action to be taken at a meeting of the
Directors, or any action that may be taken at a meeting of the Directors, may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by all of the Directors and any further requirements of
law pertaining to such consents have been complied with.
3.6 Removal. Any Director may be removed from office, with or without
cause, upon the majority vote of the Shareholders, at a meeting with respect to
which notice of such purpose is given.
ARTICLE IV
OFFICERS
4.1 General Provisions. The officers of the Corporation shall consist of a
President, a Secretary and a Treasurer who shall be elected by the Board of
Directors, and such other officers as may be elected by the Board of Directors
or appointed as provided in these Bylaws. Each officer shall be elected or
appointed for a term of office running until the meeting of the Board of
Directors following the next annual meeting of the Shareholders of the
Corporation, or such other term as provided by resolution of the Board of
Directors or the appointment to office. Each officer shall serve for the term of
his office for which he is elected or appointed and until his successor has been
elected or appointed and is qualified or his earlier resignation, removal from
office or death. Any two or more offices may be held by the same person.
4.2 President. The President shall have the powers and duties of
supervision and management usually vested in the office of President of a
corporation. He shall preside at all meetings of the stockholders if present
thereat, at all meetings of the Board of Directors, and shall have general
supervision, direction and control of the business of the Corporation. Except as
the Board of Directors shall authorize the execution thereof in some other
manner, he shall execute bonds, mortgages, and other contracts on behalf of the
Corporation, and shall cause the seal to be affixed to any instrument requiring
it and when so affixed the seal shall be attested by the signature of the
Secretary, an Assistant Secretary or the Treasurer.
4.3 Secretary The Secretary shall keep minutes of all meetings of the
Shareholders and Directors and have charge of the minute books, stock books and
seal of the Corporation and shall
<PAGE>
perform such other duties and have such other-powers as may from time to time be
delegated to him by the President or the Board of Directors.
4.4 Treasurer. The Treasurer shall be charged with the management of the
financial affairs of the Corporation, shall have the power to recommend action
concerning the Corporation's affairs to the President, and shall perform such
other duties and have such other powers as may from time to time be delegated to
him by the President or Board of Directors.
4.5 Assistant Secretaries and Treasurer. Assistants to the Secretary and
Treasurer may be appointed by the President or elected by the Board of Directors
and shall perform such duties and have such powers as shall be delegated to them
by the President or the Board of Directors.
4.6 Vice Presidents. The Corporation may have one or more Vice Presidents,
elected by the Board of Directors, who shall perform such duties and have such
powers as may be delegated by the President or the Board of Directors.
ARTICLE V
CAPITAL STOCK
5.1 Share Certificates. Share certificates shall be numbered in the order
in which they are issued. They shall be signed by the President or any Vice
President and the Secretary or an Assistant Secretary and the seal of the
Corporation shall be affixed thereto. Share certificates shall be kept in a book
and shall be issued in consecutive order therefrom. The name of the person
owning the shares, the number of shares, and the date of issue shall be entered
on the stub of each certificate. Share certificates exchanged or returned shall
be canceled by the Secretary or an Assistant Secretary and placed in their
original place in the stock book.
5.2 Transfer of Shares. Transfers of shares shall be made on the stock
books of the Corporation by the holders in person or by power of attorney, on
surrender of the old certificates for such shares, duly assigned.
5.3 Voting. The holders of the capital stock shall be entitled to one vote
for each share of stock in their name.
<PAGE>
ARTICLE VI
SEAL
The seal of the Corporation shall be in such form as the Board of
Directors may from time to time determine. In the event it is inconvenient to
use such a seal at any time, the signature of the Corporation followed by the
word "Seal" enclosed in parentheses or scroll shall be deemed the seal of the
Corporation. The seal shall be in the custody of the Secretary and affixed by
him or by his assistants on the certificates of stock and other appropriate
papers.
ARTICLE VII
AMENDMENT
These Bylaws may be amended by majority vote of the Board of Directors of
the Corporation or by majority vote of the Shareholders, provided that the
Shareholders may provide by resolution that any Bylaw provision repealed,
amended, adopted or altered by them may not be repealed, amended, adopted or
altered by the Board of Directors.
ARTICLE VIII
INDEMNIFICATION
Each person who is or was a Director or officer of the Corporation, and
each person who is or was a Director or officer of the Corporation who at the
request of the Corporation is serving or has served as an officer, director,
partner, joint venturer or trustee of another corporation, partnership, joint
venture, trust or other enterprise shall be indemnified by the Corporation
against those expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement which are allowed to be paid or reimbursed by the Corporation
under the laws of the State of Georgia and which are actually and reasonably
incurred in connection with any action, suit, or proceeding, pending or
threatened, whether civil, criminal, administrative or investigative, in which
such person may be involved by reason of his being or having been a director or
officer of this Corporation or of such other enterprises. Such indemnification
shall be made only in accordance with the laws of the State of Georgia and
subject to the conditions prescribed therein.
In any instance where the laws of the State of Georgia permit
indemnification to be provided to persons who are or have been an officer or
Director of the Corporation or who are or have been an officer, director,
partner, joint venturer or trustee of any such other enterprise only on a
determination that certain specified standards of conduct have been met, upon
application for indemnification by any such person the Corporation shall
promptly cause such determination to be made by the Shareholders, but shares
owned by or voted under the control of Directors who are at the time parties to
the proceeding may not be voted on the determination.
<PAGE>
As a condition to any such right of indemnification, the Corporation may
require that it be permitted to participate in the defense of any such action or
proceeding through legal counsel designated by the Corporation and at the
expense of the Corporation.
The Corporation may purchase and maintain insurance on behalf of any such
persons whether or not the Corporation would have the power to indemnify such
officers and Directors against any liability under the laws of the State of
Georgia. If any expenses or other amounts are paid by way of indemnification,
other than by court order, action by Shareholders or by an insurance carrier,
the Corporation shall provide notice of such payment to the Shareholders in
accordance with the provisions of the laws of the State of Georgia.
<PAGE>
Exhibit 3.130
File Number 5319-333-1
STATE OF ILLINOIS
OFFICE OF THE SECRETARY OF STATE
[GRAPHIC OMITTED]
To all to whom these Presents Shall Come, Greeting:
Whereas, ARTICLES OF INCORPORATION, of MERIDIAN EDUCATION CORPORATION
incorporated under the laws of the State of ILLINOIS have been filed in the
Office of the Secretary of State, as provided by The "Business Corporation Act"
of Illinois, in force July 13, A.D. 1933.
Now Therefore, I, Jim Edgar, Secretary of State of the State of Illinois, by
virtue of the powers vested in me by law, do hereby issue this certificate and
attach hereto a copy of the Application of the aforesaid corporation.
In Testimony Whereof, I hereto set my hand and cause to be affixed the
Great Seal of the State of Illinois, at the City of Springfield, this 1st day of
September A.D. 1983 and of the Independence of the United States the two hundred
and 8th.
[SEAL OF THE STATE OF ILLINOIS] /s/ Jim Edgar
SECRETARY OF STATE
<PAGE>
FORM BCA-47 ARTICLES OF INCORPORATION [ILLEGIBLE]
Filing Requirements - Present 2 originally signed ----------------------------
and fully executed copies in exact duplicate (Do not write in this space)
For Inserts - Use White Paper - Size 8 1/2 x 11 Date Paid 9-1-83
Initial License Fee $ .50
Franchise Tax $ 25.00
Filing Fee $ 75.00
-------
Clerk [Illegible] 100.50
----------------------------
TO: JIM EDGAR, Secretary of State
I/We, the incorporator(s), being one or more natural persons of the age of
twenty-one years or more or a corporation for the purpose of forming a
corporation under "The Business Corporation Act" of thc State of Illinois, do
hereby adopt the following Articles of Incorporation:
ARTICLE ONE The name of the corporation is: MERIDIAN EDUCATION CORPORATION
ARTICLE TWO The name and address of the initial registered agent and
registered office are:
Registered Agent Thomas E. Eggers
------------------------------------------------
First Name Middle Name Last Name
Registered Office 608 East Locust
------------------------------------------------
Number Street (Do not use P.O. Box)
Bloomington 61701 McLean
------------------------------------------------
City Zip Code County
ARTICLE THREE The duration of the corporation is |X| perpetual OR ______________
years.
ARTICLE FOUR The purposes for which the corporation is organized are:
To produce and distribute educational filmstrips, slides, video tapes and
other educational materials.
ARTICLE FIVE Paragraph 1: The class, number of shares, the par value, if any,
of each class which thc corporation is authorized to issue, the
number the corporation proposes to issue without further report to
the Secretary of State, and the consideration (expressed in
dollars) to be received by the corporation therefor, are:
<TABLE>
<CAPTION>
*Par Value Number of shares Number of shares Total consideration
Class Series per share authorized to be issued to be received therefor
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common None $ NPV 1,000 100 $1,000.00
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
================================================================================================
* (Use NPV If no Par Value) Total $1,000.00
----------------
</TABLE>
Paragraph 2: The preferences, qualifications, limitations,
restrictions and the special or relative rights in respect of the
shares of each class are: None
ARTICLE SIX The corporation will not commence business until at lease one
thousand dollars has been received as consideration for the
issuance of shares.
<PAGE>
ARTICLE SEVEN The number of directors to be elected at the first meeting of the
shareholders is 2
ARTICLE EIGHT (Complete EITHER A or B)
|X| A: All the property of the corporation is to be located in this
State and all of its business is to be transacted at or from
places of business in this State, or the incorporator(s) elect to
pay the initial franchise tax on the basis of the entire
consideration to be received for the issuance of shares.
|_| B. Paragraph 1: It is estimated that the value of all property to
be owned by the corporation for the following year wherever
located will be $____________
Paragraph 2:It is estimated that the value of the property to
be located within the State of Illinois during the following year
will be: $____________
Paragraph 3:It is estimated that the gross amount of business
which will be transacted by the corporation during the following
year will be $____________
Paragraph 4: It is estimated that the gross amount of business
which will be transacted at or from places of business in the
State of Illinois during the following year will be: $____________
I the incorporator declare that I have examined the foregoing Articles of
Incorporation and that the statements contained therein are, to the best of my
knowledge and belief, true, correct and complete.
Executed this 1st day of September, 1983.
(Signatures must be in ink. Carbon Copy, xerox or rubber stamp signatures are
not acceptable.)
NOTE: If a corporation acts as incorporator the name of the corporation and the
state of incorporation shall be shown and the execution must be by its President
or Vice-President and verified by him, and the corporate seal shall be affixed
and attested by its Secretary or an Assistant Secretary.
Signature and Names Post Office Address
1. /s/ Thomas E. Eggers 1. 1313 Schroeder
-------------------- ----------------------------
Signature Street
Thomas E. Eggers Normal, IL 61701
-------------------- ----------------------------
Name (Please print) City/Town State Zip
2. 2.
-------------------- ----------------------------
Signature Street
-------------------- ----------------------------
Name (Please print) City/Town State Zip
3. 3.
-------------------- ----------------------------
Signature Street
-------------------- ----------------------------
Name (Please print) City/Town State Zip
83 11093 INDEXED Doc. No._________ filed for Record in
Recorder's office of McLean County, IL
SEP 1~ 1983 at 9:10 o'clock A.M. MAE DEANE
Recorder of Deeds
FORM BCA-47
================================================================================
MICROFILMED
ARTICLES OF INCORPORATION
under the
BUSINESS CORPORATION ACT
- --------
For determination of proper fees please
consult The Business Corporation Act.
FILED
SEP -1 1983
JIM EDGAR
Secretary of State
RETURN TO:
Corporation Department
Secretary of State
Springfield, Illinois 62756
Telephone (217) 782-6961
C-162.5
/s/ [Illegible]
<PAGE>
Exhibit 3.131
ARTICLE I
OFFICES
The principal office of the corporation in the State of Illinois shall be
located in the City of Bloomington and County of McLean. The corporation may
have such other offices, either within or without the State of Illinois, as the
business of the corporation may require from time to time.
The registered office of the corporation required by The Business
Corporation Act to be maintained in the State of Illinois may be, but need not
be, identical with the principal office in the State of Illinois, and the
address of the registered office may be changed from time to time by the board
of directors.
ARTICLE II
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders shall be
held on the 13th day of September in each year, beginning with the year 1983, at
the hour of 2:00 p.m., for the purpose of electing directors and for the
transaction of such other business as may come before the meeting. If the day
fixed for the annual meeting is a legal holiday, such meeting shall be held on
the next succeeding business day. If the election of directors is not held on
the day designated herein for any annual meeting, or at any adjournment thereof,
the board of directors shall cause the election to be held at a meeting of the
shareholders as soon thereafter as conveniently may be.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders may be
called by the president, by the board of directors
2
<PAGE>
or by the holders of not less than one-fifth of all the outstanding shares of
the corporation.
SECTION 3. PLACE OF MEETING. The board of directors may designate any
place, either within or without the State of Illinois, as the place of meeting
for any annual meeting or for any special meeting called by the board of
directors. A waiver of notice signed by all shareholders may designate any
place, either within or without the State of Illinois, as the place for the
holding of such meeting. If no designation is made, or if the special meeting be
otherwise called, the place of meeting shall be the registered office of the
corporation in the State of Illinois, except as otherwise provided in Section 5
of this article.
SECTION 4. NOTICE OF MEETINGS. Written or printed notice stating the
place, day and hour of the meeting, and in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than forty days before the date of the meeting, or in the case of a merger or
consolidation not less than twenty nor more than forty days before the meeting,
either personally or by mail, by or at the direction of the president, or the
secretary, or the officer or persons calling the meeting, to each shareholder of
record entitled to vote at such meeting.
SECTION 5. MEETING OF ALL SHAREHOLDERS. If all of the shareholders shall
meet at any time and place, either within or without the State of Illinois, and
consent to the holding of a meeting at such time and place, such meeting shall
be valid without call or notice, and at such meeting any corporate action may be
taken.
3
<PAGE>
SECTION 6. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders, or shareholders entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the board of directors of the corporation may provide that the
stock transfer books shall be closed for a stated period but not to exceed in
any case, forty days. If the stock transfer books are closed for the purpose of
determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least ten days, or in the case
of a merger or consolidation at least twenty days, immediately preceding such
meeting.
SECTION 7. VOTING LISTS. The officer or agent having charge of the
transfer books for shares of the corporation shall make, at least ten days
before each meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting, arranged in alphabetical order, with the
address of and the number of shares held by each, which list, for a period of
ten days prior to such meeting, shall be kept on file at the registered office
of the corporation and shall be subject to inspection by any shareholder at any
time during usual business hours.
SECTION 8. QUORUM. A majority of the outstanding shares of the
corporation, represented by person or by proxy, shall constitute a quorum at any
meeting of shareholders; provided, that if less than a majority of the
outstanding shares are represented at said meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice. If
a quorum is present, the affirmative vote of the majority of the shares
<PAGE>
represented at the meeting shall be the act of the shareholders, unless the vote
of a greater number or voting by classes is required by The Business Corporation
Act, the articles of incorporation or these by-laws.
SECTION 9. PROXIES. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his duly authorized
attorney-in-fact. Such proxy shall be filed with the Secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy.
SECTION 10. VOTING OF SHARES. Subject to Section 11 of this article, each
outstanding share, regardless of class, is entitled to one vote upon each matter
submitted to vote at a meeting of shareholders.
SECTION 11. CUMULATIVE VOTING. In all elections for directors, every
shareholder may vote, in person or by proxy, the number of shares owned by him,
for as many persons as there are directors to be elected, or to cumulate those
shares, and give one candidate as many votes as the number of directors
multiplied by the number of his shares shall equal, or to distribute them on the
same principal among as many candidates as he sees fit.
SECTION 12. INFORMAL ACTION BY SHAREHOLDERS. Any action required to be
taken at a meeting of the shareholders, or any other action which may be taken
at a meeting of the shareholders may be taken without a meeting if a consent in
writing, setting forth the action so taken, is signed by all of the shareholders
entitled to vote with respect to the subject matter thereof.
4
<PAGE>
SECTION 13. VOTING BY BALLOT. Voting on any question or in any election
may be viva voce unless the presiding officer orders or any shareholder demands
that voting be by ballot.
ARTICLE III
DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the corporation
shall be managed by its board of directors.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors of
the corporation shall be two. Each director shall hold office until the next
annual meeting of shareholders or until his successor shall have been elected
and qualified. Directors need not be residents of Illinois or shareholders of
the corporation.
SECTION 3. REGULAR MEETINGS. A regular meeting of the board of directors
shall be held without other notice than this by-law, immediately after, and at
the same place as, the annual meeting of shareholders. The board of directors
may provide, by resolution, the time and place, either within or without the
State of Illinois, for the holding of additional regular meetings without other
notice than such resolution.
SECTION 4. SPECIAL MEETINGS. Special meetings of the board of directors
may be called by or at the request of the president or any two directors. The
person or persons authorized to call special meetings of the board of directors
may fix any place, either within or without the State of Illinois, as the place
for holding any special meeting of the board of directors called by them.
5
<PAGE>
SECTION 5. NOTICE. Notice of any special meeting shall be given at least
three days previously thereto by written notice delivered personally or mailed
to each director at his business address, or by telegram. If mailed, such notice
is deemed to be delivered when deposited in the United States mail so addressed,
with postage thereon prepaid. If notice is given by telegram, such notice is
deemed to be delivered then the telegram is delivered to the telegraph company.
Any director may waive notice of any meeting. The attendance of a director at
any meeting constitutes a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board of directors need be specified in the
notice or waiver of notice of such meeting.
SECTION 6. QUORUM. A majority of the number of directors fixed by these
by-laws constitutes a quorum for transaction of business at any meeting of the
board of directors, provided, that if less than a majority of such number of
directors are present at said meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice.
SECTION 7. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors.
SECTION 8. VACANCIES. Any vacancy occurring in the board of directors and
any directorship to be filled by reason of an increase in the number of
directors, may be filled by election
6
<PAGE>
at an annual meeting or at a special meeting of shareholders called for that
purpose.
SECTION 9. INFORMAL ACTION BY DIRECTORS. Any action required to be taken
at a meeting of the board of directors, or any other action which may be taken
at a meeting of the board of directors, may be taken without a meeting if a
consent in writing, setting forth the action so taken, is signed by all of the
directors entitled to vote with respect to the subject matter thereof.
SECTION 10. COMPENSATION. The board of directors, by the affirmative vote
of a majority of directors then in office, and irrespective of any personal
interest of any of its members, may establish reasonable compensation of all
directors for services to the corporation as directors, officers or otherwise.
By resolution of the board of directors, the directors may be paid their
expenses, if any, of attendance at each meeting of the board.
SECTION 11. PRESUMPTION OF ABSENT. A director of the corporation who is
present at a meeting of the board of directors at which action on any corporate
matter is taken is conclusively presumed to have assented to the action taken
unless his dissent is entered in the minutes of the meeting or unless he files
his written dissent to such action with the person acting as the secretary of
the meeting before the adjournment thereof or forwards such dissent by
registered mail to the secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent does not apply to a director
who voted in favor of such action.
7
<PAGE>
ARTICLE IV
OFFICERS
SECTION 1. NUMBER. The officers of the corporation shall be a president,
one or more vice-presidents (the number thereof to be determined by the board
of directors), a treasurer, and a secretary, and such assistant treasurers,
assistant secretaries or other officers as may be elected or appointed by the
board of directors. Any two or more offices may be held by the same person.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the corporation
shall be elected annually by the board of directors at the first meeting of the
board of directors held after each annual meeting of shareholders. If the
election of officers is not held at such meeting, such election shall be held as
soon thereafter as conveniently may be. Vacancies may be filled or new offices
filled at any meeting of the board of directors. Each officer shall hold office
until his successor has been duly elected and qualified or until his death or
until he resigns or has been removed in the manner hereinafter provided.
Election or appointment of an officer or agent does not of itself create
contract rights.
SECTION 3. REMOVAL. Any officer or agent elected or appointed by the board
of directors may be removed by the board of directors whenever in its judgment
the best interests of the corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
8
<PAGE>
SECTION 4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the board
of directors for the unexpired portion of the term.
SECTION 5. PRESIDENT. The president shall be the principal executive
officer of the corporation and shall in general supervise and control all of the
business and affairs of the corporation. He shall preside at all meetings of the
shareholders and of the board of directors. He may sign, with the secretary or
any other proper officer of the corporation thereunto authorized by the board of
directors, certificates for shares of the corporation, any deeds, mortgages,
bonds, contracts, or other instruments which the board of directors has
authorized to be executed, except in cases where the signing and execution
thereof is expressly delegated by the board of directors or by these by-laws to
some other officer or agent of the corporation, or is required by law to be
otherwise signed or executed; and in general shall perform all duties incident
to the office of president and such other duties as may be prescribed by the
board of directors from time to time.
SECTION 6. THE VICE PRESIDENTS. In the absence of the president or in the
event of his inability or refusal to act, the vice-president (or if there is
more than once vice-president, the vice-president in the order designated, or
in the absence of any designation, then in the order of their election) shall
perform the duties of the president, and when so acting, have all the powers of
and are subject to all the restrictions upon
9
<PAGE>
the president. Any vice-president may sign, with the secretary or an assistant
secretary, certificates for shares of the corporation; and shall perform such
other duties as from time to time may be assigned to him by the president or by
the board of directors.
SECTION 7. THE TREASURER. If required by the board of directors, the
treasurer shall give a bond for the faithful discharge of his duties in such sum
and with such surety or sureties as the board of directors determines. He shall:
(a) have charge and custody of and be responsible for all funds and securities
of the corporation from any source whatsoever, and deposit all such moneys in
the name of the corporation in such banks, trust companies or other depositories
as are selected in accordance with the provisions of Article V of these
by-laws; (b) in general perform all the duties incident to the office of
treasurer and such other duties as from time to time may be assigned to him by
the president or by the board of directors.
SECTION 8. THE SECRETARY. The secretary shall: (a) keep the minutes of the
shareholders' and of the board of directors' meetings in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these by-laws or as required by law; (c) be custodian of
the corporate records and of the seal of the corporation and see that the seal
of the corporation is affixed to all certificates for shares prior to the issue
thereof and to all documents, the execution of which on behalf of the
corporation under its seal is duly authorized in accordance with the provisions
of these by-laws; (d) keep a register of the post-office address of each
shareholder which shall be furnished to the secretary by
10
<PAGE>
such shareholder; (e) sign with the president, or vice-president, certificates
for shares of the corporation, the issue of which have been authorized by
resolution of the board of directors; (f) have general charge of the stock
transfer books of the corporation; (g) in general perform all duties incident to
the office of secretary and such other duties as from time to time may be
assigned to him by the president or by the board of directors.
SECTION 9. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The assistant
treasurers shall respectively, if required by the board of directors, give bonds
for the faithful discharge of their duties in such sums and with such sureties
as the board of directors determines. The assistant secretaries as thereunto
authorized by the board of directors may sign with the president or a vice-
president certificates for shares of the corporation, the issue of which have
been authorized by a resolution of the board of directors. The assistant
treasurers and assistant secretaries, in general, shall perform such duties as
are assigned to them by the treasurer or the secretary, respectively, or by the
president or the board of directors.
SECTION 10. SALARIES. The salaries of the officers shall be fixed from
time to time by the board of directors, and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS. The board of directors may authorize any officer or
officers, agent or agents, to enter
11
<PAGE>
into any contract or execute and deliver any instrument in the name of and on
behalf of the corporation, and such authority may be general or confined to
specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the board of directors. Such authority may be
general or confined to specific instances.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation, shall be signed by such officer or officers, agent or agents of
the corporation and in such manner as is from time to time determined by
resolution of the board of directors.
SECTION 4. DEPOSITS. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositaries as the board of directors may
select.
ARTICLE VI
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of
the corporation shall be in such form as may be determined by the board of
directors. Such certificates shall be signed by the president or a
vice-president and by the secretary or an assistant secretary and shall be
sealed with the seal of the corporation. All certificates for shares shall be
consecutively numbered or otherwise identified. The name of the person to whom
the shares represented thereby are issued, with the
12
<PAGE>
number of shares and date of issue, shall be entered on the books of the
corporation. All certificates surrendered to the corporation for transfer shall
be cancelled, and no new certificate may be issued until the former certificate
for a like number of shares has been surrendered and cancelled, except that in
case of a lost, destroyed or mutilated certificate, a new one may be issued
therefor upon such terms and indemnity to the corporation as the board of
directors may prescribe.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of the corporation shall
be made only on the books of the corporation by the holder of record thereof or
by his legal representative, who shall furnish proper evidence of authority to
transfer or by his attorney thereunto authorized by power of attorney duly
executed and filed with the secretary of the corporation, and on surrender for
cancellation of the certificate of such shares. The person in whose name shares
stand on the books of the corporation is deemed the owner thereof for all
purposes as regards the corporation.
ARTICLE VII
FISCAL YEAR
The fiscal year of the corporation shall begin on the first day of January
in each year and end on the last day of December in each year.
ARTICLE VIII
DIVIDENDS
The board of directors may from time to time, declare, and the corporation
may pay, dividends on its outstanding shares in the manner and upon the terms
and conditions provided by law and its articles of incorporation.
13
<PAGE>
ARTICLE IX
SEAL
The board of directors shall provide a corporate seal which shall be in
the form of a circle and shall have inscribed thereon the name of the
corporation and the words, "Corporate Seal, Illinois."
ARTICLE X
WAIVER OF NOTICE
Whenever any notice whatever is required to be given under these by-laws,
under the articles of incorporation or under The Business Corporation Act of the
State of Illinois, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated therein, is
deemed equivalent to the giving of such notice.
ARTICLE XI
AMENDMENTS
These by-laws may be altered, amended or repealed, and new by-laws may
be adopted at any meeting of the board of directors of the corporation by a
majority vote of the directors present at the meeting.
14
<PAGE>
<PAGE>
Exhibit 10.2
SECOND AMENDMENT AND CONSENT TO CREDIT AGREEMENT
SECOND AMENDMENT AND CONSENT, dated as of December 31, 1999 (this
"Amendment"), among PRIMEDIA INC., a Delaware corporation (the "Company"), the
financial institutions party to the Credit Agreement described below (the
"Banks"), THE BANK OF NEW YORK and BANKERS TRUST COMPANY, as Co-Syndication
Agents, THE BANK OF NOVA SCOTIA, as Documentation Agent, and THE CHASE MANHATTAN
BANK, as Administrative Agent. All capitalized terms used herein and not
otherwise defined herein shall have the respective meanings provided such terms
in the Credit Agreement referred to below.
W I T N E S S E T H:
WHEREAS, the Company, Canadian Sailings Inc., the Banks, the
Co-Syndication Agents, the Documentation Agent and the Administrative Agent are
parties to an Amended and Restated Credit Agreement, dated as of May 24, 1996
and amended and restated as of March 11, 1999 (as amended, modified and
supplemented through the date hereof, the "Credit Agreement");
WHEREAS, the parties hereto wish to amend the Credit Agreement as
herein provided;
NOW THEREFORE, it is agreed:
I Second Amendment and Consent to Credit Agreement.
1. Section 8.02(c) of the Credit Agreement is hereby amended by
adding the following proviso to the end thereof:
"provided that, notwithstanding the foregoing provisions of this clause
(iv), but only to the extent such sale, transfer or disposition is
structured as a leveraged recapitalization, the Company shall be permitted
to structure any sale, transfer or disposition of the capital stock of a
Restricted Subsidiary as a leveraged recapitalization in which up to 15%
of the capital stock of the Restricted Subsidiary being recapitalized is
retained (directly or indirectly) by the Company;"
2. Section 8.05(1) of the Credit Agreement is hereby amended by
deleting the amount "$25,000,000" appearing in the second line thereof and
inserting the amount "$150,000,000" in lieu thereof.
<PAGE>
3. Section 8.10 of the Credit Agreement is hereby amended by
deleting the table appearing in such Section in its entirety and inserting the
following new table in lieu thereof:
Period Ratio
------ -----
Original Effective Date to and 1.80 to 1.00
including December 31, 2000
January 1, 2001 to and including 2.00 to 1.00
December 31, 2001
January 1, 2002 to and including 2.25 to 1.00
December 31, 2002
January 1, 2003 and thereafter 2.50 to 1.00
4. Section 8.11 of the Credit Agreement is hereby amended by
deleting the table appearing in such Section in its entirety and inserting the
following new table in lieu thereof:
Period Ratio
------ -----
Original Effective Date to and 6.00 to 1.00
including December 31, 2000
January 1, 2001 to and including 5.50 to 1.00
December 31, 2001
January 1, 2002 to and including 5.00 to 1.00
December 31, 2002
January 1, 2003 and thereafter 4.50 to 1.00
5. The definition of "Unrestricted Subsidiary Investment Limit"
appearing in Section 10 of the Credit Agreement is hereby amended by deleting
the amount "$200,000,000" appearing in the second line of such definition and
inserting the amount "$350,000,000" in lieu thereof.
II Miscellaneous.
1. In order to induce the Banks to enter into this Amendment, the
Company hereby represents and warrants that (i) all representations, warranties
and agreements contained in Section 6 of the Credit Agreement are true and
correct in all material respects on and as of the
-2-
<PAGE>
Amendment Effective Date (as defined below) (unless such representations and
warranties relate to a specific earlier date, in which case such representations
and warranties shall be true and correct in all material respects as of such
earlier date) and (ii) there exists no Default or Event of Default on the
Amendment Effective Date, in each case both before and after giving effect to
this Amendment.
2. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
3. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered (including by way of facsimile) shall
be an original, but all of which shall together constitute one and the same
instrument. A complete set of counterparts shall be lodged with the Company and
the Administrative Agent.
4. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
5. This Amendment shall become effective on the date (the "Amendment
Effective Date") when: (i) the Company, Canadian Sailings and the Required Banks
shall have signed a counterpart hereof (whether the same or different
counterparts) and shall have delivered (including, without limitation, by usage
of facsimile transmission) the same to the Administrative Agent at the Notice
Office; (ii) the Amendment of even date herewith to the Credit Agreement by and
among the Company, the Banks, the Co-Syndication Agents, the Documentation Agent
and the Administrative Agent, dated as of May 24, 1996 has become effective
under the terms thereof; and (iii) the Company shall have paid to the
Administrative Agent and to the Banks all fees and expenses agreed upon by such
parties to be paid on or prior to the Amendment Effective Date (including,
without limitation, a fee equal to 0.125% of the amount of the existing
Commitment, outstanding Term Loans and outstanding B Term Loan of each Bank
party to the Credit Agreement, before giving effect to this Amendment, that
consents to this Amendment). This Amendment and the agreements contained herein
shall be binding on the successors and assigns of the parties hereto.
6. From and after the Amendment Effective Date, all references in
the Credit Agreement and the other Credit Documents to the Credit Agreement
shall be deemed to be references to the Credit Agreement as modified hereby.
* * *
-3-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the date
first above written.
PRIMEDIA INC.
By: /s/ [ILLEGIBLE]
-----------------------------
Title: SENIOR VICE PRESIDENT,
TREASURER
CANADIAN SAILINGS INC.
By:
-----------------------------
Title:
THE CHASE MANHATTAN BANK,
Individually and as
Administrative Agent
By:
-----------------------------
Title:
BANKERS TRUST COMPANY
Individually and as
Co-Syndication Agent
By:
-----------------------------
Title:
THE BANK OF NEW YORK,
Individually and as
Co-Syndication Agent
By:
-----------------------------
Title:
THE BANK OF NOVA SCOTIA,
Individually, as Canadian
Lender and as Documentation
Agent
By:
-----------------------------
Title:
<PAGE>
BANKERS TRUST COMPANY
--------------------------------
By: /s/ [ILLEGIBLE]
Name: GREGORY SHEFRIN
Title: PRINCIPAL
<PAGE>
Name of Bank:
The Bank of New York
----------------------------------
By: /s/ Steven J. Correll
-------------------------------
Name:Steven J. Correll
Title: Assistant Vice President
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the date
first above written.
PRIMEDIA INC.
By:
---------------------------------
Title:
CANADIAN SAILINGS INC.
By:
---------------------------------
Title:
THE CHASE MANHATTAN BANK,
Individually and as
Administrative Agent
By:
---------------------------------
Title:
BANKERS TRUST COMPANY
Individually and as
Co-Syndication Agent
By:
---------------------------------
Title:
THE BANK OF NEW YORK,
Individually and as
Co-Syndication Agent
By:
---------------------------------
Title:
THE BANK OF NOVA SCOTIA,
Individually, as Canadian
Lender and as Documentation
Agent
By: /s/ Vincent J. Fitzgerald, Jr.
---------------------------------
Title: VINCENT J. FITZGERALD, JR.
AUTHORIZED SIGNATORY
<PAGE>
Name of Bank:
BANK OF AMERICA
----------------------------------
By: /s/ James T. Gilland
-------------------------------
Name: JAMES T. GILLAND
Title: MANAGING DIRECTOR
<PAGE>
Name of Bank:
Bank of Hawaii
----------------------------------
By: /s/ Derek Chang
-------------------------------
Name: DEREK CHANG
Title: Asst. Vice President
<PAGE>
Name of Bank:
CAPTIVA FINANCE LTD.
----------------------------------
By: /s/ John Cullinane
-------------------------------
Name: John Cullinane
Title: Director
<PAGE>
Name of Bank:
CIBC INC.
----------------------------------
By: /s/ Harold Birk
-------------------------------
Name: Harold Birk
Title: Executive Director
CIBC World Markets Corp.
As Agent
<PAGE>
Name of Bank:
CREDIT AGRICOLE INDOSUEZ
----------------------------------
By: /s/ [ILLEGIBLE]
-------------------------------
Name: [ILLEGIBLE]
Title: RVP
By: /s/ John McClaske
-------------------------------
Name: JOHN MCCLASKE
Title: VP, SRM
<PAGE>
Name of Bank:
Credit Lyonnais New York Branch
----------------------------------
By: /s/ W. Michael George
-------------------------------
Name: W. Michael George
Title: First Vice President
<PAGE>
Name of Bank: CREDIT SUISSE FIRSTBOSTON
/s/ Robert Hetu
--------------------------------------
ROBERT HETU
VICE PRESIDENT
By: /s/ Joel Glodonski
-----------------------------------
Name: Joel Glodonski
Title: Managing Director
<PAGE>
Name of Bank:
The Dai-Ichi Kangyo Bank, Ltd.
---------------------------------------
By: /s/ Ronald Wolinsky
------------------------------------
Name: Ronald Wolinsky
Title: Vice President & Group Leader
<PAGE>
Name of Bank:
DLJ Capital Funding, Inc.
----------------------------------
By: /s/ [ILLEGIBLE]
-------------------------------
Name: [ILLEGIBLE]
Title: JVP
<PAGE>
Name of Bank:
FIRST UNION NATIONAL BANK
----------------------------------
By: /s/ Harry E. Ellis
-------------------------------
Name: HARRY E. ELLIS
Title: MANAGING DIRECTOR
OF RISK MANAGEMENT
<PAGE>
Name of Bank:
FLEET NATIONAL BANK
----------------------------------
By: /s/ R.E. Anderson
-------------------------------
Name: R.E. ANDERSON
Title: SVP
<PAGE>
Name of Bank:
Franklin Floating Kate Trust
----------------------------------
By: /s/ Chauncey Lufkin
-------------------------------
Name: Chauncey Lufkin
Title: Vice President
<PAGE>
Name of Bank:
General Electric Capital Corporation
------------------------------------
By: /s/ Janet K. Williams
---------------------------------
Name: Janet K. Williams
Title: Senior Vice President
<PAGE>
Name of Bank:
HSBC BANK USA
----------------------------------
(fka Marine Midland Bank)
By: /s/ Martin F. Brown
-------------------------------
Name: Martin F. Brown
Title: Authorized Signatory
<PAGE>
Name of Bank:
The Industrial Bank of Japan, Ltd.
----------------------------------
By: /s/ William Kennedy
-------------------------------
Name: WILLIAM KENNEDY
Title: SENIOR VICE PRESIDENT
<PAGE>
Name of Bank:
The Industrial Bank of Japan, Ltd.
----------------------------------
By: /s/ William Kennedy
-------------------------------
Name: WILLIAM KENNEDY
Title: SENIOR VICE PRESIDENT
<PAGE>
Name of Bank:
Natexis Banque BFCE
----------------------------------
By: /s/ Cynthia E. Sachs
-------------------------------
Name: CYNTHIA E. SACHS
Title: VP. GROUP MANAGER
By: /s/ Claudia V. Padron
-------------------------------
CLAUDIA V. PADRON
ASSOCIATE
<PAGE>
OASIS COLLATERALIZED HIGH INCOME
PORTFOLIOS-I, LTD
By: INVESCO Senior Secured Management,
Inc., as Sub-Advisor
By: /s/ Joseph Rotondo
-----------------------------------
Name: Joseph Rotondo
Title: Authorized Signatory
<PAGE>
Name of Bank:
K2H HIGHLAND-2 LLC
----------------------------------
By: /s/ Susan Lee
-------------------------------
Name: Susan Lee
Title: Authorized Agent
<PAGE>
Name of Bank:
K2H HIGHLAND-2 LLC
----------------------------------
By: /s/ Susan Lee
-------------------------------
Name: Susan Lee
Title: Authorized Agent
<PAGE>
Name of Bank:
Mellon Bank, N.A.
----------------------------------
By: /s/ Paul F. Noel
-------------------------------
Name: Paul F. Noel
Title: Vice President
<PAGE>
Name of Bank:
MERITA BANK PLC
----------------------------------
By: /s/ Clifford Abramsky
-------------------------------
Name: CLIFFORD ABRAMSKY
Title: VICE PRESIDENT
By: /s/ William Keller
-------------------------------
Name: William Keller
Title: Vice President
<PAGE>
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
By: /s/ Joseph Matteo
------------------------------------------
JOSEPH MATTEO
AUTHORIZED SIGNATORY
<PAGE>
Name of Bank:
The Mitsubishi Trust and Banking Corporation
---------------------------------------------
By: /s/ Beatrice Kossodo
------------------------------------------
Name: Beatrice Kossodo
Title: Senior Vice President
<PAGE>
Name of Bank:
Bank of Montreal, Chicago Branch
----------------------------------
By: /s/ Ola Anderssen
-------------------------------
Name: OLA ANDERSSEN
Title: DIRECTOR
<PAGE>
Name of Bank:
NEW YORK LIFE INSURANCE COMPANY
----------------------------------
By: /s/ S. Thomas Knoff
-------------------------------
Name: S. Thomas Knoff
Title: Director
<PAGE>
Name of Bank:
NEW YORK LIFE INSURANCE COMPANY
----------------------------------
By: /s/ S. Thomas Knoff
-------------------------------
Name: S. Thomas Knoff
Title: Director
<PAGE>
OCTAGON INVESTMENT PARTNERS II, LLC
By: Octagon Credit Investors, LLC
as sub-investment manager
/s/ James P. Ferguson
-----------------------------------
By: James P. Ferguson
Title: Senior Portfolio Manager
<PAGE>
OCTAGON INVESTMENT PARTNERS III, LTD.
By: Octagon Credit Investors, LLC
as Portfolio Manager
/s/ James P. Ferguson
-----------------------------------
By: James P. Ferguson
Title: Senior Portfolio Manager
<PAGE>
Name of Bank:
PARIBAS
----------------------------------
By: /s/ Ernie Sigal
-------------------------------
Name: ERNIE SIGAL
Title: ASSISTANT V.P
By: /s/ Raymond T. Baxter
-------------------------------
Name: Raymond T. Baxter
Title: Group Vice President
<PAGE>
Sprint Enhanced Indexation
-----------------------------------------
By: Pacific Investment Management Company
as its Investment Advisor acting through
The Northern Trust Company in the
Nominee Name of How & Co.
By: /s/ Mohan V. Phansalkar
--------------------------------------
Name: Mohan V. Phansalkar
Title: Senior Vice President
<PAGE>
PIMCO Low Duration Fund
-----------------------------------------
By: Pacific Investment Management Company
as its investment advisor, acting through
Investors Fiduciary Trust Company in the
Nominee Name of IFTCO.
By: /s/ Mohan V. Phansalkar
--------------------------------------
Name: Mohan V. Phansalkar
Title: Senior Vice President
<PAGE>
PIMCO Total Return Fund
-----------------------------------------
By: Pacific Investment Management Company
as its investment advisor, acting through
Investors Fiduciary Trust Company in the
Nominee Name of IFTCO.
By: /s/ Mohan V. Phansalkar
--------------------------------------
Name: Mohan V. Phansalkar
Title: Senior Vice President
<PAGE>
Captiva III Finance, Ltd.
-----------------------------------------
as advised by Pacific Investment
Management Company
By: /s/ David Dyer
--------------------------------------
Name: DAVID DYER
Title: DIRECTOR
Captiva IV Finance, Ltd.
as advised by Pacific Investment
Management Company
By: /s/ David Dyer
--------------------------------------
Name: DAVID DYER
Title: DIRECTOR
<PAGE>
Name of Bank:
PNC BANK, NATIONAL ASSOCIATION
----------------------------------
By: /s/ John M. Iadanza
-------------------------------
Name: JOHN M. IADANZA
Title: ASSISTANT VICE PRESIDENT
<PAGE>
Name of Bank:
Riggs Bank N.A.
----------------------------------
By: /s/ David H. Olson
-------------------------------
Name: David H. Olson
Title: Group Vice President
<PAGE>
SANKATY HIGH YIELD PARTNERS II, L.P.
By: /s/ Diane J. Exter
-----------------------------------------------
Name: Diane J. Exter
---------------------------------------------
Title: Executive Vice President, Portfolio Manager
--------------------------------------------
<PAGE>
SANKATY HIGH YIELD PARTNERS II, L.P.
By: /s/ Diane J. Exter
-----------------------------------------------
Name: Diane J. Exter
---------------------------------------------
Title: Executive Vice President, Portfolio Manager
--------------------------------------------
<PAGE>
Name of Bank:
THE SANWA BANK, LIMITED
---------------------------------------
By: /s/ Stephen C. Small
------------------------------------
Name: Stephen C. Small
Title: Vice President & Area Manager
<PAGE>
Name of Bank:
SOCIETE GENERALE, NEW YORK BRANCH
---------------------------------------
By: /s/ Elaine Khalil
------------------------------------
Name: Elaine Khalil
Title: Vice President
<PAGE>
Name of Bank:
STRATA FUNDING LTD.
---------------------------------------
By: /s/ John Cullinane
------------------------------------
Name: John Cullinane
Title: Director
<PAGE>
Name of Bank:
STB Delaware Funding Trust I
---------------------------------------
By: /s/ Donald C. Hargadon
------------------------------------
Name: Donald C. Hargadon
Title: Assistant Vice President
<PAGE>
Name of Bank:
TORONTO DOMINION (TEXAS), INC.
---------------------------------------
By: /s/ Debbie A. Greene
------------------------------------
Name: DEBBIE A. GREENE
Title: VICE PRESIDENT
<PAGE>
Name of Bank:
Union Bank of California, N
---------------------------------------
By: /s/ Lena M. Bryant
------------------------------------
Name: LENA M. BRYANT
Title: VICE PRESIDENT
<PAGE>
Exhibit 10.3
SECOND AMENDMENT AND CONSENT TO CREDIT AGREEMENT
SECOND AMENDMENT AND CONSENT, dated as of December 31, 1999 (this
"Amendment"), among PRIMEDIA INC., a Delaware corporation (the "Company"), the
financial institutions party to the Credit Agreement described below (the
"Banks"), THE BANK OF NEW YORK and BANKERS TRUST COMPANY, as Co-Syndication
Agents, THE BANK OF NOVA SCOTIA, as Documentation Agent, and THE CHASE MANHATTAN
BANK, as Administrative Agent. All capitalized terms used herein and not
otherwise defined herein shall have the respective meanings provided such terms
in the Credit Agreement referred to below.
WITNESSETH:
WHEREAS, the Company, the Banks, the Co-Syndication Agents, the
Documentation Agent and the Administrative Agent are parties to a Credit
Agreement, dated as of May 24, 1996 (as amended, modified and supplemented
through the date hereof, the "Credit Agreement");
WHEREAS, the parties hereto wish to amend the Credit Agreement as
herein provided;
NOW THEREFORE, it is agreed:
I. Second Amendment and Consent to Credit Agreement.
1. Section 7.02(c) of the Credit Agreement is hereby amended by
adding the following proviso to the end thereof:
"provided that, notwithstanding the foregoing provisions of this clause
(iv), but only to the extent such sale, transfer or disposition is
structured as a leveraged recapitalization, the Company shall be permitted
to structure any sale, transfer or disposition of the capital stock of a
Restricted Subsidiary as a leveraged recapitalization in which up to 15%
of the capital stock of the Restricted Subsidiary being recapitalized is
retained (directly or indirectly) by the Company;"
2. Section 7.05(1) of the Credit Agreement is hereby amended by
deleting the amount "$25,000,000" appearing in the second line thereof and
inserting the amount "$150,000,000", in lieu thereof.
<PAGE>
3. Section 7.10 of the Credit Agreement is hereby amended by
deleting the table appearing in such Section in its entirety and inserting the
following new table in lieu thereof:
Period Ratio
------ -----
Effective Date to and including l.80 to 1.00
December 31, 2000
January 1, 2001 to and including 2.00 to 1.00
December 31, 2001
January 1, 2002 to and including 2.25 to 1.00
December 31, 2002
January 1, 2003 and thereafter 2.50 to 1.00
4. Section 7.11 of the Credit Agreement is hereby amended by
deleting the table appearing in such Section in its entirety and inserting the
following new table in lieu thereof:
Period Ratio
------ -----
Effective Date to and including 6.00 to 1.00
December 31, 2000
January 1, 2001 to and including 5.50 to 1.00
December 31, 2001
January 1, 2002 to and including 5.00 to 1.00
December 31, 2002
January 1, 2003 and thereafter 4.50 to 1.00
5. The definition of "Unrestricted Subsidiary Investment Limit"
appearing in Section 9 of the Credit Agreement is hereby amended by deleting the
amount "$200,000,000" appearing in the second line of such definition and
inserting the amount "$350,000,000" in lieu thereof.
II. Miscellaneous.
1. In order to induce the Banks to enter into this Amendment, the
Company hereby represents and warrants that (i) all representations, warranties
and agreements contained in Section 5 of the Credit Agreement are true and
correct in all material respects on and as of the
-2-
<PAGE>
Amendment Effective Date (as defined below) (unless such representations and
warranties relate to a specific earlier date, in which case such representations
and warranties shall be true and correct in all material respects as of such
earlier date) and (ii) there exists no Default or Event of Default on the
Amendment Effective Date, in each case both before and after giving effect to
this Amendment.
2. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
3. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered (including by way of facsimile) shall
be an original, but all of which shall together constitute one and the same
instrument. A complete set of counterparts shall be lodged with the Company and
the Administrative Agent.
4. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
5. This Amendment shall become effective on the date (the "Amendment
Effective Date") when: (i) the Company and the Required Banks shall have signed
a counterpart hereof (whether the same or different counterparts) and shall have
delivered (including, without limitation, by usage of facsimile transmission)
the same to the Administrative Agent at the Notice Office; (ii) the Amendment of
even date herewith to the Amended and Restated Credit Agreement by and among the
Company, Canadian Sailings Inc., the Banks, the Co-Syndication Agents, the
Documentation Agent and the Administrative Agent, dated as of May 24, 1996 and
amended and restated as of March 11, 1999, has become effective under the terms
thereof; and (iii) the Company shall have paid to the Administrative Agent and
to the Banks all fees and expenses agreed upon by such parties to be paid on or
prior to the Amendment Effective Date (including, without limitation, a fee
equal to 0.125% of the amount of the outstanding Term Loans of each Bank party
to the Credit Agreement, before giving effect to this Amendment, that consents
to this Amendment). This Amendment and the agreements contained herein shall be
binding on the successors and assigns of the parties hereto.
6. From and after the Amendment Effective Date, all references in
the Credit Agreement and the other Credit Documents to the Credit Agreement
shall be deemed to be references to the Credit Agreement as modified hereby.
* * *
-3-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the date
first above written.
PRIMEDIA INC.
By: /s/ [ILLEGIBLE]
-----------------------------------------
Title: SENIOR VICE PRESIDENT, TREASURER
THE CHASE MANHATTAN
BANK, Individually
and as Administrative Agent
By:
-----------------------------------------
Title:
BANKERS TRUST COMPANY
Individually and as
Co-Syndication Agent
By:
-----------------------------------------
Title:
THE BANK OF NEW YORK,
Individually and as
Co-Syndication Agent
By:
-----------------------------------------
Title:
THE BANK OF NOVA SCOTIA,
Individually, as Canadian Lender and as
Documentation Agent
By:
-----------------------------------------
Title:
<PAGE>
BANKERS TRUST COMPANY
--------------------------------------------
By: /s/ Gregory Shefrin
-----------------------------------------
Name: GREGORY SHEFRIN
Title: PRINCIPAL
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the date
first above written.
PRIMEDIA INC.
By:
-----------------------------------------
Title:
THE CHASE MANHATTAN
BANK, Individually
and as Administrative Agent
By:
-----------------------------------------
Title:
BANKERS TRUST COMPANY
Individually and as
Co-Syndication Agent
By:
-----------------------------------------
Title:
THE BANK OF NEW YORK,
Individually and as
Co-Syndication Agent
By:
-----------------------------------------
Title:
THE BANK OF NOVA SCOTIA,
Individually, as Canadian Lender and as
Documentation Agent
By: /s/ Vincent J. Fitzgerald, Jr.
-----------------------------------------
Title: VINCENT J. FITZGERALD, JR.
AUTHORIZED SIGNATORY
<PAGE>
Name of Bank:
The Sakura Bank, Limited
---------------------------------------------
By: /s/ Koshikazu Nagura
-----------------------------------------
Name: Koshikazu Nagura
Title: Senior Vice President
<PAGE>
Name of Bank:
The Bank of New York
---------------------------------------------
By: /s/ Steven J. Correll
-----------------------------------------
Name: Steven J. Correll
Title: Assistant Vice President
<PAGE>
Name of Bank:
ALLSTATE LIFE INSURANCE COMPANY
---------------------------------------------
By: /s/ Jerry D. Zinkula
-----------------------------------------
Name: JERRY D. ZINKULA
By: /s/ Patricia W. Wilson
-----------------------------------------
Name: PATRICIA W. WILSON
Its Authorized Signatories
<PAGE>
Name of Bank:
ALLSTATE LIFE INSURANCE COMPANY
---------------------------------------------
By: /s/ Jerry D. Zinkula
-----------------------------------------
Name: JERRY D. ZINKULA
By: /s/ Patricia W. Wilson
-----------------------------------------
Name: PATRICIA W. WILSON
Its Authorized Signatories
<PAGE>
Name of Bank:
BANK OF AMERICA, N.A.
---------------------------------------------
By: /s/ Thomas J. Kane
-----------------------------------------
Name: Thomas J. Kane
Title: Vice President
<PAGE>
Name of Bank:
Bank of Hawaii
---------------------------------------------
By: /s/ Derek Chang
-----------------------------------------
Name: Derek CHANG
Title: Asst. Vice President
<PAGE>
Name of Bank:
Bank of Montreal, Chicago Branch
---------------------------------------------
By: /s/ Ola Anderssen
-----------------------------------------
Name: OLA ANDERSSEN
Title: DIRECTOR
<PAGE>
Name of Bank:
CIBC INC
---------------------------------------------
By: /s/ Harold Birk
-----------------------------------------
Name: HAROLD BIRK
Title: Executive Director
CIBC World Markets Corp. As Agent
<PAGE>
Name of Bank:
Credit Suisse First Boston
---------------------------------------------
By: /s/ Jeffrey B. Ulmer
-----------------------------------------
Name: JEFFREY B. ULMER
VICE PRESIDENT
/s/ Douglas E. Maher
DOUGLAS E. MAHER
VICE PRESIDENT
<PAGE>
Name of Bank:
The Dai-Ichi Kangyo Bank, Ltd.
---------------------------------------------
By: /s/ Ronald Wolinsky
-----------------------------------------
Name: Ronald Wolinsky
Title: Vice President & Group Leader
<PAGE>
Name of Bank:
DLJ CAPITAL FUNDING, INC.
---------------------------------------------
By: /s/ Howard Shams
-----------------------------------------
Name: HOWARD SHAMS
Title: Vice President
<PAGE>
Name of Bank:
FLEET NATIONAL BANK
---------------------------------------------
By: /s/ R. E. Anderson
-----------------------------------------
Name: R. E. ANDERSON
Title: SVP
<PAGE>
Name of Bank:
FIRST UNION NATIONAL BANK
---------------------------------------------
By: /s/ Harry E. Ellis
-----------------------------------------
Name: Harry E. Ellis
Title: Senior Vice President
Managing Director
<PAGE>
Name of Bank:
GENERAL ELECTRIC CAPITAL CORPORATION
---------------------------------------------
By: /s/ Janet K. Williams
-----------------------------------------
Name: JANET K. WILLIAMS
Title: DULY AUTHORIZED SIGNATORY
<PAGE>
Name of Bank:
HSBC BANK USA
(FKA Marine Midland Bank)
---------------------------------------------
By: /s/ John B. Lyons
-----------------------------------------
Name: John B. Lyons
Title: Senior Vice President
<PAGE>
Name of Bank:
The Industrial Bank of Japan, Ltd.
---------------------------------------------
By: /s/ William Kennedy
-----------------------------------------
Name: WILLIAM KENNEDY
Title: SENIOR Vice President
<PAGE>
Name of Bank:
---------------------------------------------
Indosuez Capital Funding IV, L.P.
By Indosuez Capital as Portfolio Advisor
By: /s/ Melissa Marano
-----------------------------------------
Name: Melissa Marano
Title: Vice President
<PAGE>
Name of Bank:
---------------------------------------------
Indosuez Capital Funding IV, L.P.
By Indosuez Capital as Portfolio Advisor
By: /s/ Melissa Marano
-----------------------------------------
Name: Melissa Marano
Title: Vice President
<PAGE>
Name of Bank:
Mellon Bank, N.A.
---------------------------------------------
By: /s/ Paul F. Noel
-----------------------------------------
Name: Paul F. Noel
Title: Vice President
<PAGE>
Name of Bank:
Merita Bank Plc
---------------------------------------------
By: /s/ Clifford Abramsky
-----------------------------------------
Name: Clifford Abramsky
Title: VP
By: /s/ William Keller
-----------------------------------------
Name: WILLIAM KELLER
Title: Vice President
<PAGE>
Name of Bank:
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
By: /s/ Joseph Moroney
-----------------------------------------
JOSEPH MORONEY
AUTHORIZED SIGNATORY
<PAGE>
Name of Bank:
The Mitsubishi Trust and Banking Corporation
---------------------------------------------
By: /s/ Beatrice Kossodo
-----------------------------------------
Name: Beatrice Kossodo
Title: Senior Vice President
<PAGE>
OCTAGON INVESTMENT PARTNERS II,
LLC
By: Octagon Credit Investors, LLC
as sub-investment manager
/s/ Andrew D. Gordon
---------------------------------------------
By: Andrew D. Gordon
Title: Portfolio Manager
<PAGE>
OCTAGON INVESTMENT PARTNERS II,
LLC
By: Octagon Credit Investors, LLC
as Portfolio Manager
/s/ Andrew D. Gordon
---------------------------------------------
By: Andrew D. Gordon
Title: Portfolio Manager
<PAGE>
Name of Bank:
Paribas
---------------------------------------------
By: /s/ Ching Lim
-----------------------------------------
Name: Ching Lim
Title: Vice President
/s/ Thomas G. Brandt
Thomas G. Brandt
Managing Director
<PAGE>
Name of Bank:
PNC BANK, NATIONAL ASSOCIATION
---------------------------------------------
By: /s/ John M. Iadanza
-----------------------------------------
Name: JOHN M. IADANZA
Title: ASSISTANT VICE PRESIDENT
<PAGE>
Name of Bank:
RIGGS BANK N.A.
---------------------------------------------
By: /s/ David H. Olson
-----------------------------------------
Name: DAVID H. OLSON
Title: Vice President
<PAGE>
Name of Bank:
THE SANWA BANK, LIMITED
---------------------------------------------
By: /s/ Stephen C. Small
-----------------------------------------
Name: Stephen C. Small
Title: Vice President
& Area Manager
<PAGE>
Name of Bank:
SOCIETE GENERALE, NEW YORK BRANCH
---------------------------------------------
By: /s/ Elaine Khalil
-----------------------------------------
Name: ELAINE KHALIL
Title: Vice President
<PAGE>
Name of Bank:
STB Delaware Funding Trust I
---------------------------------------------
By: /s/ Donald C. Hargadon
-----------------------------------------
Name: Donald C. Hargadon
Title: Assistant Vice President
Primedia, Inc.
Second Amendment and Consent
<PAGE>
Name of Bank:
TORONTO DOMINION (TEXAS), INC.
---------------------------------------------
By: /s/ Debbie A. Greene
-----------------------------------------
Name: DEBBIE A. GREENE
Title: VICE PRESIDENT
<PAGE>
Name of Bank:
Union Bank of California, N.A.
---------------------------------------------
By: /s/ Lena M. Bryant
-----------------------------------------
Name: LENA M. BRYANT
Title: VICE PRESIDENT
<PAGE>
EXHIBIT 10.19
AGREEMENT dated as of November 30, 1999 by and between PRIMEDIA,
INC., a Delaware corporation, having its principal place of business at 745
Fifth Avenue, New York, New York 10151 (the "Company") and WILLIAM F. REILLY, an
individual residing at 7 Sutton Square, New York, New York 10002 (the
"Executive").
BACKGROUND
The Executive, a founder of the Company and its Chairman and Chief
Executive Officer since 1989, has been employed by the Company (or its
predecessor, K-III COMMUNICATIONS CORPORATION) since its formation. The
Executive and the Company have determined that the parties shall make provision
for the Executive to step down as Chairman and Chief Executive Officer of the
Company, to be appointed Chairman Emeritus of the Company, to continue to render
services to the Company as an employee, and thereafter to retire from the
Company. The Company and the Executive have therefore entered into this
Agreement on the terms and conditions set forth herein.
1. Employment.
The Executive served as Chairman and Chief Executive Officer of the
Company until September 15, 1999, at which time, the Executive (a) ceased to be
Chairman and Chief Executive Officer of the Company; (b) ceased to be a member
of the Board of Directors (the "board") of the Company and its affiliated
companies; (c) was appointed "Chairman Emeritus" of the Company; and (d)
commenced to render advice and consultation to the Company for the "Employment
Period" as set forth in Section 3 hereof and shall continue to provide such
services until the Executive's "Retirement" as set forth in Section 6 hereof,
unless earlier terminated in accordance with Section 5 hereof.
2. Incentive Compensation for Prior Service as Chairman and Chief Executive
Officer.
(a) Bonus. The Company shall pay the Executive $1,079,250 not later than
ten (10) business days after the execution of this Agreement. Such payment
represents the sum of (i) the Executive's salary from September 15, 1999
through December 31, 1999 and (ii) short-term and long-term incentive
bonus which would have been paid to the Executive for the 1999 calendar
year (as if the Executive had continued in employment in the capacity of
Chairman and Chief Executive Officer of the Company through December 31,
1999).
(b) Vesting of Stock Options.
(i) Notwithstanding anything to the contrary contained in the Option
Agreements (as defined below), the Executive will be fully vested in
all of the stock options granted to him to purchase shares of
Company common stock, which are listed in Schedule A hereto and
which shall have the exercise prices and expiration dates as set
forth in such Schedule A. Such stock options and any Company Stock
(as defined in Section 7 hereof) acquired pursuant to such
<PAGE>
2
options shall be subject to the provisions of Section 7 hereof.
"Option Agreements" shall mean collectively the Non-Qualified Stock
Option Agreements dated May 13, 1992, May 3, 1994, September 30,
1994 and March 29, 1995, each between K-III Communications
Corporation and the Executive.
(ii) Notwithstanding anything to the contrary contained in the
Option Agreements, the Executive will be permitted to exercise all
of the stock options granted to him to purchase shares of Company
Stock through the delivery shares of Common Stock (which (i) the
Executive has held for at least six months prior to delivery of such
shares or (ii) the Executive has purchased on the open market and
for which the Executive holds title free and clear of all liens and
encumbrances) with an aggregate value on the date of exercise equal
to the exercise price and satisfy the income tax withholding
obligation upon exercise of any option, by the tender or deemed
tender of shares of Company common stock which would otherwise have
been acquired by the Executive upon the exercise of such stock
option. For purposes of this Section 2(b)(ii), all shares of Company
common stock shall be valued in a manner consistent with past
practice of the Company, which shall mean the highest trading price
of the Company's common stock on the New York Stock Exchange, or the
principal exchange on which the shares of Company Stock may at the
time be listed, on the date of exercise, or, if there shall have
been no sales on such exchange on such day, the highest of the bid
and asked prices on such exchange on such day or the next preceding
date when such bid and asked price occurred or, if the shares of
Company Stock shall not be so listed, the highest of the sales
prices as reported by NASDAQ on such day. If the shares of Company
Stock are not so listed or reported by NASDAQ, then the fair market
value of a share of Company Stock shall be determined by an
appraiser mutually agreeable to the Company and the Executive or the
Executive's beneficiary or estate, as the case may be, the costs and
expenses of which shall be borne by the Company.
(iii) Except as otherwise provided in Sections 2(b)(i) and 2(b)(ii)
hereof, in this subsection (b)(iii) or otherwise in this Agreement,
the stock options shall continue to be subject to the provisions of
the Option Agreements, it being understood and agreed, however, that
(A) the Executive's duties and services rendered hereunder shall be
deemed to satisfy the Executive's obligations under Section 2.3 of
each Option Agreement and the Company shall not prescribe any
additional duties and responsibilities for Executive or terminate
Executive's employment with the Company as may have been
contemplated by Section 2.3 of each Option Agreement, (B) for
purposes of Section 3.2(c) of each Option Agreement, the termination
of the employment of the Executive shall be deemed to occur on the
last day of the Employment Period and (C) the last sentence of
Section 5.6 of each Option Agreement and each reference to the
"Purchase Agreement" or "Common Stock Agreement" in Section 5.6 of
each Option Agreement shall be deemed to be omitted from each Option
Agreement.
<PAGE>
3
(c) Expenses. The Company shall reimburse the Executive for attorney fees
plus disbursements for the legal fees incurred in connection with this
Agreement and the subject matter hereof, including without limitation the
preparation, review and negotiation of this Agreement and all documents
related to this Agreement, such reimbursement not to exceed $20,000. Such
reimbursement shall be paid to the Executive within 10 days following
Executive's submission of a properly documented request for reimbursement.
3. Employment Period.
The Executive shall continue to be employed by the Company to render
advice and consultation to the Company on the basis described in this Agreement
until September 15, 2003 (the "Employment Period"). During the Employment
Period, the Executive shall report to the Board and shall perform such duties as
the Company's Chief Executive Officer or the Board shall require which may
include the following: (a) attend and represent the Company in international
trade association meetings and conferences, including without limitation, at the
"World Magazine Association"; (b) attend and represent the Company in domestic
trade association meetings and conferences, including without limitation, at the
"Magazine Publishers Association"; (c) attend advisory sessions and testify
before federal governmental bodies on behalf of the Company with respect to
pending or proposed federal legislation which may affect the Company and its
business; (d) advise the Company with respect to large acquisitions or
divestitures that it may contemplate; (e) assist the Company in major product
launches that it may contemplate; (f) assist the Company with respect to
relevant data base associations or organizations which may affect the Company
and its business; and (g) assist the Company with respect to the relationship of
print media publications to Internet sites and e-commerce; all of the foregoing
at the expense of the Company. Subject to the covenants set forth in Section 8
hereof, nothing contained herein shall preclude the Executive from devoting
substantial time and attention to his own personal investments or to pursuing
other business or investment opportunities during the Employment Period;
provided, that such activities do not materially interfere with Executive's
stated duties as an employee.
4. Compensation and Benefits during the Employment Period.
(a) Salary. During the Employment Period, the Company shall pay the
Executive an annual salary of $250,000 and an annual payment of $750,000
in consideration for compliance with Section 8 of this Agreement, payable
in regular installments in accordance with the Company's usual payment
practices.
(b) Expense Reimbursement. The Company shall promptly reimburse the
Executive for the ordinary and necessary business expenses previously
approved by the Company and reasonably incurred by Executive in the
performance of his duties during the Employment Period. Such reimbursement
shall be in accordance with the Company's policy.
<PAGE>
4
(c) Office and Secretarial Support. During the Employment Period, the
Company shall lease and provide to the Executive at the Company's expense
a fully equipped (i.e., fax, computer and similar equipment) and furnished
office space in midtown Manhattan, and shall provide the Executive with a
full-time executive secretary at the Company's expense, in each case, at a
level reasonably appropriate to the Executive's position with the Company.
Any Company expense for alterations or improvements to the office shall
not exceed $50,000.
(d) Medical and Dental Plans. During the Employment Period, the Executive
shall continue to participate in or receive benefits under any medical and
dental benefits plan generally made available by the Company to senior
executives. Except as otherwise provided in this Agreement, any such
participation shall be in accordance with the provisions of such plans and
nothing contained in this Agreement is intended to, or shall be deemed to,
affect adversely any of Executive's rights as a participant under any such
plans.
5. Termination of Employment on Account of Executive's Death or Permanent
Disability.
(a) Termination. Executive's employment under this Agreement shall
terminate upon Executive's death or permanent disability. For purposes of
this Agreement, "permanent disability" shall mean that the Executive has
been medically determined to have a physical or mental impairment which
can be expected to result in death or which has lasted or can reasonably
be expected to last for a continuous period of not less than six months.
(b) Compensation Due by Reason of Death or Permanent Disability. In the
event that Executive's employment is terminated by reason of Executive's
death or permanent disability, the Company shall pay the following amounts
to the Executive (or in the case of death, to the Executive's beneficiary
or estate):
(i) Earned But Unpaid Compensation. Any accrued but unpaid
compensation for services rendered to the date of death or permanent
disability, any accrued but unpaid expenses required to be
reimbursed under this Agreement and any vacation accrued to the date
of death or permanent disability.
(ii) Additional Payments. An amount equal to the compensation for
services which would have been payable to Executive if Executive had
continued in employment until the end of the Employment Period plus
the COBRA payments for a one year period following the death or
permanent disability of Executive to provide health insurance
coverage for the benefit of the Executive and/or Executive's family.
This amount will be paid in a single lump sum within thirty days
after the date of death or permanent disability, or, at the
Company's option can be paid, in installments over the balance of
the Employment Period, at the same time as payments had been made to
Executive.
<PAGE>
5
(iii) Other Benefits. Any benefits to which Executive may be entitled
pursuant to the plans, policies and arrangements of the Company,
determined and paid in accordance with the terms of such plans, policies
and arrangements.
(iv) Reduction for Disability Payments. The amount payable to Executive
under Section 5(b)(ii) hereof in the case of the Executive's permanent
disability during the Employment Period shall be reduced by the amount of
disability insurance benefits payable to Executive during such period
under any Company-paid disability insurance plan.
6. Retirement.
Commencing on September 16, 2003 (which shall be the day following the
termination of the Employment Period), the Executive shall commence his
retirement from the Company ("Retirement"). The Executive shall continue to be
named "Chairman Emeritus" of the Company following his Retirement.
(a) Supplemental Retirement Benefits. The Company shall pay to the
Executive a supplemental retirement benefit in recognition of service
through the Employment Period equal to $400,000 per annum commencing on
the Executive's Retirement for the remainder of the Executive's life. Such
amount shall be payable monthly in equal installments commencing with the
first day of the first month following the Executive's Retirement.
(b) Other Benefits. The Executive shall be paid all other benefits to
which the Executive may be entitled pursuant to the plans, policies and
arrangements of the Company, determined and paid in accordance with the
terms of such plans, policies and arrangements. The Company shall provide
to the Executive at its expense health insurance coverage for the benefit
of the Executive and his family for a period of 18 months following the
Executive's Retirement (or such longer period as may be required under
COBRA).
7. Company Stock.
(a) The Company shall cause all of the Company Stock held or to be
acquired by the Executive to be represented by certificates free of any
legend, including without limitation, the legend described in Section 2(b)
of each Purchase Agreement (as defined in Section 7(b) hereof).
(b) Except as expressly provided in this Agreement, any Company common
stock held by the Executive or acquired by the Executive pursuant to the
exercise of stock options from and after the date of this Agreement shall
be subject to the provisions of this Section 7 and shall not be subject to
the provisions of the Common Stock Purchase Agreements entered into as of
May 13, 1992 and May 3, 1994 or the Common Stock Agreements entered into
as of September 30, 1994 and March 29, 1995, each between K-
<PAGE>
6
III Communications Corporation and the Executive, as the same have been or
may be amended, or the Preferred Stock Purchase Agreement entered into as
of July 24, 1992 between K-III Communications Corporation and the
Executive, as the same has been or may be amended (such Preferred Stock
Purchase Agreement, together with the above-referenced Common Stock
Purchase Agreements and Common Stock Agreements, the "Purchase
Agreements"); provided, however, that (i) the provisions of Section 9
(other than the last sentence thereof) of each Purchase Agreement shall
continue to apply to any Company common stock so held or acquired as if
such provisions were in full force and effect and (ii) the provisions of
Section 10 (Registration Rights) of each Purchase Agreement shall continue
to apply to any Company common stock so held or acquired as if such
provisions were in full force and effect.
(c) The parties hereto hereby agree and acknowledge that the Sale
Participation Agreement dated July 24, 1992 between KKR Partners II, L.P.,
MA Associates, L.P., FP Associates, L.P., Magazine Associates, L.P., and
the Executive, which provides for certain "tag-along" rights in favor of
the Executive, is hereby deemed to be in full force and effect and,
notwithstanding the provisions of Section 7 thereof, shall continue to be
in full force and effect until the last date on which any of the stock
options set forth on Schedule A hereto may be exercised.
(d) For purposes of this Agreement, "Company Stock" shall include any and
all capital stock of the Company or any capital stock, partnership units
or any other security evidencing ownership interests in any successor of
the Company (whether by merger, consolidation, sale of assets or
otherwise) which may be issued in respect of, in exchange for, or in
substitution of the Company Stock, by reason of any stock dividend, split,
reverse split, combination, recapitalization, liquidation,
reclassification, merger, consolidation or otherwise, any of the
foregoing, a "capital transaction." In the event the Company undertakes to
effect a capital transaction or to declare a dividend or other
distribution with respect to the Company Stock, the Executive or the
Executive's beneficiary or estate, as the case may be, shall be afforded
the opportunity to exercise any of the Stock Options set forth on Exhibit
A hereto and become a stockholder with respect to the Company Stock to be
issued pursuant to such exercise, prior to the effectiveness of the
capital transaction or dividend or other distribution.
8. Restrictive Covenants.
(a) Protected Information. Executive recognizes and acknowledges that he
has had access to confidential or proprietary information concerning the
Company and entities affiliated with the Company (collectively, the
"Protected Information"). Executive therefore covenants and agrees that he
will not at any time, either while employed by the Company or afterwards,
knowingly make any independent use of or knowingly disclose to any other
person or organization (except as authorized by the Company) any of the
Protected Information. Information will not be "Protected Information"
under the provisions of this Agreement if (i) it was known by the
Executive prior to his
<PAGE>
7
employment with the Company, (ii) it is available from public sources or
otherwise known to the general public or disclosed by the Company to third
parties without a duty of confidentiality, or (iii) it is known to the
trade or in the Company's industry; provided, that (ii) and (iii) did not
result from Executive's breach of this Section 8(a).
(b) Nondisparagement. Executive covenants and agrees that he will not at
any time, either while employed by the Company or afterwards, publish any
statement or make any statement under circumstances reasonably likely to
become public that is critical of the Company or any of its affiliates,
including Kohlberg Kravis Roberts & Co. ("KKR"), or in any way adversely
affecting or otherwise maligning the business or reputation of the
Company, KKR or any of their respective affiliates. The Executive shall
maintain in all public communication, both written and verbal, the highest
regard for the Company and its affiliates and their personnel. The Company
covenants and agrees that it will not issue or publish any press release
or any statement to the press that is critical of the Executive, or in any
way adversely affecting or otherwise maligning the business or reputation
of the Executive. The Company shall maintain in all public communication,
both written and verbal, the highest regard for the Executive.
(c) Media Contact. From and after the date hereof, Executive will not
engage in any contact with the media with respect to the Company, KKR,
their respective affiliates, their employees, their shareholders, partners
or directors without the prior written consent of the Company.
(d) Competitive Activity. Executive covenants and agrees that at all times
during his period of employment with the Company, including during the
Employment Period, he will not, directly or indirectly, engage in, or have
any active interest or involvement whether as an employee, agent,
consultant, officer, or director (exclusive of Executive's current
directorship in Barnesandnoble.com), in any person, firm, or business
entity which is engaged in, the same "business" (as defined herein) as
that conducted and principally carried on by the Company without the
Company's specific written consent to do so, all of the foregoing in any
geographic area in which the Company does Business. For purposes of this
Section "Business" shall mean the business of publishing, selling and
distributing publications and magazines of the same type and nature as
those published by the Company at any time during the Employment Period;
provided, however, that any publication or magazine that the Company
ceases to publish, sell or distribute shall thereupon cease to constitute
part of the "Business" for purposes of this Section; provided, further
that if the Executive enters into any business, other than a Business,
after September 15, 1999 and during the Employment Period (a "Later
Started Business") and the Company thereafter enters into a Later Started
Business, the Later Started Business shall not constitute part of the
Business for purposes of this Section; provided, further that nothing
herein shall be deemed to preclude the Company and the Executive from
entering into an agreement for the purchase by the Executive of assets or
rights with respect to one or more of the magazines or publications
published by the Company. Notwithstanding the foregoing, the Company
acknowledges and agrees that the
<PAGE>
8
Executive shall be permitted to continue his investment and involvement in
Arc Publishing LLC ("Arc") and the Company shall continue its business
relationship with Arc on arms-length terms until the end of the Employment
Period; provided, such business relationship does not result in a
substantial cost to the Company.
(e) Non-solicitation. Executive covenants and agrees that at all times
during his period of employment with the Company, including during the
Employment Period, he will not, without the Company's prior written
consent, directly or indirectly, offer, solicit or encourage to leave the
employment or other service of the Company, or any of its affiliates, any
employee of the Company or its affiliates or any person who was so
employed within the three months prior to such offer or solicitation.
9. Enforcement of Covenants.
(a) Right to Injunction. Executive acknowledges that a breach of the
covenants set forth in Section 8 hereof will cause irreparable damage to
the Company with respect to which the Company's remedy at law for damages
will be inadequate. Therefore, in the event of breach or anticipatory
breach of the covenants set forth in this section by Executive, Executive
and the Company agree that the Company shall be entitled to cease making
any cash payments due hereunder pending ultimate resolution of the matter
and shall also be entitled to the following particular forms of relief, in
addition to remedies otherwise available to it at law or equity:
injunctions, both preliminary and permanent, enjoining or retraining such
breach or anticipatory breach and Executive hereby consents to the
issuance thereof forthwith and without bond by any court of competent
jurisdiction. Any payments held back pending resolution shall be paid to
the Executive within thirty (30) days of any resolution unless it has been
determined that Executive has breached the covenants set forth herein and
shall bear interest at the 90 day treasury rate for the period of
cessation.
(b) Separability of Covenants. The covenants contained in Section 8 hereof
constitute a series of separate covenants, one for each county and city
included within each State in the United States and the District of
Columbia, and one for each applicable foreign city or province included
within each foreign country. If in any judicial proceeding, a court shall
hold that any of the covenants set forth in Section 8 exceed the time,
geographic, or occupational limitations permitted by applicable laws,
Executive and the Company agree that such provisions shall and hereby
reformed to the maximum time, geographic, or occupational limitations
permitted by such laws. Further, in the event a court shall hold
unenforceable any of the separate covenants deemed included herein, then
such unenforceable covenant or covenants shall be deemed eliminated from
the provisions of this Agreement for the purpose of such proceeding to the
extent necessary to permit the remaining separate covenants to be enforced
in such proceedings.
<PAGE>
9
10. Withholding Taxes.
The Company shall withhold from any compensation and benefits payable
under this Agreement all applicable federal, state, local or other taxes and
such compensation and benefits (to the extent reportable as income) will be
reported as W-2 income of the Executive by the Company.
11. Source of Payments.
All payments provided under this Agreement, other than payments made
pursuant to a plan which provides otherwise, shall be paid from the general
funds of the Company, and no special or separate fund shall be established, and
no other segregation of assets made, to assure payment.
12. General Release.
As a condition to the receipt of any payments hereunder, Executive hereby
agrees to execute a release substantially in the form attached hereto as Exhibit
A. As a condition to the receipt of any payments hereunder after Executive's
Retirement, Executive, upon his Retirement, agrees to executive an additional
release substantially in the form attached hereto as Exhibit B.
13. Successor and Binding Agreement.
(a) Company Successor. The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company
expressly to assume and agree to perform this Agreement in the same manner
and to the same extent as the Company would be required to perform it if
no such succession had taken place. As used in this Agreement, "Company"
shall mean the Company as defined in the first sentence of this Agreement
and any successor to all or substantially all its business or assets or
which otherwise becomes bound by all the terms and provisions of this
Agreement, whether by the terms hereof, by operation of law or otherwise.
(b) Executive's Successor. This Agreement shall inure to the benefit of
and be enforceable by Executive and his personal or legal representatives
and successors in interest under this Agreement; provided, however, that
Executive may not assign any of the duties and obligations hereunder
without the written consent of the Board.
(c) Facility of Payment. In the event of Executive's legal incapacity, the
Company may make any payments due under this Agreement to his legal
representative. In the event of Executive's death, the Company may make
any payment due under this Agreement to his surviving spouse or, if none,
to Executive's estate.
<PAGE>
10
14. Assignment.
The rights and benefits of Executive under this Agreement are personal to
him and no such right or benefit shall be subject to voluntary or involuntary
alienation, assignment or transfer; provided, however, that nothing in this
Section 14 shall preclude Executive from designating a beneficiary or
beneficiaries to receive any benefit payable on his death or from transferring
any of his rights and benefits hereunder to (a) his executors, administrators,
testamentary trustees, legatees or beneficiaries, (b) the executors,
administrators, testamentary trustees, legatees or beneficiaries of any of the
persons in clause (a) above or (c) a trust or custodianship, the beneficiaries
of which include only the Executive, his spouse or his lineal descendants by
blood or adoption.
15. Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York applicable to agreements made and to be performed
in that State, without regard to its conflict of laws provisions.
16. Notices.
Any notice, consent, request or other communication made or given in
connection with this Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by registered or certified mail, return
receipt requested, or by facsimile or by hand delivery, to those listed below at
their following respective addresses or at such other address as each may
specify by notice to the others:
To the Company:
Primedia, Inc.
745 Fifth Avenue
New York, New York 10151
Attention General Counsel
Fax: (212) 745-0101
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Gary I. Horowitz, Esq.
Fax: (212) 455-2502
<PAGE>
11
To Executive:
William F. Reilly
7 Sutton Square
New York, New York 10002
With a copy to:
Dechert Price & Rhoads
30 Rockefeller Plaza
New York, New York 10112
Attention: James E. Tolan, Esq.
Fax (212) 698-3599
17. Miscellaneous.
(a) 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
thereof or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other terms of this Agreement.
(b) Separability. If any term or provision of this Agreement is declared
illegal or unenforceable by any court of competent jurisdiction and cannot
be modified to be enforceable, such term or provision shall immediately
become null and void, leaving the remainder of this Agreement in full
force and effect.
(c) Headings. Section headings are used herein for convenience of
reference only and shall not affect the meaning of any provision of this
Agreement.
(d) Rules of Construction. Whenever the context so requires, the use of
the singular shall be deemed to include the plural and vice versa.
(e) Counterparts. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original,
and such counterparts will together constitute but one Agreement.
<PAGE>
12
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year set forth below.
PRIMEDIA, INC.
By: /s/ Beverly C. Chell
-----------------------------------
Date: 12/2/99
---------------------------------
EXECUTIVE
By: /S/ William F. Reilly
-----------------------------
Date: 11/30/1999
---------------------------
Acknowledged and Agreed to for
the purposes of Section 7(c) as
of the date first written above:
- --------------------------------
- --------------------------------
<PAGE>
Reilly Agreement
dated as of November 30, 1999
Schedule A
Company Stock Options
Expiration
Grant Date Date Share Price # of Options
5/13/92 5/13/02 $ 5.00 2,425,160
5/03/94 5/03/04 $ 8.00 188,000
9/30/94 9/30/04 $ 8.00 125,000
3/29/95 3/29/05 $ 8.00 150,000
10/07/96 10/07/06 $11.13 150,000
Total Options 3,038,160
<PAGE>
EXHIBIT A
GENERAL RELEASE
WHEREAS, Mr. William F. Reilly ("Executive") has ceased to be
Chairman and Chief Executive Officer of PRIMEDIA, INC. ("PRIMEDIA"); and
WHEREAS, Executive and PRIMEDIA have reached a full and final
compromise and settlement of all matters, disputes, causes of action, claims,
contentions and differences between them and PRIMEDIA's divisions, merged
entities and affiliates, subsidiaries, parents, branches, predecessors,
successors, assigns, officers, directors, trustees, employees, agents,
stockholders (including without limitation all affiliates of Kohlberg Kravis and
Roberts & Co. ("KKR")), administrators, representatives, attorneys, insurers or
fiduciaries, past, present or future (the "Released Parties"), including but not
limited to any and all claims arising from or derivative of Executive's
employment with PRIMEDIA as Chairman and Chief Executive Officer through
September 15, 1999;
WHEREAS, in return for PRIMEDIA performing its obligations as
provided for herein, the agreement between the Executive and PRIMEDIA dated as
of November 30, 1999 (the "Agreement"), Executive will execute and comply fully
with the terms of this General Release (the "Release");
WHEREAS, Executive (i) understands that in executing the Release he
is, inter alia, giving up rights and claims under the Age Discrimination in
Employment Act of 1967, as amended, 29 U.S.C. Section 621 et seq. ("ADEA"), and
(ii) has been given a period of not less than 21 days within which to consider
this Release;
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, Executive and PRIMEDIA agree and covenant as
follows:
1. By entering into this Release, the Released Parties do not admit,
and each specifically denies any liability, wrongdoing or violation of any law,
statute, regulations, agreement or policy.
2. Executive ceased to be Chairman and Chief Executive Officer of
PRIMEDIA effective September 15, 1999.
3. In consideration of the obligations of Executive as set forth in
this Release and the Agreement, and in full settlement and final satisfaction of
any and all claims, contractual or otherwise, which Executive had, has or may
have against PRIMEDIA or the Released Parties with respect to his employment as
Chairman and Chief Executive Officer, or otherwise arising on or prior to
September 15, 1999, PRIMEDIA shall pay to Executive the payments and benefits to
which Executive is entitled under the Agreement. This Release shall not pertain
to any claim alleging that PRIMEDIA has failed to comply with any obligations
created by the Agreement or the Release or that PRIMEDIA has failed to pay to
Executive the payments and benefits to which Executive is entitled under the
Agreement.
<PAGE>
2
4. (a)Executive, for and in consideration of the payments and
benefits as set forth in the Agreement and for other good and valuable
consideration, hereby, on behalf of himself, his agents, assignees, attorneys,
successors, assigns, heirs and executors, releases and forever discharges, and
by this release does release and forever discharge, PRIMEDIA and the Released
Parties of and from all debts, obligations, promises, covenants, collective
bargaining obligations, agreements, contracts, endorsements, bonds,
controversies, suits or causes of actions known or unknown, suspected or
unsuspected, of every kind and nature whatsoever, which may heretofore have
existed or which may now exist, including but not limited to those arising under
the ADEA, Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C.
Section 2000e et seq., the Employee Retirement Income Security Act of 1974, as
amended, 29 U.S.C. Section 1001 et seq., the Americans With Disabilities Act, as
amended, 42 U.S.C. Section 12101 et seq., the Reconstruction Era Civil Rights
Act, as amended, 42 U.S.C. Section 1981 et seq., the Rehabilitation Act of 1973,
as amended, 29 U.S.C. Section 701 et seq., the Family and Medical Leave Act of
1992, 29 U.S.C. Section 2601 et seq., and any and all state or local laws
regarding employment discrimination and/or federal, state or local laws of any
type or description regarding employment as well as any claim for breach of
contract, wrongful discharge, breach of any express or implied promise,
misrepresentation, fraud, retaliation, violation of public policy, infliction of
emotional distress, defamation, promissory estoppel, invasion of privacy or any
other theory or claim, whether legal or equitable, including but not limited to
any claims arising from or derivative of Executive's employment with PRIMEDIA as
Chairman and Chief Executive Officer through September 15, 1999. Executive
acknowledges that he has not been discriminated against on the basis of age,
sex, handicap, race, ethnicity, religion or any other protected class status.
(b) This Release shall not affect (i) any present or future
indemnification obligations that PRIMEDIA and the Released Parties may have to
Executive pursuant to any charter, by-law, agreement or policy of insurance,
(ii) any benefits or payments to which Executive is entitled under any of the
PRIMEDIA employee benefit plans or (iii) any right Executive has as an optionee
or shareholder of PRIMEDIA.
5. Executive covenants and agrees not to sue nor authorize any other
party, either governmental or otherwise, to file any grievances, arbitration or
commence any other proceeding, administrative or judicial, against PRIMEDIA or
the Released Parties in any court of law or equity, or before any administrative
agency, with respect to any claims released pursuant to this Release.
6. PRIMEDIA, the Released Parties and Executive understand and agree
that the terms of this Release and the Agreement are confidential except (i) to
the extent required by law, (ii) to the extent this Agreement has been made
public and (iii) that the Executive may disclose the terms of this Agreement to
his spouse, financial advisor, accountants and attorney, provided that such
persons understand and agree that the terms of this Release and Agreement are
confidential.
7. Except as herein contemplated, Executive agrees that he will not
voluntarily participate in any proceeding of any kind brought against PRIMEDIA
or the Released Parties relating to any claims released pursuant to this
Release.
<PAGE>
3
8. (a) The parties agree that this Release should be construed in
accordance with the laws of the State of New York, exclusive of New York choice
of law provisions.
(b) The parties agree that any and all further legal
proceedings between Executive and PRIMEDIA or the Released Parties relating to
any claims released pursuant to this Release, whether arising under statute,
constitutions, contract, common law or otherwise, including the issue of
arbitrability, will be submitted for resolution exclusively pursuant to
arbitration under the rules of the American Arbitration Association and that
such arbitration will take place in New York, New York. The parties hereby waive
their right to a trial of any and all claims arising out of this Release or
breach of this Release.
(c) Should any provision of this Release be found to be in
violation of any law, or ineffective or barred for any reason whatsoever, the
remainder of this Release shall be in full force and effect to the maximum
extent permitted by law.
9. PRIMEDIA and Executive agree to execute such other documents and
to take such other actions as may be reasonably necessary to further the
purposes of this Release.
(a) Executive acknowledges and agrees that, in deciding to
execute this Release, he has had the opportunity to consult with legal,
financial and other personal advisors of his own choosing as he deems
appropriate, in assessing whether to execute this Release and that he has
consulted legal counsel. Executive represents and acknowledges that no
representations, statement, promise, inducement, threat or suggestion has been
made by PRIMEDIA or the Released Parties to influence him to sign this Release
except such statements as are expressly set forth herein. Executive agrees that
he has been given a minimum of twenty-one (21) days within which to consider the
terms and effects of this Release insofar as it relates to settlement and
release of potential claims under the ADEA, and to consult with, and to ask any
questions that he may have of anyone, including legal counsel and other personal
advisors of his own choosing, and that he has executed this Release voluntarily
and with fill understanding of its terms and effects.
(b) Executive has been informed of his right to revoke this
Release as far as it extends to potential claims under the Age Discrimination in
Employment Act, 29 U.S.C. Section 621 et seq., by informing PRIMEDIA of his
intent to revoke this Release within seven calendar days following the execution
of this Release. To be effective, notice of revocation must be in writing and
must be delivered either by hand or by mail to Beverly Chell, General Counsel,
PRIMEDIA, Inc., 745 Fifth Avenue, 23rd Floor, New York, NY, 10151, within the
7-day period. If a notice of rescission or revocation is delivered by mail, it
must be: (i) postmarked within the seven day period, respectively, (ii) properly
addressed to Ms. Chell as set forth above, and (iii) sent by certified mail
return receipt requested. This Release shall not become effective or enforceable
until the seven day period described above has expired. No payment shall be due,
owing or paid by PRIMEDIA unless and until this Release becomes effective.
<PAGE>
4
10. This Release may not be changed or modified, except by a written
instrument signed by Executive and PRIMEDIA.
/s/ William F. Reilly
--------------------------------------
William F. Reilly
Address 7 SUTTON SQUARE
NEW YORK, NY 10022
Date NOVEMBER 30, 1999
STATE OF NEW YORK )
) ss
COUNTY OF )
On November 30, 1999, before me personally came William F. Reilly to
me known and known to me to be the individual described in, and who executed,
the foregoing General Release, and duly acknowledged to me that he executed the
same
/s/ Katina Nash
--------------------------------------
Notary Public
Katina Nash
NOTARY PUBLIC, State of New York
No. 94-4817148
Certified in Kings County
Cert. Filed in New York County
Commission Expires 6-30-01
PRIMEDIA, INC.
By:
-----------------------------------
Address
Date
<PAGE>
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 Thomas S. Rogers (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.
<PAGE>
2
(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);
<PAGE>
3
(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.
<PAGE>
4
(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.
<PAGE>
5
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
<PAGE>
6
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
<PAGE>
7
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
<PAGE>
8
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.
<PAGE>
9
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
<PAGE>
10
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:
<PAGE>
11
(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 Section 12 (d) (ii));
(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 Section 12 (d)
(ii));
(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.
<PAGE>
12
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
<PAGE>
13
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
<PAGE>
14
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,
<PAGE>
15
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
<PAGE>
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
<PAGE>
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.
745 Fifth Avenue
New York, New York 10151
If to the Executive: Thomas S. Rogers
c/o PRIMEDIA Inc.
745 Fifth Avenue
New York, New York 10151
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.
<PAGE>
18
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
PRIMEDIA Inc.
By: /s/ Perry Golkin
----------------------------------
Perry Golkin
/s/ Thomas S. Rogers
-------------------------------------
Thomas S. Rogers
<PAGE>
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.
<PAGE>
B-l
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
<PAGE>
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.
<PAGE>
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.
<PAGE>
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 Thomas S. Rogers (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.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
date first written above.
PRIMEDIA Inc.
by /s/ Beverly C. Chell
---------------------------
Vice Chairman
/s/ Thomas S. Roger
------------------------------
Thomas S. Roger
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
No. 33-47091 of PRIMEDIA Inc. (formerly known as K-III Communications
Corporation) on Form S-8 under the Securities Act of 1933 of our report dated
February 2, 2000 appearing in this Annual Report on Form 10-K of PRIMEDIA Inc.
for the year ended December 31, 1999.
DELOITTE & TOUCHE LLP
New York, New York
March 28, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000884382
<NAME> PRIMEDIA INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 28,661
<SECURITIES> 0
<RECEIVABLES> 268,311
<ALLOWANCES> 32,746
<INVENTORY> 32,709
<CURRENT-ASSETS> 333,415
<PP&E> 320,145
<DEPRECIATION> 167,802
<TOTAL-ASSETS> 2,714,552
<CURRENT-LIABILITIES> 533,873
<BONDS> 1,732,896
559,689
0
<COMMON> 988,668
<OTHER-SE> (1,132,370)
<TOTAL-LIABILITY-AND-EQUITY> 2,714,552
<SALES> 1,716,102
<TOTAL-REVENUES> 1,716,102
<CGS> 392,105
<TOTAL-COSTS> 392,105
<OTHER-EXPENSES> 1,269,665
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 164,909
<INCOME-PRETAX> (113,613)
<INCOME-TAX> 6,500
<INCOME-CONTINUING> (120,113)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (120,113)
<EPS-BASIC> (1.19)
<EPS-DILUTED> (1.19)
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