Pursuant to Rule 424(b)(3)
Registration No. 333-51432.
[PRIMEDIA LOGO] [ABOUT LOGO]
TO THE STOCKHOLDERS OF PRIMEDIA INC. AND ABOUT.COM, INC.
A MERGER PROPOSAL--YOUR VOTE IS VERY IMPORTANT
The Boards of Directors of PRIMEDIA Inc. and About.com, Inc. have agreed to
merge our two companies. In the proposed merger, a newly formed, wholly owned
subsidiary of PRIMEDIA will merge with About, and About stockholders will
receive 2.3409 shares of PRIMEDIA common stock for each share of About stock
they own. We believe the proposed merger will create the leading targeted media
company which will provide a vast array of marketing solutions to advertisers
and an unprecedented level of niche content to users that no two other companies
could create.
About will hold a special meeting of its stockholders at which About will
ask its stockholders to approve the adoption of the merger agreement. An
affiliate of PRIMEDIA which holds approximately 11.4% of the About stock has
already agreed to vote in favor of the merger. PRIMEDIA is sending its
stockholders a solicitation of written consents in lieu of calling a special
meeting to approve the issuance of PRIMEDIA common stock in connection with the
merger agreement. A majority of the holders of the outstanding shares of
PRIMEDIA common stock have already consented to the issuance. Each of our boards
of directors has unanimously approved the merger and recommends that our
respective stockholders vote FOR, or consent to, the merger proposal. We cannot
complete the merger unless the stockholders of About approve the adoption of the
merger agreement.
PRIMEDIA's common stock is listed on the New York Stock Exchange under the
symbol "PRM," and on January 16, 2001, PRIMEDIA's common stock closed at $11.94
per share.
Information about the merger and the other matters to be considered at the
special meeting and in the consent solicitation is contained in this joint proxy
statement-consent solicitation-prospectus. WE URGE YOU TO CAREFULLY READ THE
ATTACHED DOCUMENT, INCLUDING THE SECTION DESCRIBING RISK FACTORS THAT BEGINS ON
PAGE 17.
The date, time and place of the About special meeting is as follows:
February 20, 2001 at 10:00 a.m.
Hotel Intercontinental
111 East 48th Street
New York, New York
Your vote or consent is very important, regardless of the number of shares
you own. IF YOU ARE AN ABOUT STOCKHOLDER, WHETHER OR NOT YOU PLAN TO ATTEND THE
SPECIAL MEETING, PLEASE VOTE AS SOON AS POSSIBLE TO MAKE SURE THAT YOUR SHARES
ARE REPRESENTED AT THE MEETING. IF A STOCKHOLDER OF ABOUT DOES NOT VOTE, IT WILL
HAVE THE SAME EFFECT AS VOTING AGAINST THE ADOPTION OF THE MERGER AGREEMENT. IF
YOU ARE A PRIMEDIA STOCKHOLDER, PLEASE SEND IN YOUR CONSENT BEFORE FEBRUARY 20,
2001.
We strongly support this combination of our companies and join with our
boards of directors in recommending that you vote in favor of the merger.
/s/ Thomas S. Rogers /s/ Scott P. Kurnit
Thomas S. Rogers Scott P. Kurnit
Chairman and Chief Executive Officer Chairman and Chief Executive Officer
PRIMEDIA Inc. About.com, Inc.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities to be issued in
connection with the merger or determined if this joint proxy statement-consent
solicitation-prospectus is accurate or complete. Any representation to the
contrary is a criminal offense.
This joint proxy statement-consent solicitation-prospectus is dated
January 17, 2001, and is first being mailed to stockholders of PRIMEDIA and
About on or about January 19, 2001.
ADDITIONAL INFORMATION
This joint proxy statement-consent solicitation-prospectus incorporates
important business and financial information about PRIMEDIA and About from other
documents that are not included in or delivered with this joint proxy
statement-consent solicitation-prospectus. This information is available to you
without charge upon your written or oral request. You can obtain the documents
incorporated by reference in this joint proxy statement-consent
solicitation-prospectus through the Securities and Exchange Commission website
at HTTP://WWW.SEC.GOV. Alternatively, you may request them in writing or by
telephone, no later than February 13, 2001, if you are a PRIMEDIA stockholder,
and before February 15, 2001, if you are an About stockholder, from the
appropriate company, information agent, or the proxy solicitor at one of the
following addresses:
- IF YOU ARE A PRIMEDIA STOCKHOLDER:
PRIMEDIA Inc. or Georgeson Shareholder Communications, Inc.
745 Fifth Avenue 17 State Street
New York, New York 10151 New York, New York 10004
(212) 745-0100 Banks and Brokers (212) 440-9800
Attention: Warren Bimblick All Others (800) 223-2064
e-mail: wbimblick@primedia.com
- IF YOU ARE AN ABOUT STOCKHOLDER:
About.com, Inc. or Beacon Hill Partners, Inc.
1440 Broadway, 19th Floor 90 Broad Street
New York, New York 10018 New York, New York 10004
(212) 204-4000 (800) 357-8212
Attention: Investor Relations
[PRIMEDIA LOGO]
NOTICE OF CONSENT SOLICITATION
PRIMEDIA is sending you and its other stockholders this joint proxy
statement-consent solicitation-prospectus in connection with its solicitation of
written consents to issue PRIMEDIA common stock in connection with the merger
agreement between PRIMEDIA and About, pursuant to which a newly formed, wholly
owned subsidiary of PRIMEDIA will merge with About as described in this joint
proxy statement-consent solicitation-prospectus.
As permitted under Delaware law, PRIMEDIA is soliciting consents to the
issuance of PRIMEDIA common stock in connection with the merger agreement in
lieu of calling a special stockholders meeting. The issuance of PRIMEDIA common
stock in connection with the merger agreement requires the approval of the
holders of a majority in voting power of the outstanding common stock of
PRIMEDIA. A majority of the holders of the outstanding shares of PRIMEDIA common
stock have already consented to the issuance. Common stockholders of record at
the close of business on November 9, 2000 are entitled to receive the consent
materials.
Your consent is important. Please complete, sign, date and return your
consent card in the enclosed envelope promptly.
/s/ Beverly C. Chell
BEVERLY C. CHELL
SECRETARY
January 17, 2001
[ABOUT LOGO]
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
Time: 10:00 a.m.
Date: February 20, 2001
Place: Hotel Intercontinental
111 East 48th Street
New York, NY 10017
Purpose:
- Consider and vote upon a proposal to adopt a merger agreement between
PRIMEDIA and About, pursuant to which a newly formed, wholly owned
subsidiary of PRIMEDIA will merge with About as described in the attached
joint proxy statement-consent solicitation-prospectus.
- Conduct any other business properly brought before the meeting or any
adjournment or postponement of the meeting.
Holders of approximately 17.7% of the outstanding shares of About stock have
already agreed to vote in favor of adopting the merger agreement. Only
stockholders of record at the close of business on January 16, 2001 may vote at
the meeting.
Your vote is important. Please complete, sign, date and return your proxy
card or voting instruction in the enclosed envelope promptly, or authorize the
individuals named on your proxy card to vote your shares by calling the
toll-free telephone number or by using the Internet as described in the
instructions included with your proxy card.
/s/ Alan P. Blaustein
ALAN P. BLAUSTEIN
SECRETARY
January 17, 2001
TABLE OF CONTENTS
PAGE
----
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY..................................................... 4
The Companies............................................. 4
The Merger................................................ 5
The PRIMEDIA Consent Solicitation......................... 5
The About Special Meeting................................. 5
Record Dates; Votes Required.............................. 5
Recommendations of the Boards of Directors................ 6
Opinions of Financial Advisors............................ 6
Appraisal Rights.......................................... 6
Interests of Directors and Executive Officers in the
Merger.................................................. 6
Accounting Treatment of the Merger........................ 7
Board of Directors and Management after the Merger........ 7
Conditions to Completion of the Merger.................... 7
Termination of the Merger Agreement; Termination Fees..... 7
Market Prices and Dividends............................... 8
Selected Historical and Unaudited Pro Forma Consolidated
Financial Data.......................................... 10
RISK FACTORS................................................ 17
RISKS RELATING TO ABOUT'S PROPOSED MERGER WITH PRIMEDIA... 17
RISKS RELATED TO PRIMEDIA'S BUSINESS...................... 18
RISKS RELATED TO PRIMEDIA'S COMMON STOCK.................. 23
RISKS RELATED TO ABOUT'S BUSINESS......................... 24
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
INFORMATION............................................... 31
THE PRIMEDIA CONSENT SOLICITATION........................... 32
THE ABOUT SPECIAL MEETING................................... 33
Joint Proxy Statement-Consent Solicitation-Prospectus..... 33
Date, Time and Place Of the Special Meeting............... 33
Purpose of the Special Meeting............................ 33
Record Date for the Special Meeting....................... 33
Vote Required............................................. 33
Proxies................................................... 34
Voting Electronically or by Telephone..................... 35
Solicitation of Proxies................................... 35
THE MERGER.................................................. 36
What You Will Receive in the Merger....................... 36
Background of the Merger.................................. 36
PRIMEDIA's Reasons for the Merger; Recommendation of
PRIMEDIA's Board of Directors........................... 39
About's Reasons for the Merger; Recommendation of About's
Board of Directors...................................... 41
Opinion of Wit SoundView Corporation...................... 43
Opinion of Merrill Lynch & Co............................. 49
Opinion of Donaldson, Lufkin & Jenrette Securities
Corporation............................................. 55
Interests of Directors and Executive Officers in the
Merger.................................................. 60
Board of Directors and Management after the Merger........ 62
Material United States Federal Income Tax Consequences of
the Merger.............................................. 63
Accounting Treatment of the Merger........................ 65
Regulatory Approvals...................................... 65
Exchange of About Stock Certificates...................... 65
Treatment of Stock Options and Other Rights............... 66
Restrictions on Sales of Shares of Affiliates of PRIMEDIA
and About............................................... 66
i
PAGE
----
Stock Exchange Listing.................................... 67
Appraisal Rights.......................................... 67
Delisting and Deregistration of About Stock after the
Merger.................................................. 67
The Merger Agreement...................................... 67
The Voting Agreements..................................... 75
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS....... 76
DESCRIPTION OF PRIMEDIA CAPITAL STOCK....................... 83
General................................................... 83
Description of PRIMEDIA Common Stock...................... 83
Description of Series D Exchangeable Preferred Stock...... 84
Description of Series F Exchangeable Preferred Stock...... 85
Description of Series H Exchangeable Preferred Stock...... 87
COMPARISON OF STOCKHOLDER RIGHTS............................ 89
Capitalization............................................ 89
Voting Rights............................................. 89
Number and Election of Directors.......................... 89
Vacancies on the Board of Directors and Removal of
Directors............................................... 89
Amendments to the Certificate of Incorporation............ 90
Amendments to By-Laws..................................... 90
Action by Written Consent................................. 90
Ability to Call Special Meetings.......................... 90
Notice of Stockholder Action.............................. 91
Limitation of Personal Liability of Directors and
Officers................................................ 92
Indemnification of Directors and Officers................. 92
State Anti-Takeover Statutes.............................. 93
EXECUTIVES; EXECUTIVE COMPENSATION; STOCK OWNERSHIP OF
DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL
STOCKHOLDERS.............................................. 94
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 94
Ads for Equity Agreements................................. 94
Sales Representation Agreement............................ 95
Right of First Offer Agreement............................ 95
List Rental Agreement..................................... 95
Other Agreements.......................................... 95
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE
ACT....................................................... 96
LEGAL MATTERS............................................... 97
CHANGE IN INDEPENDENT PUBLIC ACCOUNTANTS.................... 97
EXPERTS..................................................... 97
STOCKHOLDER PROPOSALS....................................... 97
WHERE YOU CAN FIND MORE INFORMATION......................... 98
ANNEX A--Opinion of Wit SoundView Corporation
ANNEX B--Opinion of Merrill Lynch & Co.
ANNEX C--Opinion of Donaldson, Lufkin & Jenrette Securities
Corporation
ANNEX D--Agreement and Plan of Merger
ANNEX E--Voting Agreement
ANNEX F--Parent Voting Agreement
ANNEX G--Abra Voting Agreement
ii
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. WHY ARE PRIMEDIA AND ABOUT PROPOSING THE MERGER?
A: We are proposing the merger because we believe it will
enable us to create the leading targeted media company that
no two other companies could create. The merger will combine
PRIMEDIA's delivery of highly targeted print and video
products in more than 700 media niches and its 1,600 person
sales force selling to over 60,000 advertisers with About's
more than 700 topic specific guide sites and some 7,000
associated experts to provide an unprecedented level of
niche content to users and a vast array of marketing
solutions to advertisers.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: PRIMEDIA stockholders will keep their PRIMEDIA shares, which
will remain outstanding and unchanged following the merger.
About stockholders will receive 2.3409 shares of PRIMEDIA
common stock for each share of About stock they own.
Q: WHAT STOCKHOLDER APPROVALS ARE NEEDED?
A: For PRIMEDIA, the consent of the holders of a majority of
the outstanding shares of PRIMEDIA common stock is required
to issue PRIMEDIA common stock in connection with the merger
agreement. As permitted under Delaware law, PRIMEDIA is
soliciting consents in lieu of calling a special
stockholders' meeting. A majority of the holders of the
outstanding shares of PRIMEDIA common stock have already
consented to the issuance.
For About, the affirmative vote of the holders of a majority
of the outstanding shares of About stock is required to
adopt the merger agreement. Each holder of About stock is
entitled to one vote per share. Holders of approximately
17.7% of the outstanding shares of About stock have already
agreed to vote in favor of adopting the merger agreement.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?
A: We expect that, if the merger is completed, About
stockholders would not recognize gain or loss for United
States federal income tax purposes, except with respect to
the cash, if any, received instead of fractional shares of
PRIMEDIA common stock. However, we strongly encourage you to
consult your own tax advisor to determine your particular
tax consequences.
For a more complete description of the tax consequences of
the merger see the section entitled "The Merger--Material
United States Federal Income Tax Consequences of the Merger"
that begins on page 63 of this joint proxy statement-consent
solicitation-prospectus.
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering the information
contained in this joint proxy statement-consent
solicitation-prospectus, please respond by completing,
signing and dating your proxy card, consent card or voting
instruction and returning it in the enclosed postage paid
envelope, or, if available, by submitting your proxy or
consent by telephone or through the Internet, as soon as
possible so that your shares may be represented at your
special meeting or counted in the consent solicitation.
1
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY A BROKER OR BANK,
WILL MY BROKER OR BANK VOTE MY SHARES FOR ME?
A: Your broker or bank will vote your shares held by them in
"street name" or deliver consents ONLY if you provide
instructions to them on how to vote or whether to consent.
You should follow the directions your broker or bank
provides. Shares of About stock that are not voted because
an About stockholder does not properly instruct its broker
or bank will be counted as votes against the adoption of the
merger agreement.
Q: WHAT IF I DON'T VOTE OR CONSENT?
A: If you fail to respond, it will have the same effect as a
vote against the adoption of the merger agreement or a
failure to consent.
If you respond and do not indicate how you want to vote,
your proxy will be counted as a vote in favor of the
adoption of the merger agreement or a consent.
If you respond and indicate that you are abstaining from
voting, your proxy will have the same effect as a vote
against the adoption of the merger agreement or a failure to
consent.
Q: CAN I CHANGE MY VOTE AFTER I HAVE DELIVERED MY PROXY OR
CONSENT?
A: Yes. You can change your vote at any time before your proxy
is voted at the special meeting and you can revoke your
consent at any time before the end of the consent
solicitation. You can do this in one of three ways.
First, you can revoke your proxy or consent.
Second, you can submit a new proxy or a later-dated consent
card.
If you choose either of these two methods, you must submit
your notice of revocation or your new proxy or consent card
to the secretary of About or PRIMEDIA, as appropriate,
before your special meeting or the end of the consent
solicitation. If your shares are held in an account at a
brokerage firm or bank, you should contact your brokerage
firm or bank to change your vote or consent.
Third, if you are a holder of record of About, you can
attend the special meeting and vote in person.
If you are an About stockholder, and you submit your proxy
or voting instructions electronically through the Internet
or by telephone, you can change your vote by submitting a
proxy at a later date, using the same procedures, in which
case your later submitted proxy will be recorded and your
earlier proxy revoked.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. If you are an About stockholder, you will receive
written instructions from the exchange agent after the
merger is completed on how to exchange your stock
certificates for PRIMEDIA shares. Please do not send in your
stock certificates with your proxy. If you are a PRIMEDIA
stockholder, you will keep your existing shares, which will
remain outstanding and unchanged following the merger.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working to obtain all necessary stockholder and
regulatory approvals and complete the merger as quickly as
possible. We expect to complete the merger by February 26,
2001.
2
Q: WHAT IS THE PURPOSE OF THIS JOINT PROXY STATEMENT-CONSENT
SOLICITATION-PROSPECTUS?
A: This document serves as both a joint proxy statement and
consent solicitation of About and PRIMEDIA and a prospectus
of PRIMEDIA. As a joint proxy statement and consent
solicitation, it is being provided by About to its
stockholders because About's board of directors is
soliciting the affirmative vote of those stockholders to the
adoption of the merger agreement, and it is being provided
by PRIMEDIA to its common stockholders because PRIMEDIA's
board of directors is soliciting the consent of its
stockholders to issue PRIMEDIA common stock in connection
with the merger agreement. As a prospectus, it is being
provided by PRIMEDIA to holders of About stock because
PRIMEDIA is offering shares of its common stock in exchange
for shares of About stock if the merger is completed.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have any questions about the merger or how to submit
your proxy, or if you need additional copies of this joint
proxy statement-consent solicitation-prospectus or the
enclosed proxy card, consent card or voting instructions,
you should contact:
- IF YOU ARE A PRIMEDIA STOCKHOLDER:
PRIMEDIA Inc. or Georgeson Shareholder Communications, Inc.
745 Fifth Avenue 17 State Street
New York, New York 10151 New York, New York 10004
Attention: Warren Bimblick Banks and Brokers (212) 440-9800
(212) 745-0100 All Others (800) 223-2064
e-mail: wbimblick@primedia.com
- IF YOU ARE AN ABOUT STOCKHOLDER:
About.com, Inc. or Beacon Hill Partners, Inc.
1440 Broadway 90 Broad Street
19th Floor New York, New York 10004
New York, New York 10018 (800) 357-8212
(212) 204-4000
Attention: Investor Relations
3
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION IN THIS JOINT PROXY
STATEMENT-CONSENT SOLICITATION-PROSPECTUS AND MAY NOT CONTAIN ALL OF THE
INFORMATION THAT IS IMPORTANT TO YOU. YOU SHOULD CAREFULLY READ THIS ENTIRE
JOINT PROXY STATEMENT-CONSENT SOLICITATION-PROSPECTUS AND THE OTHER DOCUMENTS WE
REFER YOU TO FOR A MORE COMPLETE UNDERSTANDING OF THE MATTERS BEING CONSIDERED
AT THE SPECIAL MEETING AND IN THE CONSENT SOLICITATION. IN ADDITION, WE
INCORPORATE BY REFERENCE IMPORTANT BUSINESS AND FINANCIAL INFORMATION ABOUT
PRIMEDIA AND ABOUT INTO THIS JOINT PROXY STATEMENT-CONSENT
SOLICITATION-PROSPECTUS. YOU MAY OBTAIN THE INFORMATION INCORPORATED BY
REFERENCE INTO THIS JOINT PROXY STATEMENT-CONSENT SOLICITATION-PROSPECTUS
WITHOUT CHARGE BY FOLLOWING THE INSTRUCTIONS IN THE SECTION ENTITLED "WHERE YOU
CAN FIND MORE INFORMATION" THAT BEGINS ON PAGE 98 OF THIS JOINT PROXY
STATEMENT-CONSENT SOLICITATION-PROSPECTUS.
THE COMPANIES
PRIMEDIA INC.
745 Fifth Avenue
New York, New York 10151
(212) 745-0100
PRIMEDIA is a targeted media company with leading positions in consumer and
business-to-business markets. PRIMEDIA's 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 the Internet
(nearly 300 sites). PRIMEDIA's products serve highly specialized niches and
capitalize on the growing trend toward targeted rather than mass information
distribution.
Many of PRIMEDIA's products, such as its enthusiast magazines,
business-to-business products, CHANNEL ONE NEWS and the consumer guides afford
advertisers with an opportunity to directly reach niche market audiences. In
1999, 49% of PRIMEDIA's total revenues were from "lead generation" advertising,
bringing the advertisers and customers together and providing a springboard for
on-line communities.
PRIMEDIA has exploited the Internet to take advantage of the opportunities
that this medium affords its targeted media properties. PRIMEDIA has numerous
Internet initiatives which expand its role in its 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 and assets for equity transactions. In addition, PRIMEDIA
Ventures, PRIMEDIA's venture capital vehicle, invests in early stage Internet
and other technology opportunities such as e-commerce services, enterprise
software applications and advertising-related technologies.
ABOUT.COM, INC.
1440 Broadway, 19th Floor
New York, New York 10018
(212) 204-4000
About.com is a platform comprised of a network of more than 700
highly-targeted, topic-specific web sites. About's network is differentiated by
the high quality and depth of content it provides to users through the efforts
of knowledgeable human guides who manage the sites, the volume of sites in its
network and the consistency of site structure and design across the network. The
sites provide high-quality original articles, moderated forums and chat rooms,
newsletters, easy access to related sites, tools, and functionality within the
About.com network and extensive hand-picked links to web sites outside of
About.com. About pre-screens, trains, and monitors its guides to ensure quality
and consistency across About.com's network.
4
About's extended network includes the Luna Network, a cooperative marketing
program that allows About to create strategic partnerships with high-quality
independent web sites that complement About's sites, and Sprinks, an
auction-based online advertising purchasing system that allows users to create
text-link advertisements for placement within About's topic sites. About
currently has over 1,500 Luna partners and approximately 5,700 Sprinks
advertisers.
The About network has been one of the fastest growing properties among the
top 25 Internet properties ranked by Jupiter Media Metrix since the launch of
the About.com brand in May 1999. According to Jupiter Media Metrix,
approximately 21.3 million unique users in the United States visited About.com
in December 2000, making About.com the sixth largest Internet property overall.
About believes that the design of its network provides an attractive
advertising and electronic commerce platform for reaching highly concentrated
groups of users. Because the About.com network is organized into channels of
related sites, About.com provides advertisers and electronic commerce marketers
the ability to access specific audiences through its highly targeted sites or
use its channels or network to reach broader audiences.
THE MERGER (SEE PAGE 36)
PRIMEDIA and About have entered into a merger agreement that provides for
the merger of a newly-formed and wholly-owned subsidiary of PRIMEDIA with About.
As a result, About will become a wholly-owned subsidiary of PRIMEDIA.
Stockholders of About will become stockholders of PRIMEDIA, and each share of
About stock will be exchanged for the right to receive 2.3409 shares of PRIMEDIA
common stock. We urge you to read carefully the entire merger agreement, which
is attached as Annex D to this joint proxy statement-consent
solicitation-prospectus.
THE PRIMEDIA CONSENT SOLICITATION (SEE PAGE 32)
The PRIMEDIA consent solicitation will expire at the close of business on
February 20, 2001.
THE ABOUT SPECIAL MEETING (SEE PAGE 33)
The About special meeting will be held at Hotel Intercontinental, 111 East
48th Street, New York, New York on February 20, 2001, starting at 10:00 a.m.,
local time. At the About special meeting, About's stockholders will be asked to
adopt the merger agreement.
RECORD DATES; VOTES REQUIRED (SEE PAGE 33)
PRIMEDIA CONSENT SOLICITATION. If you owned shares of PRIMEDIA common stock
at the close of business on November 9, 2000, you are entitled to receive notice
of this joint proxy statement-consent solicitation-prospectus and give your
consent to the issuance of PRIMEDIA common stock in connection with the merger
agreement. On that date there were 167,733,602 shares of PRIMEDIA common stock
outstanding, approximately 79.0% of which were owned and entitled to be voted by
PRIMEDIA directors and executive officers and affiliates of PRIMEDIA.
You can cast one vote for each share of PRIMEDIA common stock you own. The
consent of a majority of the outstanding shares of PRIMEDIA common stock is
required for approval of the issuance of PRIMEDIA common stock in connection
with the merger agreement, which consent has already been obtained.
ABOUT SPECIAL MEETING. You may vote at the About special meeting if you
owned shares of About stock at the close of business on January 16, 2001. On
that date there were 22,310,360 shares of About stock outstanding, 6.4% of which
were owned and entitled to be voted by About directors and executive officers
and their affiliates and 25.7% of which were owned and entitled to be voted by
PRIMEDIA and its affiliates.
5
You can cast one vote for each share of About stock you own. The affirmative
vote of a majority of the outstanding shares of About stock is required for
adoption of the merger agreement by the About stockholders. Holders of
approximately 17.7% of the outstanding About stock have already agreed to vote
in favor of the adoption of the merger agreement.
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS (SEE PAGES 39 AND 41)
PRIMEDIA STOCKHOLDERS. The PRIMEDIA board of directors has determined that
the merger, the merger agreement and related agreements are fair to and in the
best interests of PRIMEDIA and its stockholders and unanimously recommends that
PRIMEDIA stockholders CONSENT TO the issuance of PRIMEDIA common stock in
connection with the merger agreement.
ABOUT STOCKHOLDERS. The About board of directors has determined that the
merger, the merger agreement and related agreements are fair to and in the best
interests of About and its stockholders and unanimously recommends that the
About stockholders vote FOR the adoption of the merger agreement.
OPINIONS OF FINANCIAL ADVISORS (SEE PAGES 43, 49 AND 55)
OPINIONS OF PRIMEDIA'S FINANCIAL ADVISORS. In deciding to approve the
merger, the PRIMEDIA board of directors considered the opinions of its financial
advisor, Wit SoundView Corporation, that, as of October 29, 2000, and subject to
and based on the qualifications and assumptions set forth in such opinion, the
exchange ratio in the merger was fair, from a financial point of view, to
PRIMEDIA and PRIMEDIA's common stockholders, and its financial advisor, Merrill
Lynch & Co., that, as of October 29, 2000, and based upon the assumptions made,
matters considered and limits of review set forth in such opinion, the exchange
ratio in the merger was fair, from a financial point of view, to PRIMEDIA. The
full text of these opinions are attached as Annexes A and B to this joint proxy
statement-consent solicitation-prospectus. PRIMEDIA urges its stockholders to
read these opinions in their entirety.
OPINION OF ABOUT'S FINANCIAL ADVISOR. In deciding to approve the merger,
the About board of directors considered the opinion of its financial advisor,
Donaldson, Lufkin & Jenrette Securities Corporation, that, as of October 29,
2000, and based on and subject to the assumptions, limitations and
qualifications set forth in its opinion, the consideration to be received by the
holders of About stock pursuant to the merger agreement was fair to the holders
of About stock from a financial point of view. The full text of this opinion is
attached as Annex C to this joint proxy statement-consent
solicitation-prospectus. About urges its stockholders to read that opinion in
its entirety.
APPRAISAL RIGHTS (SEE PAGE 67)
Under Delaware law, the common stockholders of PRIMEDIA and About are not
entitled to appraisal rights in connection with the merger.
INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER (SEE PAGE 60)
Some of the directors and executive officers of About have interests in the
merger that are different from, or are in addition to, the interests of
stockholders of About. These interests include the appointment to senior
management positions at PRIMEDIA and/or About following the merger, employment
agreements, share lock-up agreements, rights under stock-based benefit programs
and awards and the right to continued indemnification and insurance coverage by
PRIMEDIA for acts or omissions occurring prior to the merger. The board of
directors of About considered these interests when deciding to approve the
merger.
6
ACCOUNTING TREATMENT OF THE MERGER (SEE PAGE 65)
The transactions contemplated by the merger agreement will be accounted for
under the purchase method of accounting in accordance with generally accepted
accounting principles.
BOARD OF DIRECTORS AND MANAGEMENT AFTER THE MERGER (SEE PAGE 62)
Following the merger, the board of directors of PRIMEDIA will consist of ten
directors. The board will include Scott P. Kurnit, currently the Chairman and
Chief Executive Officer of About. Mr. Kurnit will also be the Chief Internet
Officer of PRIMEDIA and the Chief Executive Officer of About following the
merger. William C. Day will continue to be the President and Chief Operating
Officer of About following the merger.
Thomas S. Rogers will continue to be the Chairman and Chief Executive
Officer of PRIMEDIA following the merger and Charles G. McCurdy will continue to
be the President of PRIMEDIA following the merger.
CONDITIONS TO COMPLETION OF THE MERGER (SEE PAGE 67)
We may not complete the merger unless the following conditions are satisfied
or, where permitted, waived:
- the merger agreement must be adopted by holders of a majority of the
outstanding shares of About stock;
- no legal prohibition to completion of the merger may be in effect;
- the PRIMEDIA common stock to be issued in the merger must have been
approved for listing on the New York Stock Exchange;
- our respective representations and warranties in the merger agreement must
be true and correct, subject to exceptions that would not have a material
adverse effect on PRIMEDIA following the merger;
- we must have complied in all material respects with our respective
covenants in the merger agreement; and
- we must each receive an opinion of tax counsel that the merger will
qualify as a tax-free reorganization.
TERMINATION OF THE MERGER AGREEMENT; TERMINATION FEES (SEE PAGE 70)
We may jointly agree to terminate the merger agreement at any time. Either
of us may also terminate the merger agreement if:
- the merger is not completed on or before June 30, 2001, except that this
termination right is not available to a party whose failure to comply with
the merger agreement resulted in the failure to complete the merger by
that date;
- the approval of About's stockholders is not obtained by reason of the
failure to obtain the required vote at its stockholders' meeting;
- any governmental entity that must grant an approval has denied approval of
the merger and the denial has become final and nonappealable or any
governmental entity issues a final order or ruling or takes any other
final action restraining, enjoining or otherwise prohibiting the merger,
and the order, ruling or other action has become final and nonappealable;
7
- the other party breaches any of its representations and warranties
contained in the merger agreement which could reasonably be expected to
have a material adverse effect upon the non-breaching party or materially
adversely effect or delay the completion of the merger; or
- a party fails to cure within ten days following notice of any breach of a
covenant or agreement contained in the merger agreement which could
reasonably be expected to have a material adverse effect upon the
non-breaching party or materially adversely effect or delay the completion
of the merger.
In addition, PRIMEDIA may terminate the merger agreement if:
- About's board of directors fails to recommend or withdraws, modifies or
amends in any respect adverse to PRIMEDIA its approval or recommendation
of the merger agreement, the merger, or any of the related transactions,
or approves or recommends a superior proposal;
- About breaches any of its non-solicitation obligations under the merger
agreement; or
- any person or group becomes the beneficial owner of at least 25% of
About's stock or acquires 25% or more of the assets of About and its
subsidiaries, taken as a whole.
The merger agreement provides that in several circumstances described more
fully on pages 71 and 72, About may be required to pay a termination fee to
PRIMEDIA of $23.5 million. This fee generally would be payable only if the
merger agreement is terminated after a third party has made a proposal to
acquire About. The termination fee could discourage other companies from seeking
to acquire or merge with About. In addition, if the merger agreement is
terminated, About may also be required to pay PRIMEDIA's out-of-pocket expenses
and fees in connection with the merger agreement of up to $1 million.
MARKET PRICES AND DIVIDENDS
PRIMEDIA's common stock trades on the New York Stock Exchange under the
symbol "PRM". About's stock trades on the Nasdaq National Market under the
symbol "BOUT". The table below shows the closing prices of the PRIMEDIA and
About common stock and the pro forma equivalent per share value of About stock
at the close of the regular trading session on October 27, 2000, the last
trading day before our public announcement of the merger, and January 16, 2001
the last trading day for which that information was available before the filing
of this joint proxy statement-consent solicitation-prospectus.
ABOUT PRO FORMA
DATE PRIMEDIA CLOSING PRICE ABOUT CLOSING PRICE EQUIVALENT(A)
---- ---------------------- ------------------- -------------
October 27, 2000............. $15.25 $23.88 $35.70
January 16, 2001............. $11.94 $27.81 $27.95
------------------------
(a) The About pro forma equivalent per share value of About stock is calculated
by multiplying the PRIMEDIA closing price by the exchange ratio of 2.3409.
The following table sets forth the high and low sale prices for PRIMEDIA
common stock and About stock. Neither PRIMEDIA nor About has declared dividends
on its common stock. The prices
8
are as reported on the New York Stock Exchange and on the Nasdaq National
Market, respectively, based on published financial sources.
PRIMEDIA
COMMON STOCK ABOUT STOCK
---------------------------------- -----------------------------------
CALENDAR QUARTERS HIGH LOW HIGH LOW
----------------- ---------------- --------------- ---------------- ----------------
(DOLLARS PER SHARE) (DOLLARS PER SHARE)
1998
First Quarter....................................... $ 14.88 $ 11.81 n/a n/a
Second Quarter...................................... $ 15.00 $ 12.81 n/a n/a
Third Quarter....................................... $ 13.81 $ 9.25 n/a n/a
Fourth Quarter...................................... $ 11.94 $ 9.63 n/a n/a
1999
First Quarter (From March 24 for About)............. $ 14.00 $ 11.63 $ 89.50 $ 46.44
Second Quarter...................................... $ 17.75 $ 13.56 $ 100.00 $ 23.00
Third Quarter....................................... $ 17.19 $ 11.00 $ 58.75 $ 19.50
Fourth Quarter...................................... $ 16.50 $ 10.88 $ 94.75 $ 40.50
2000
First Quarter....................................... $ 34.88 $ 15.50 $ 105.81 $ 59.88
Second Quarter...................................... $ 32.00 $ 18.06 $ 88.38 $ 22.50
Third Quarter....................................... $ 22.31 $ 16.00 $ 45.88 $ 25.63
Fourth Quarter...................................... $ 17.00 $ 7.00 $ 33.44 $ 14.69
2001
First Quarter (Through January 16).................. $ 12.94 $ 11.31 $ 32.00 $ 26.00
We urge you to obtain current market quotations. Because the exchange ratio
is fixed in the merger agreement and neither PRIMEDIA nor About has the right to
terminate the merger agreement based on changes in either party's stock price,
THE MARKET VALUE OF THE PRIMEDIA COMMON STOCK THAT ABOUT STOCKHOLDERS RECEIVE IN
THE MERGER MAY VARY SIGNIFICANTLY FROM THE PRICES SHOWN IN THE TABLES ABOVE.
9
SELECTED HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following financial information is to aid you in your analysis of the
financial aspects of the merger. The following tables present selected
historical consolidated financial data of PRIMEDIA, selected historical
consolidated financial data of About and selected unaudited pro forma
consolidated financial data reflecting the merger.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF PRIMEDIA
The selected historical consolidated operating and balance sheet data of
PRIMEDIA are derived from the audited historical financial statements of
PRIMEDIA contained in PRIMEDIA's Annual Reports on Form 10-K for each of the
years in the five-year period ended December 31, 1999 and from the unaudited
financial statements of PRIMEDIA contained in PRIMEDIA's Quarterly Report on
Form 10-Q for the period ended September 30, 2000. The historical data are only
a summary, and should be read in conjunction with the historical financial
statements and related notes contained in the Form 10-K for the year ended
December 31, 1999 and the Form 10-Q for the quarter ended September 30, 2000,
which have been incorporated by reference into this joint proxy
statement-consent solicitation-prospectus. In the opinion of management, the
unaudited consolidated financial statements have been prepared on the same basis
as the audited consolidated financial statements and include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position and results of operations for such
periods. The results of operations as of and for the nine months ended
September 30, 2000 are not necessarily indicative of PRIMEDIA's results for any
other interim period or for the full year.
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------------- -------------------------------------------------------------------
1999 2000 1995 1996 1997 1998 1999
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OPERATING DATA:
Sales, net...................... $ 1,260,454 $ 1,231,624 $ 1,046,329 $ 1,374,449 $ 1,487,595 $ 1,573,573 $ 1,716,102
Depreciation.................... 36,350 39,760 25,761 38,233 37,334 42,214 47,653
Amortization.................... 126,676 98,279 166,515 152,469 146,831 176,755 176,361
Other (income) charges(1)....... 22,000 19,084 50,114 -- 138,640 (7,216) 62,208
Operating income (loss)(2)...... 59,186 15,201 (26,275) 85,901 (20,793) 118,157 54,332
Interest expense................ 123,965 109,434 105,837 124,601 136,625 144,442 164,909
Income tax benefit
(expense)(3).................. -- -- 59,600 53,300 1,685 -- (6,500)
Income (loss) before
extraordinary charge.......... (67,975) (89,518) (75,435) 17,597 (157,439) (37,736) (120,113)
Extraordinary
charge-extinguishment of
debt(4)....................... -- -- -- (9,553) (15,401) -- --
Net income (loss)(2)............ (67,975) (89,518) (75,435) 8,044 (172,840) (37,736) (120,113)
Preferred stock dividends(5).... 39,796 39,797 28,978 43,526 65,073 63,285 53,062
Loss applicable to common
shareholders.................. (107,771) (129,315) (104,413) (35,482) (237,913) (101,021) (173,175)
Basic and diluted loss
applicable to common
shareholders per common
share(2)(6):
Loss before extraordinary
charge...................... $ (.74) $ (.81) $ (.92) $ (.20) $ (1.72) $ (.71) $ (1.19)
=========== =========== =========== =========== =========== =========== ===========
Net loss...................... $ (.74) $ (.81) $ (.92) $ (.27) $ (1.84) $ (.71) $ (1.19)
=========== =========== =========== =========== =========== =========== ===========
Basic and diluted common shares
outstanding................... 145,008,251 158,977,115 113,218,711 128,781,518 129,304,900 142,529,024 145,418,441
10
NINE
MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------------- -------------------------------------------------------------------
1999 2000 1995 1996 1997 1998 1999
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OTHER DATA:
EBITDA(7)....................... $ 244,212 $ 172,324 $ 216,115 $ 276,603 $ 302,012 $ 329,910 $ 340,554
Additions to property, equipment
and other, net................ 43,198 53,595 23,414 28,790 31,108 55,238 69,488
Net cash provided by (used in)
operating activities.......... 40,704 (22,009) 64,062 150,192 125,360 140,804 107,298
Net cash provided by (used in)
investing activities.......... (125,724) (3,412) (318,712) (721,709) (185,725) (609,621) 186,081
Net cash provided by (used in)
financing activities.......... 90,531 26,421 263,644 580,946 46,688 470,377 (289,256)
AT
SEPTEMBER 30, AT DECEMBER 31,
------------------------- ----------------------------------------------------------------
1999 2000 1995 1996 1997 1998 1999
----------- ----------- ---------- ---------- ---------- ----------- -----------
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents.......... $ 30,049 $ 29,661 $ 27,226 $ 36,655 $ 22,978 $ 24,538 $ 28,661
Working capital(8)................. (58,961) (180,352) (56,560) (44,705) (146,245) (234,045) (200,458)
Intangible assets, gross........... 3,005,378 2,801,693 1,996,564 2,649,805 2,508,650 3,171,598 3,024,955
Less: accumulated amortization... 882,792 1,181,575 762,393 896,824 736,597 914,854 1,189,599
----------- ----------- ---------- ---------- ---------- ----------- -----------
Intangible assets, net............. 2,122,586 1,620,118 1,234,171 1,752,981 1,772,053 2,256,744 1,835,356
Total assets....................... 3,054,524 2,661,541 1,881,416 2,552,215 2,485,990 3,041,074 2,714,552
Long-term debt(9).................. 2,098,888 1,605,217 1,146,697 1,577,469 1,682,224 1,956,997 1,732,896
Exchangeable preferred stock....... 558,969 560,916 231,606 442,729 470,280 557,841 559,689
----------- ----------- ---------- ---------- ---------- ----------- -----------
Shareholders' equity (deficiency):
Common stock..................... $ 1,482 $ 1,669 $ 1,259 $ 1,283 $ 1,298 $ 1,470 $ 1,483
Additional paid-in capital....... 986,320 1,342,626 748,194 772,642 780,191 979,720 986,649
Accumulated deficit.............. (1,137,803) (1,332,522) (655,616) (691,098) (929,011) (1,030,032) (1,203,207)
Accumulated other comprehensive
income (loss).................. (1,609) (132,619) (1,275) (1,270) (1,543) (1,720) 87,364
Unearned stock grant
compensation................... -- (8,188) -- -- -- -- (15,250)
Common stock in treasury, at
cost........................... (42,799) (1,663) -- -- (13,158) (33,141) (1,277)
----------- ----------- ---------- ---------- ---------- ----------- -----------
Total shareholders' equity
(deficiency)..................... $ (194,409) $ (130,697) $ 92,562 $ 81,557 $ (162,223) $ (83,703) $ (144,238)
=========== =========== ========== ========== ========== =========== ===========
------------------------------
(1) Represents non-cash compensation and non-cash non-recurring charges of
$26,900 for the nine months ended September 30, 2000, a provision for
severance, closures and integration costs of $19,008 and $22,000 for the
nine-months ended September 30, 2000 and 1999, respectively, (gain) loss on
the sales of businesses and other, net of ($26,824), ($235,580), ($7,216),
$138,640 and $35,447 for the nine months ended September 30, 2000, and for
the years ended December 31, 1999, 1998, 1997 and 1995, respectively,
provisions for the impairment of long-lived assets and product-line closures
of $297,788 for the year ended December 31, 1999, and another non-recurring
provision of $14,667 for the year ended December 31, 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, PRIMEDIA'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, PRIMEDIA recorded an income
tax benefit of $53,300 in 1996 and $59,600 in 1995. For the year ended
December 31, 1997, PRIMEDIA recorded an income tax carryback claim of
$1,685. In 1999, PRIMEDIA 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 September 30, 2000,
PRIMEDIA had net operating loss and capital loss carryforwards of
approximately $1,057,000 which will be available to reduce future taxable
income. In addition, management estimates that approximately $927,000 of
unamortized goodwill and other intangible assets will be available as
deductions from any future taxable income.
11
(4) Represents the write-off of unamortized deferred financing costs and the
premiums paid on the redemptions of PRIMEDIA's 10 5/8% Senior Notes.
(5) Includes the premiums paid on the redemptions of PRIMEDIA's $11.625
Series B Exchangeable Preferred Stock and PRIMEDIA's $2.875 Senior
Exchangeable Preferred Stock in 1998 and 1997, respectively. In 1997,
PRIMEDIA 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 incorporated by
reference in this joint proxy statement-consent solicitation-prospectus.
(7) Represents earnings before interest, taxes, depreciation, amortization and
other (credits) and charges including non-cash compensation and non-cash
non-recurring charges of $26,900, gain on sale of businesses and other, net
of ($26,824) and a provision for severance, closures and integration costs
of $19,008 for the nine months ended September 30, 2000, a provision for
severance, closures and integration costs of $22,000 for the nine months
ended September 30, 1999, an impairment provision for long-lived assets of
$275,788, a provision for severance, closures and integration costs of
$22,000 and gain on the sales of businesses and other, net of ($235,580) for
the year ended December 31, 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 is not intended to represent cash flow from operating activities and
should not be considered as an alternative to net income (loss) (as
determined in conformity with generally accepted accounting principles) as
an indicator of PRIMEDIA's operating performance or to cash flows as a
measure of liquidity. PRIMEDIA 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
PRIMEDIA's operating performance relative to other companies in its
industry. EBITDA should not be considered in isolation or as a substitute
for other measures of financial performance or liquidity. The primary
difference between EBITDA and cash flows provided by operating activities
relates to changes in working capital requirements and payments made for
interest and income taxes. EBITDA as presented may not be comparable to
similarly titled measures reported by other companies, since not all
companies necessarily calculate EBITDA in identical manners, and therefore,
are not necessarily accurate measures of comparisons between 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.
12
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF ABOUT
The selected historical consolidated financial data of About have been
derived from the historical consolidated financial statements and related notes
of About, which are incorporated by reference in this joint proxy
statement-consent solicitation-prospectus. Interim unaudited data as of
September 30, 1999 and 2000 and for the nine months ended September 30, 2000 and
1999 reflect, in the opinion of About's management, all adjustments (consisting
only of normal, recurring adjustments) necessary for a fair presentation of that
data. Results for the nine months ended September 30, 2000 do not necessarily
indicate results that may be obtained for any other interim period or for the
year as a whole.
PERIOD FROM
JUNE 27,
AS OF OR FOR THE NINE 1996
MONTHS (INCEPTION) AS OF OR FOR THE YEAR ENDED
ENDED SEPTEMBER 30, THROUGH DECEMBER 31,
----------------------- DECEMBER 31, ------------------------------
1999 2000 1996 1997 1998 1999
--------- ----------- ------------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues.......................................... $ 13,958 $ 62,755 $ -- $ 391 $ 3,722 $ 26,962
Cost of revenues.................................. 9,336 23,466 91 1,931 4,189 13,981
Non-cash compensation............................. 3,626 3,049 -- -- 27 3,630
--------- -------- ------- -------- -------- --------
Gross profit (loss)............................... 996 36,240 (91) (1,540) (494) 9,351
Operating expenses:
Sales and marketing............................. 36,290 34,675 241 1,761 7,890 48,597
General and administrative...................... 5,704 14,021 1,101 1,994 2,944 8,772
Product development............................. 5,191 13,973 948 3,046 3,113 8,386
Non-cash compensation........................... 857 665 -- -- 451 1,099
Amortization of goodwill and other intangible
assets........................................ 240 26,326 -- -- -- 967
--------- -------- ------- -------- -------- --------
Total operating expenses.......................... 48,282 89,660 2,290 6,801 14,398 67,821
--------- -------- ------- -------- -------- --------
Loss from operations.............................. (47,286) (53,420) (2,381) (8,341) (14,892) (58,470)
Other income (expense), net....................... 1,499 6,800 (57) (299) (686) 3,375
--------- -------- ------- -------- -------- --------
Net loss.......................................... (45,787) (46,620) (2,438) (8,640) (15,578) (55,095)
Cumulative dividends and accretion of convertible
preferred stock to liquidation value............ (660) -- -- -- (1,230) (660)
--------- -------- ------- -------- -------- --------
Net loss attributable to common stockholders...... $ (46,447) $(46,620) $(2,438) $ (8,640) $(16,808) $(55,755)
========= ======== ======= ======== ======== ========
Basic and diluted net loss per common share....... $ (5.08) $ (2.64) $ (1.20) $ (4.94) $ (9.71) $ (5.30)
========= ======== ======= ======== ======== ========
Weighted average shares outstanding used in basic
and diluted net loss per common share
calculation..................................... 9,139 17,676 2,035 1,749 1,732 10,519
========= ======== ======= ======== ======== ========
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents......................... $ 47,767 $ 53,225 $ 1,647 $ 303 $ 10,644 $ 74,780
Working capital (deficit)......................... 39,303 118,604 1,195 (3,098) 4,231 157,943
Total assets...................................... 65,558 298,556 2,039 1,357 15,658 242,081
Convertible notes payable......................... -- -- -- 4,851 -- --
Notes payable, excluding current portion.......... 562 106 3,972 3,630 621 695
Convertible preferred stock....................... -- -- -- -- 32,072 --
Total stockholders' (deficit) equity.............. 49,633 279,764 (2,425) (10,944) (24,662) 225,160
13
SELECTED UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following selected unaudited pro forma consolidated operating and
balance sheet data of PRIMEDIA are derived from the unaudited pro forma
consolidated financial statements contained herein. This information should be
read in conjunction with the audited consolidated financial statements of
PRIMEDIA and About, the unaudited interim consolidated financial statements of
PRIMEDIA and About, the selected historical consolidated financial data and the
unaudited pro forma consolidated financial information included elsewhere or
incorporated by reference herein. The pro forma information is presented for
illustrative purposes only and is not necessarily indicative of the operating
results or financial position that would have occurred if the merger had been
consummated as of the beginning of the periods presented, nor is it necessarily
indicative of the future operating results or financial position of the combined
companies.
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, 2000 DECEMBER 31, 1999
------------------- ------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
OPERATING DATA (1):
Sales, net................................................. $ 1,294,379 $ 1,743,064
Depreciation............................................... 44,145 50,462
Amortization............................................... 221,130 340,162
Other charges (2).......................................... 39,504 109,772
Operating loss............................................. (151,750) (210,252)
Interest expense, net...................................... 102,634 161,629
Income tax expense......................................... -- 6,500
Net loss................................................... (249,669) (381,322)
Preferred stock dividends.................................. 39,797 53,722
Loss applicable to common shareholders..................... (289,466) (435,044)
Basic and diluted loss applicable to common shareholders
per common share (3)..................................... $ (1.42) $ (2.51)
------------ ------------
Basic and diluted common shares outstanding (3)............ 203,481,644 173,167,564
OTHER DATA:
EBITDA (4)................................................. $ 153,029 $ 290,144
AT SEPTEMBER 30,
2000
----------------
BALANCE SHEET DATA (1):
Cash and cash equivalents.................................. $ 85,248
Working capital deficiency (5)............................. (78,386)
Intangible assets, net..................................... 2,111,521
Total assets............................................... 3,342,610
Long-term debt (6)......................................... 1,605,217
Exchangeable preferred stock............................... 560,916
------------
Shareholders' equity
Common stock............................................. 2,123
Additional paid-in capital............................... 2,067,684
Accumulated deficit...................................... (1,332,522)
Accumulated other comprehensive loss..................... (132,619)
Unearned stock grant compensation........................ (90,433)
Common stock in treasury, at cost........................ (1,663)
------------
Total shareholders' equity................................. $ 512,570
============
--------------------------
(1) The 1999 and 2000 pro forma consolidated operating data include the
operating results of About as if the merger occurred on January 1, 1999. The
2000 pro forma consolidated balance sheet data include the financial
position of About as if the merger occurred on September 30, 2000. See notes
to Unaudited Pro Forma Consolidated Financial Statements.
14
(2) Represents non-cash compensation and non-cash non-recurring charges of
$47,320 in 2000, a provision for severance, closures and integration costs
of $19,008 in 2000, gain on the sales of businesses and other, net of
$26,824 in 2000 and $235,580 in 1999, non-cash compensation of $47,564 in
1999 and a provision for the impairment of long-lived assets and
product-line closures of $297,788 in 1999.
(3) Basic and diluted loss per common share, as well as the basic and diluted
common shares outstanding, were computed as described in the notes to the
Unaudited Pro Forma Consolidated Financial Statements.
(4) Represents earnings before interest, taxes, depreciation, amortization and
other (credits) and charges including non-cash compensation and non-cash
non-recurring charges of $47,320, gain on sale of businesses and other, net
of $26,824 and a provision for severance, closures and integration costs of
$19,008 for the nine months ended September 30, 2000 and non-cash
compensation of $47,564, an impairment provision for long-lived assets of
$275,788, a provision for severance, closures and integration costs of
$22,000 and gain on the sales of businesses and other, net of $235,580 for
the year ended December 31, 1999. EBITDA is not intended to represent cash
flow from operating activities and should not be considered as an
alternative to net income (loss) (as determined in conformity with generally
accepted accounting principles) as an indicator of PRIMEDIA's operating
performance or to cash flows as a measure of liquidity. PRIMEDIA 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 PRIMEDIA's operating performance relative to other
companies in the media industry. EBITDA should not be considered in
isolation or as a substitute for other measures of financial performance or
liquidity. The primary difference between EBITDA and cash flows provided by
operating activities relates to changes in working capital requirements and
payments made for interest and income taxes. EBITDA as presented may not be
comparable to similarly titled measures reported by other companies, since
not all companies necessarily calculate EBITDA in identical manners, and
therefore, are not necessarily accurate measures of comparisons between
companies.
(5) Includes current maturities of long-term debt and net assets held for sale.
(6) Excludes current maturities of long-term debt.
15
UNAUDITED COMPARATIVE PER SHARE DATA
The following table summarizes per share information for PRIMEDIA and About
on a historical, pro forma consolidated and equivalent pro forma consolidated
basis. The following information should be read in conjunction with the audited
consolidated financial statements of PRIMEDIA and About, the unaudited interim
consolidated financial statements of PRIMEDIA and About, the selected historical
consolidated financial data and the unaudited pro forma consolidated financial
information included elsewhere or incorporated by reference herein. The pro
forma information is presented for illustrative purposes only and is not
necessarily indicative of the operating results or financial position that would
have occurred if the merger had been consummated as of the beginning of the
periods presented, nor is it necessarily indicative of the future operating
results or financial position of the combined companies.
The historical book value per share is computed by dividing total
stockholders' equity by the number of common shares outstanding at the end of
the period. The pro forma consolidated loss per share is computed by dividing
the pro forma loss applicable to common shareholders by the pro forma weighted
average number of shares outstanding. The pro forma consolidated book value per
share is computed by dividing total pro forma stockholders' equity by the pro
forma number of common shares outstanding at the end of the period which
includes 43,218,375 shares to be issued as a result of the merger (using an
exchange ratio of 2.3409), based on estimated About shares outstanding of
18,462,290 and assuming the exercise of 72,800 About stock options which are
vested or will become vested prior to or as a result of the merger and the
issuance of 2,955,450 shares of restricted PRIMEDIA common stock to
Messrs. Kurnit and Day. The About equivalent unaudited pro forma consolidated
per share amounts are calculated by multiplying the PRIMEDIA pro forma
consolidated per share amounts by the exchange ratio of 2.3409 provided under
the terms of the merger agreement. You should read the information below in
conjunction with the financial statements and accompanying notes that are
incorporated by reference in this joint proxy statement-consent
solicitation-prospectus and with the unaudited pro forma consolidated financial
data included under "Selected Unaudited Pro Forma Consolidated Financial Data."
FOR THE
NINE MONTHS FOR THE
ENDED YEAR ENDED
SEPTEMBER 30, 2000 DECEMBER 31, 1999
------------------ -----------------
PRIMEDIA COMMON STOCK:
Loss per Share:
Basic and Diluted:
Historical............................................. $(0.81) $(1.19)
Pro Forma Consolidated................................. $(1.42) $(2.51)
Book Value Per Share at Period End
Historical............................................... $(0.78) $(0.97)
Pro Forma Consolidated................................... $ 2.41
ABOUT COMMON STOCK:
Loss per Share:
Basic and Diluted:
Historical............................................. $(2.64) $(5.30)
Pro Forma Equivalent(a)................................ $(3.32) $(5.88)
Book Value Per Share at Period End
Historical............................................... $15.15 $13.92
Pro Forma Equivalent(a).................................. $ 5.64
--------------------------
(a) The About pro forma equivalent per share amounts are calculated by
multiplying the PRIMEDIA pro forma consolidated per share amounts by the
exchange rate of 2.3409.
16
RISK FACTORS
The merger involves a high degree of risk. By voting in favor of the
adoption of the merger agreement, About stockholders will be choosing to invest
in PRIMEDIA common stock. An investment in PRIMEDIA common stock involves a high
degree of risk. In addition to the other information contained or incorporated
by reference in this joint proxy statement-consent solicitation-prospectus, both
PRIMEDIA and About stockholders should carefully consider the following risk
factors in deciding whether to vote for the merger. In addition, if the merger
is not completed, holders of About stock may face additional risks which are
specified below under "Risks Related to About's Business." Any of the following
risks could seriously harm PRIMEDIA's or About's business and financial results
and cause the value of PRIMEDIA's or About's securities to decline which, in
turn, could cause you to lose all or part of your investment.
RISKS RELATING TO ABOUT'S PROPOSED MERGER WITH PRIMEDIA
ABOUT STOCKHOLDERS WILL RECEIVE A FIXED RATIO OF 2.3409 SHARES OF PRIMEDIA
COMMON STOCK PER SHARE OF ABOUT STOCK.
There will be no adjustment to this exchange ratio if the market price of
either About stock or PRIMEDIA common stock fluctuates. The specific dollar
value of PRIMEDIA common stock that About stockholders will receive upon
completion of the merger will depend on the market value of PRIMEDIA common
stock at the time of the merger. The share prices of both About stock and
PRIMEDIA common stock are subject to price fluctuations in the market for
publicly-traded equity securities and have each experienced significant
volatility. We cannot predict the market prices for either About stock or
PRIMEDIA common stock at any time before the completion of the merger or the
market price for PRIMEDIA common stock after the completion of the merger. We
encourage you to obtain current market quotations of PRIMEDIA common stock and
About stock.
PRIMEDIA MAY FAIL TO REALIZE THE ANTICIPATED BENEFITS OF THE MERGER.
The success of the merger will depend, in part, on the ability of PRIMEDIA
to realize the anticipated growth opportunities and synergies from combining the
businesses of About with the businesses of PRIMEDIA. The integration of PRIMEDIA
and About will be a complex, time consuming and expensive process and may
disrupt PRIMEDIA's business if not completed in a timely and efficient manner.
To realize the anticipated benefits of this combination, members of the
management team of PRIMEDIA must develop strategies and implement a business
plan that will:
- effectively combine PRIMEDIA's media delivery systems with About's
interactive services, technology and infrastructure;
- successfully use the anticipated opportunities for cross-promotion and
sales of the products and services of PRIMEDIA and About and for
increasing revenues from advertising and e-commerce;
- effectively and efficiently integrate the policies, procedures and
operations of PRIMEDIA and About;
- successfully retain and attract key employees of the combined company,
including operating management and key technical personnel, during a
period of transition and in light of the competitive employment market;
and
- while integrating the combined company's operations, maintain adequate
focus on the core businesses of PRIMEDIA in order to take advantage of
competitive opportunities and respond to competitive challenges.
17
If members of the management team of PRIMEDIA and About are not able to
develop strategies and implement a business plan that achieves these objectives,
the anticipated benefits of the merger may not be realized.
OFFICERS AND DIRECTORS OF ABOUT HAVE DIFFERENT INTERESTS FROM YOURS.
Certain officers and directors of About have certain interests in the merger
and participate in certain arrangements that are different from, or are in
addition to, those of PRIMEDIA and About stockholders generally. These include:
- Scott P. Kurnit, the Chief Executive Officer and Chairman of the About
board of directors, will become a member of the PRIMEDIA board of
directors and will be the Chief Internet Officer of PRIMEDIA after the
merger;
- Mr. Kurnit held 1,302,097 shares of About stock as of October 29, 2000,
which shares will be converted into an aggregate of 3,048,078 shares of
PRIMEDIA common stock in the merger;
- Mr. Kurnit held options to purchase 441,300 shares of About stock as of
October 29, 2000, which will be assumed by PRIMEDIA in the merger;
- William C. Day, President and Chief Operating Officer of About, held
71,780 shares of About stock as of October 29, 2000, which shares will be
converted into an aggregate of 165,688 shares of PRIMEDIA common stock in
the merger;
- Mr. Day held options to purchase 515,182 shares of About stock as of
October 29, 2000, which will be assumed by PRIMEDIA in the merger;
- Messrs. Kurnit and Day have entered into employment agreements with
PRIMEDIA, which will take effect only if the merger is completed;
- Pursuant to their employment agreements, Messrs. Kurnit and Day will be
issued additional options to purchase PRIMEDIA common stock and PRIMEDIA
restricted share units upon completion of the merger;
- Messrs. Kurnit and Day have entered into share lock-up agreements with
PRIMEDIA, pursuant to which, among other things, PRIMEDIA has guaranteed
that, during the first year after the effective date of the merger, they
will receive specified proceeds upon the sale of a portion of their shares
of PRIMEDIA common stock;
- The options to purchase shares of About stock held by the About directors
(other than Mr. Kurnit) will become immediately vested and exercisable;
and
- About officers and directors have continuing indemnification against
certain liabilities.
These interests may have influenced these officers and directors in
supporting the adoption of the merger.
RISKS RELATED TO PRIMEDIA'S BUSINESS
PRIMEDIA HAS SUBSTANTIAL INDEBTEDNESS WHICH CONSUMES A SUBSTANTIAL PORTION OF
THE CASH FLOW THAT IT GENERATES.
PRIMEDIA has substantial indebtedness and expects to incur additional
indebtedness under its credit facilities. PRIMEDIA had a ratio of consolidated
debt to total equity (including all preferred stock and common stock subject to
redemption) of 4.22 to 1 and 3.78 to 1 as of December 31, 1999 and
September 30, 2000, respectively. The indebtedness of PRIMEDIA requires a
substantial portion of PRIMEDIA's cash flow to be dedicated to the payment of
principal and interest on indebtedness,
18
which reduces funds available for capital expenditures and future business
opportunities. For the fiscal year ended December 31, 1999, there were
$14.3 million of scheduled maturities on outstanding indebtedness and PRIMEDIA
made cash interest payments of $165.0 million. For the nine months ended
September 30, 2000, there were $58.7 million of scheduled maturities on
outstanding indebtedness and PRIMEDIA made cash interest payments of $108.2
million.
At December 31, 1999 and September 30, 2000, borrowings under PRIMEDIA's
credit facilities were approximately $1,050.5 million and $931.8 million,
respectively. These borrowings bear interest at floating rates based on the
federal funds rate, the prime lending rate or LIBOR. Increases in interest rates
on indebtedness under PRIMEDIA's credit facilities would increase PRIMEDIA's
interest payment obligations and could have an adverse effect on PRIMEDIA. The
weighted average interest rate on PRIMEDIA's credit facilities was 6.92% for the
year ended December 31, 1999 and 8.08% for the nine months ended September 30,
2000.
PRIMEDIA'S SUBSTANTIAL INDEBTEDNESS LIMITS ITS BUSINESS FLEXIBILITY BY IMPOSING
OPERATING AND FINANCIAL RESTRICTIONS ON ITS OPERATIONS.
The agreements governing PRIMEDIA's indebtedness impose specific operating
and financial restrictions on PRIMEDIA. These restrictions prohibit or limit
PRIMEDIA from, among other things:
- changing the nature of its business;
- incurring additional indebtedness;
- creating liens on its assets;
- selling assets;
- engaging in mergers, consolidations or transactions with its affiliates;
- making investments in or loans to specific subsidiaries;
- making guarantees or specific restricted payments; and
- declaring or making dividend payments on its common or preferred stock.
Under PRIMEDIA's most restrictive debt covenants, PRIMEDIA must maintain a
minimum interest coverage ratio of 1.8 to 1 and a minimum fixed charge coverage
ratio of 1.05 to 1. For the fiscal year ended December 31, 1999, PRIMEDIA's
interest coverage ratio and fixed charge coverage ratio were 2.25 to 1 and 1.30
to 1, respectively, and for the last 12 months ended September 30, 2000,
PRIMEDIA's interest coverage ratio and fixed charge coverage ratio were 2.27 to
1 and 1.73 to 1, respectively. These restrictions, in combination with the
leveraged nature of PRIMEDIA, could limit the ability of PRIMEDIA to effect
future acquisitions or financings or otherwise restrict corporate activities.
Failure to comply with the terms of these restrictions could result in the
acceleration of the indebtedness governed by these agreements.
PRIMEDIA'S EARNINGS HAVE BEEN INSUFFICIENT TO PAY ITS FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS.
PRIMEDIA's earnings were inadequate to cover fixed charges and fixed charges
plus preferred stock dividends by $113.6 million and $166.7 million,
respectively, for the year ended December 31, 1999 and by $89.5 million and
$129.3 million, respectively, for the nine months ended September 30, 2000.
Fixed charges consist of interest expense on long-term debt and other
non-current obligations (including current maturities on long-term debt) and
amortization of deferred financing costs. Such earnings have been reduced by net
non-cash and non-recurring charges (including depreciation, amortization,
provision for the impairment of long-lived assets, provision for severance,
closures and integration costs, non-cash compensation and non-cash non-recurring
charges, (gain) loss on the sale of businesses and other, net and non-cash
interest expense) of approximately $288.1 million and $160.6
19
million for the year ended December 31, 1999 and the nine months ended
September 30, 2000, respectively. Adjusted to eliminate these non-cash charges,
earnings would have exceeded fixed charges and fixed charges plus cash preferred
stock dividends, by approximately $174.5 million and $121.4 million,
respectively, for the year ended December 31, 1999 and $71.1 million and $31.3
million, respectively, for the nine months ended September 30, 2000. Based on
historical evidence of PRIMEDIA's earnings exceeding fixed charges and fixed
charges plus cash preferred dividends after eliminating non-cash charges,
PRIMEDIA believes it will continue to generate sufficient cash flow to service
its interest and dividend payments.
IT IS UNLIKELY YOU WILL RECEIVE A RETURN ON YOUR PRIMEDIA SHARES THROUGH THE
PAYMENT OF CASH DIVIDENDS.
PRIMEDIA has never declared or paid cash dividends on any of its common
stock and has no intention of doing so in the foreseeable future. As a result,
it is unlikely that you will receive a return on your shares through the payment
of cash dividends.
PRIMEDIA'S INDEBTEDNESS CONTAINS PROVISIONS WHICH MAY REQUIRE PRIMEDIA TO
REPURCHASE ALL OF THE INDEBTEDNESS UPON A CHANGE OF CONTROL. PRIMEDIA MAY NOT
HAVE SUFFICIENT FINANCIAL RESOURCES TO MAKE THOSE REPURCHASES.
The agreements governing PRIMEDIA's indebtedness contain change of control
provisions which, under specified circumstances, may require PRIMEDIA to
repurchase that indebtedness upon a change of control. Because of the
substantial indebtedness of PRIMEDIA, we cannot assure you that PRIMEDIA would
have sufficient financial resources available to repurchase all of that
indebtedness in the event of a change in control.
IF PRIMEDIA IS IN DEFAULT IN THE PAYMENT OR OF OTHER COVENANTS OF ITS
INDEBTEDNESS, THE HOLDERS OF THE INDEBTEDNESS MAY CAUSE THE DEBT TO BECOME DUE
IMMEDIATELY AND CAUSE A DEFAULT IN OTHER OUTSTANDING INDEBTEDNESS OF PRIMEDIA.
In the event that PRIMEDIA is unable to generate cash flow sufficient to
meet required payments or does not make required payments of principal and
interest on its indebtedness under its credit facilities or is otherwise in
default with respect to the covenants in its credit facilities or under any
other indebtedness of PRIMEDIA, the holders of indebtedness under PRIMEDIA's
credit facilities could elect to declare all of the funds borrowed under the
credit facilities to be due and payable together with accrued and unpaid
interest and to terminate their commitments under the credit facilities. Neither
the credit facilities nor the other indebtedness are secured by the pledge of
assets, subsidiary securities or any other security. Any default under the
documents governing the indebtedness of PRIMEDIA could have a significant
adverse effect on the market value of the PRIMEDIA common stock.
PRIMEDIA MAY HAVE PROBLEMS RAISING MONEY IT NEEDS IN THE FUTURE. PRIMEDIA CANNOT
GUARANTEE ITS PAST FINANCING SOURCES WILL BE AVAILABLE IN THE FUTURE.
In recent years, PRIMEDIA has financed its acquisitions and new media
investments in part by issuing preferred stock and refinancing and/or extending
maturities on its existing indebtedness and preferred stock. This funding source
may not be sufficient in the future, and PRIMEDIA may need to obtain funding
from other sources. However, PRIMEDIA may not be able to obtain funding from
other sources. PRIMEDIA may also be required to take other actions, which may
lessen the value of its common stock, including borrowing money on terms that
are not favorable to PRIMEDIA.
KKR HAS CONTROL OF PRIMEDIA'S COMMON STOCK AND HAS THE POWER TO ELECT ALL OF
PRIMEDIA'S BOARD OF DIRECTORS AND TO APPROVE ANY ACTION REQUIRING STOCKHOLDER
APPROVAL.
As of November 9, 2000, approximately 74.0% of the shares of PRIMEDIA common
stock are held by investment partnerships, of which KKR Associates, L.P., a New
York limited partnership, or
20
KKR Associates 1996 L.P., a Delaware limited partnership, both affiliates of
Kohlberg Kravis Roberts & Co. L.P., is the general partner. KKR Associates or
KKR Associates 1996 has sole voting and investment power with respect to these
shares. Consequently, KKR Associates and its general partners, four of whom are
also directors of PRIMEDIA, and KKR Associates 1996 and its general partner
control PRIMEDIA and have the power to elect all of its directors and approve
any action requiring stockholder approval, including adopting amendments to
PRIMEDIA's certificate of incorporation and approving mergers or sales of all or
substantially all of PRIMEDIA's assets. KKR Associates and KKR Associates 1996
will also be able to prevent or cause a change of control of PRIMEDIA at any
time. PRIMEDIA cannot assure you that the interest of KKR Associates, KKR
Associates 1996 and their affiliates will not conflict with the interest of the
other holders of PRIMEDIA common stock.
INCREASES IN PAPER AND POSTAGE COSTS MAY HAVE AN ADVERSE IMPACT ON PRIMEDIA'S
FUTURE FINANCIAL RESULTS.
The price of paper is a significant expense of PRIMEDIA relating to its
print products and direct mail solicitations. Paper price increases may have an
adverse effect on PRIMEDIA's future results. Postage for product distribution
and direct mail solicitations is also a significant expense of PRIMEDIA.
PRIMEDIA uses the U.S. Postal Service for distribution of many of its products
and marketing materials. Postage costs increase periodically and can be expected
to increase in the future. PRIMEDIA cannot assure you that PRIMEDIA can pass
these cost increases through to its customers.
PRIMEDIA DEPENDS ON SOME IMPORTANT EMPLOYEES, AND THE LOSS OF ANY OF THOSE
EMPLOYEES MAY HARM ITS BUSINESS.
PRIMEDIA's performance is substantially dependent on the performance of its
executive officers and other key employees. In addition, PRIMEDIA's success is
dependent on its ability to attract, train, retain and motivate high quality
personnel, especially for its management team. The loss of the services of any
of PRIMEDIA's executive officers or key employees may harm its business.
PRIMEDIA's success also depends on its continuing ability to attract, train,
retain and motivate other highly qualified technical and managerial personnel.
Competition for these personnel is intense.
PRIMEDIA'S STRATEGY OF EXPANDING ITS BUSINESS THROUGH ACQUISITIONS OF AND
INVESTMENTS IN OTHER BUSINESSES PRESENTS SPECIAL RISKS.
PRIMEDIA intends to continue to expand through the acquisition of and
investment in businesses, technologies, products and services from other
businesses. Acquisitions and investments involve a number of special problems,
including:
- difficulty integrating acquired technologies, operations, and personnel
with PRIMEDIA's existing businesses;
- diversion of management attention in connection with both negotiating the
acquisitions and integrating the assets;
- strain on managerial and operational resources as management tries to
oversee larger operations;
- exposure to unforeseen liabilities of acquired companies;
- potential issuance of securities in connection with an acquisition with
rights that are superior to the rights of holders of PRIMEDIA's currently
outstanding securities;
- the need to incur additional debt; and
- the requirement to record potentially significant additional future
operating costs for the amortization of goodwill and other intangible
assets.
21
PRIMEDIA may not be able to successfully address these problems. Moreover,
PRIMEDIA's future operating results will depend to a significant degree on its
ability to successfully manage growth and integrate acquisitions. In addition,
many of PRIMEDIA's investments are in early-stage companies with limited
operating histories and limited or no revenues. PRIMEDIA may not be able to
successfully develop these young companies.
PRIMEDIA'S GROWTH PLACES STRAIN ON ITS MANAGERIAL, OPERATIONAL AND FINANCIAL
RESOURCES.
PRIMEDIA's growth has placed, and is expected to continue to place, a
significant strain on its managerial, operational and financial resources.
Further, as the number of its customers, advertisers and other business partners
grows, PRIMEDIA will be required to manage multiple relationships with various
customers, strategic partners and other third parties. PRIMEDIA's further growth
or an increase in the number of its strategic relationships will increase this
strain on its managerial, operational and financial resources, inhibiting its
ability to achieve the rapid execution necessary to successfully implement its
business plan.
PRIMEDIA'S TRADITIONAL BUSINESS IS SUBJECT TO COMPETITION FROM THE RAPIDLY
INCREASING AND COMPETITIVE MARKET FOR NEW MEDIA PRODUCTS AND SERVICES.
PRIMEDIA derives a substantial portion of its revenues from its traditional
businesses. The increased availability of information on the Internet subjects
PRIMEDIA's traditional business to additional competition, which may adversely
affect PRIMEDIA's future operating results. PRIMEDIA cannot assure you that its
strategies for obtaining sustained revenue growth and profitability in the
market for new media products and services will be sufficient to compensate for
any losses of revenue in its traditional businesses resulting from competition
with new media.
Numerous well-established companies and smaller entrepreneurial companies
are focusing significant resources on developing and marketing products and
services that will compete with the products and services of PRIMEDIA.
Competition in the market for Internet products and services may intensify in
the future. In addition, current and potential competitors of PRIMEDIA may have
greater financial, technical, operational and marketing resources. Competitive
pressures may also force prices for Internet goods and services down and such
price reductions may adversely affect PRIMEDIA.
PRIMEDIA MUST DEVELOP AND MAINTAIN POSITIVE BRAND NAME AWARENESS FOR ITS NEW
MEDIA VENTURES.
PRIMEDIA believes that establishing and maintaining its brand names are
essential to expanding its new media business and attracting new customers.
PRIMEDIA also believes that the importance of brand name recognition will
increase in the future because of the growing number of Internet companies that
will need to differentiate themselves. Promotion and enhancement of PRIMEDIA's
brand names will depend largely on its ability to provide consistently
high-quality products and services. If PRIMEDIA is unable to provide
high-quality products and services, the value of its brand names may suffer.
IF THE UNITED STATES OR OTHER GOVERNMENTS REGULATE THE INTERNET MORE CLOSELY,
THE NEW MEDIA BUSINESSES OF PRIMEDIA MAY BE HARMED.
Because of the Internet's popularity and increasing use, new laws and
regulations may be adopted. These laws and regulations may cover issues such as
privacy, pricing, taxation and content. The enactment of any additional laws or
regulations may impede the growth of the new media businesses of PRIMEDIA and
could place additional financial burdens on those businesses.
IN ORDER FOR ITS NEW MEDIA BUSINESSES TO SUCCEED, PRIMEDIA MUST RESPOND TO THE
RAPID CHANGES IN TECHNOLOGY AND DISTRIBUTION CHANNELS RELATED TO THE INTERNET.
The markets for Internet products and services are characterized by:
- rapidly changing technology;
22
- evolving industry standards;
- frequent new product and service introductions;
- shifting distribution channels; and
- changing customer demands.
The success of the new media businesses of PRIMEDIA will depend on
PRIMEDIA's ability to adapt to this rapidly evolving marketplace. PRIMEDIA may
not be able to adequately adapt its products and services or to acquire new
products and services that can compete successfully. In addition, PRIMEDIA may
not be able to establish and maintain effective distribution channels on the
Internet.
THE SUCCESS OF PRIMEDIA'S NEW MEDIA BUSINESSES DEPENDS ON INCREASED USE OF THE
INTERNET BY BUSINESSES AND INDIVIDUALS.
The success of PRIMEDIA's new media businesses depends on increased use of
the Internet for advertising, marketing, providing services and conducting
business. Commercial use of the Internet is currently at an early stage of
development and the future of the Internet is not clear. In addition, it is not
clear how effective advertising on the Internet is in generating business as
compared to more traditional types of advertising such as print, television and
radio. PRIMEDIA's new media businesses may suffer if commercial use of the
Internet fails to grow in the future.
PRIMEDIA FACES SPECIFIC SECURITY RISKS REGARDING THE TRANSMISSION OF
CONFIDENTIAL INFORMATION.
Consumer concerns about the security of transmissions of confidential
information over public telecommunications facilities is a significant barrier
to electronic commerce and communications. Many factors may cause compromises or
breaches of PRIMEDIA's security systems or other Internet sites used to protect
proprietary information, including advances in computer and software
functionality or new discoveries in the field of cryptography. A compromise of
security on the Internet would have a negative effect on the use of the Internet
for commerce and communications and negatively impact PRIMEDIA's businesses.
Security breaches of its activities or the activities of its customers and
sponsors involving the storage and transmission of proprietary information, such
as credit card numbers, may expose PRIMEDIA to a risk of loss or litigation and
possible liability. PRIMEDIA cannot assure that the security measures of
PRIMEDIA will prevent security breaches or that insurance programs obtained by
PRIMEDIA intended to address the potential loses or liabilities will be
sufficient to cover any such losses or liabilities.
PRIMEDIA MAY HAVE LIABILITY FOR INFORMATION RETRIEVED FROM THE INTERNET.
Because materials may be downloaded from the Internet and subsequently
distributed to others, PRIMEDIA may be subject to claims for defamation,
negligence, copyright or trademark infringement, personal injury or other
theories based on the nature, content, publication and distribution of those
materials.
RISKS RELATED TO PRIMEDIA'S COMMON STOCK
THE PRICE OF PRIMEDIA'S COMMON STOCK HAS FLUCTUATED.
The market price of PRIMEDIA's common stock has been, and is likely to
continue to be, variable, experiencing fluctuations. In recent years, the stock
market has experienced significant price and volume fluctuations. Future market
movements may adversely affect the market price of PRIMEDIA common stock. The
market price of PRIMEDIA's common stock may continue to fluctuate significantly
in response to various factors, including:
- actual and anticipated operating results;
- the introduction of new products;
- changes in estimates by securities analysts;
- market conditions in the industry;
23
- announcements of mergers, acquisitions, alliances and joint ventures by
PRIMEDIA;
- announcements of mergers and acquisitions and other actions by
competitors;
- regulatory and judicial actions; and
- general economic conditions.
FUTURE SALES OF PRIMEDIA COMMON STOCK THAT ARE CURRENTLY RESTRICTED MAY
ADVERSELY AFFECT THE MARKET PRICE OF PRIMEDIA'S COMMON STOCK.
140,352,932 shares of PRIMEDIA common stock held by some investment
partnerships, of which KKR Associates is general partner, and others, including
CMGI, Inc., Liberty Digital, Inc., Liberty Prime, Inc. and Paul Kagan Associates
and certain of its affiliates, may not be resold in the absence of registration
under the Securities Act, or pursuant to exemptions from that registration. KKR
Associates has demand registration rights with respect to all of the 123,552,932
shares owned by them, and management has been granted incidental registration
rights, which in the case of senior management may only be exercised without
PRIMEDIA's consent if KKR Associates registers any of their shares or at least
40% of the PRIMEDIA common stock is held by the public. Liberty Digital and
Liberty Media each has two demand registration rights as well as incidental
registration rights, and the Kagan stockholders have incidental registration
rights.
Approximately 8,481,000 shares issuable upon the exercise of stock options
and approximately 27,380,670 shares of PRIMEDIA common stock outstanding as of
November 9, 2000 are eligible for sale by holders without restrictions under the
Securities Act.
PRIMEDIA cannot predict the effect, if any, that future sales of shares, or
the availability of shares for future sale, will have on the market price of
PRIMEDIA common stock prevailing from time to time. Sales of substantial amounts
of PRIMEDIA common stock (including shares issued upon the exercise of stock
options), or the perception that sales could occur, could adversely affect
prevailing market prices for the common stock. If these sales reduce the market
price of the PRIMEDIA common stock, PRIMEDIA's ability to raise additional
capital in equity markets could be adversely affected.
RISKS RELATED TO ABOUT'S BUSINESS
FAILURE TO COMPLETE THE MERGER COULD NEGATIVELY IMPACT ABOUT'S STOCK PRICE AND
FUTURE BUSINESS AND OPERATIONS.
If the merger is not completed for any reason, About may be subject to the
following risks:
- About may be required to pay PRIMEDIA a termination fee of $23.5 million,
depending on the reason why the merger was not completed;
- About's stock price may decline if its current market price reflects a
market assumption that the merger will be completed; and
- About must pay various costs related to the merger, such as legal and
accounting fees and the expenses and fairness opinion fee of About's
financial advisor, even if the merger is not completed.
If the merger is terminated and About's board of directors determines to
seek another merger or business combination, About may not be able to find a
partner willing to pay an equivalent or more attractive price than the price to
be paid in the proposed merger with PRIMEDIA.
Further, simultaneously with the execution of the merger agreement, About
also entered into several commercial transactions with PRIMEDIA relating to the
purchase of advertising from PRIMEDIA, the use of PRIMEDIA's sales
representatives and the possible provision by PRIMEDIA of certain content as
more fully described in "Certain Relationships and Related Transactions." If the
24
merger is not completed, these transactions may have a negative impact on
About's future business and operations.
BECAUSE ABOUT HAS ONLY BEEN IN BUSINESS FOR A SHORT PERIOD OF TIME, THERE IS
LIMITED INFORMATION UPON WHICH YOU CAN EVALUATE ITS BUSINESS.
About was incorporated in June 1996 and launched its About.com web site
network in April 1997. Accordingly, you can only evaluate About's business based
on its limited operating history. As a young company, About faces risks and
uncertainties relating to its ability to successfully implement its business
plan. If About is unsuccessful in addressing these risks and uncertainties, its
business, results of operations and financial condition will be materially
adversely affected.
ABOUT HAS LOST MONEY EVERY QUARTER AND EVERY YEAR, AND ABOUT EXPECTS TO LOSE
MONEY IN THE FUTURE.
If About's revenues do not increase substantially, About may never become
profitable as an independent company. About has not generated enough revenues to
exceed the substantial amounts it has spent to create, launch and enhance
About.com and to grow its business. Even if About does achieve profitability, it
may not sustain or increase profitability on a quarterly or annual basis in the
future.
A portion of the historical revenues of About have been derived from barter
agreements. Since inception, less than 10% of About's revenues have been derived
from agreements where About traded advertisements on About.com in exchange for
advertisements on other web sites without receiving any cash payments. The
corresponding expenses from these barter arrangements, which equal the amount of
the barter revenues from these arrangements, are included as a component of cost
of revenues. About expects that these barter revenues will account for less than
10% of the total annual revenues for About in the future.
The costs of revenues of About combined with its operating expenses have
exceeded About's revenues for all quarters. About has historically funded its
operations by selling its stock and not by generating income from its business.
As of September 30, 2000, the accumulated deficit for About was $128.4 million.
About expects to continue to lose money in this fiscal year, although About
expects to reach positive operating cash flow within the foreseeable future.
FLUCTUATIONS IN THE OPERATING RESULTS OF ABOUT MAY NEGATIVELY IMPACT ITS
QUARTERLY RESULTS.
The quarterly operating results of About may fluctuate significantly in the
future due to a variety of factors that could affect its revenues or expenses in
any particular quarter. It is possible that in some future periods About's
results of operations may be below the expectations of public market analysts
and investors. In this event, the price of About stock is likely to fall.
You should not rely on About's results of operations during any particular
quarter as an indication of its results for a full year or any other quarter.
Factors that may affect About's quarterly results include:
- the demand for advertising on About.com;
- the number of Internet users on, and the frequency of their use of, About,
because the advertising revenues of About are typically based on user
traffic;
- the ability of About to attract and retain advertisers and electronic
commerce partners;
- fees About may pay for distribution or content or other costs that About
may incur as it expands its operations;
- the ability of About to meet the minimum number of advertisements that it
is required to deliver to users under many of its advertising contracts,
because About's failure to do this would
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result in deferring recognition of the related revenues and would reduce
the company's available advertising inventory in subsequent periods;
- changes in rates paid for advertising on About.com; and
- the timing and amount of costs related to advertising sales and marketing
efforts.
The operating expenses of About are based in part on About's expectations of
its future revenues and are relatively fixed in the short term. Given About's
limited operating history and difficulties in accurately estimating the user
traffic historically experienced on the About.com web site, user traffic and
page views on its web site are difficult to forecast accurately. Consequently,
since revenues from Internet advertising will make up substantially all of
About's revenues for the foreseeable future, its revenues are difficult to
forecast accurately. In particular, About intends to continue to expend
significant amounts to expand its internal advertising sales force and to build
and enhance brand awareness of the About.com web site. About may be unable to
adjust spending quickly enough to offset any unexpected revenue shortfall. If
About has a shortfall in revenues in relation to its expenses, or if its
expenses precede increased revenues, then About's results of operations and
financial condition would be materially adversely affected.
ABOUT WILL ONLY BE ABLE TO EXECUTE ITS BUSINESS PLAN IF INTERNET USAGE GROWS.
About's business would be adversely affected if Internet usage does not
grow. Internet usage may be inhibited for any of the following reasons:
- the Internet infrastructure may not be able to support the demands placed
on it, and its performance and reliability may decline as usage grows;
- security and authentication concerns with respect to the transmission over
the Internet of confidential information, such as credit card numbers, and
attempts by unauthorized computer users (so-called "hackers") to penetrate
online security systems; and
- privacy concerns, including those related to the ability of web sites to
gather user information without the user's knowledge or consent.
ABOUT WILL ONLY BE ABLE TO EXECUTE ITS BUSINESS PLAN IF INTERNET ADVERTISING
INCREASES.
About's business, results of operations and financial condition would be
materially adversely affected if the Internet advertising market develops more
slowly than About expects or if About is unsuccessful in increasing its
advertising revenues. Revenues from Internet advertising will make up a
significant amount of About's revenues for the foreseeable future. Since the
Internet advertising market is new and rapidly evolving, About cannot yet gauge
its effectiveness as compared to traditional advertising media.
The adoption of Internet advertising, particularly by those entities that
have historically relied upon traditional media for advertising, requires the
acceptance of a new way of conducting business, exchanging information and
advertising products and services. Advertisers that have traditionally relied
upon other advertising media may be reluctant to advertise on the Internet.
These businesses may find Internet advertising to be less effective than
traditional advertising media for promoting their products and services. Many
potential advertising and electronic commerce partners have little or no
experience using the Internet for advertising purposes. Consequently, they may
allocate only limited portions of their advertising budgets to Internet
advertising.
26
Advertisers and electronic commerce marketers may not advertise on About.com
or may pay less for advertising on About.com if they do not believe that they
can reliably measure the effectiveness of Internet advertising or the
demographics of the user viewing their advertisements. About uses both internal
measurements and measurements provided to About by third parties. If these third
parties are unable to continue to provide these services, About would have to
perform them itself or obtain them from another provider. This could cause About
to incur additional costs or cause interruptions in its business while the
company is replacing these services. In addition, About is implementing
additional systems designed to record demographic data on its customers. If
About does not implement these systems successfully, it may not be able to
accurately evaluate the demographic characteristics of its customers. Moreover,
"filter" software programs that limit or prevent advertising from being
delivered to an Internet user's computer are available. Widespread adoption of
this software could adversely affect the commercial viability of Internet
advertising.
To the extent that minimum guaranteed impression levels are not met over the
contract period, About defers recognition of the corresponding PRO RATA portion
of the revenues related to such unfulfilled obligations until the guaranteed
impression levels are achieved. Advertising based on impressions, or the number
of times an advertisement is delivered to users, represents substantially all of
About's current revenues. To the extent that minimum impression levels are not
achieved for any reason, About may be required to provide additional impressions
after the contract term, which would reduce its advertising inventory.
The revenues of About could be adversely affected if it is unable to adapt
to other Internet advertising pricing models if they are adopted. It is
difficult to predict which, if any, pricing models for Internet advertising will
emerge as industry standards. This makes it difficult to project the future
advertising rates and revenues of About.
ABOUT MAY NOT BE ABLE TO ADAPT AS INTERNET TECHNOLOGIES AND CUSTOMER DEMANDS
CONTINUE TO EVOLVE.
To be successful, About must adapt to rapidly changing Internet technologies
by continually enhancing About.com and introducing new services to address its
users' changing demands. About could incur substantial costs if it needs to
modify its services or infrastructure in order to adapt to changes affecting
providers of Internet services. About's business, results of operations and
financial condition could be materially adversely affected if it incurred
significant costs to adapt, or cannot adapt, to these changes.
THE DEVELOPMENT OF ABOUT'S BRAND IS ESSENTIAL TO ITS FUTURE SUCCESS.
If About's brand marketing efforts are unsuccessful, its business, financial
condition and results of operations would be materially adversely affected. In
order to build About's brand awareness, About must succeed in its brand
marketing efforts, provide high-quality services and increase user traffic on
About.com. These efforts have required, and will continue to require,
significant expenses.
ABOUT MAY NOT BE ABLE TO COMPETE SUCCESSFULLY.
Competition could result in less user traffic to About.com, price reductions
for About's advertising inventory, reduced margins or loss of market share, any
of which would have a material adverse effect on About's business, results of
operations and financial condition. About faces intense competition for users,
advertisers and electronic commerce marketers. About expects this competition to
increase because there are no substantial barriers to entry in its market.
Competition may also increase as a result of industry consolidation. About may
not be able to compete successfully.
About believes that many of its existing competitors, as well as potential
new competitors, have longer operating histories, greater name recognition,
larger customer bases and significantly greater financial, technical and
marketing resources than it does. This may allow them to devote greater
27
resources than About can to the development and promotion of their services.
These competitors may also engage in more extensive research and development,
adopt more aggressive pricing policies and make more attractive offers to
existing and potential employees, guides, distribution partners and advertisers.
About's competitors may develop services that are equal or superior to About.com
or that achieve greater market acceptance than About.com.
In addition, current and potential competitors have established or may
establish cooperative relationships among themselves or with third parties to
increase the ability of their services to address the needs of advertisers and
electronic commerce marketers. As a result, it is possible that new competitors
may emerge and rapidly acquire significant market share.
ABOUT DEPENDS ON RELATIONSHIPS WITH THIRD PARTIES.
About has entered into, and may continue to enter into, agreements with
advertisers or other third-party web sites that require About to exclusively
feature these parties for certain aspects of About.com. These exclusivity
agreements may limit About's ability to enter into other advertising or
sponsorship agreements or other strategic relationships. Many companies that
About may pursue for strategic relationships also offer competing services. As a
result, these competitors may be reluctant to enter into strategic relationships
with About.
ABOUT MAY NOT EFFECTIVELY MANAGE ITS GROWTH.
In order to execute its business plan, About must grow significantly. This
growth will place a significant strain on About's personnel, management systems
and resources. If About does not manage growth effectively, its business,
results of operations and financial condition would be materially adversely
affected. About expects that the number of its employees, including
management-level employees, will continue to increase for the foreseeable
future. Some of About's key employees have recently been hired. These
individuals do not have significant experience working with About or its
management team. In addition, About expects that the number of guides will
continue to increase as new topic-specific sites are established. About must
continue to improve its operational and financial systems and managerial
controls and procedures, and it will need to continue to expand, train and
manage its workforce. About must also maintain close coordination among its
technical, accounting, finance, marketing, sales and editorial organizations.
REGULATORY AND LEGAL UNCERTAINTIES COULD HARM ABOUT'S BUSINESS.
Any new law or regulation pertaining to the Internet, or the application or
interpretation of existing laws, could decrease the demand for the About.com
network, increase About's cost of doing business or otherwise have a material
adverse effect on its business, results of operations and financial condition.
There are, and will be, an increasing number of laws and regulations pertaining
to the Internet. These laws or regulations may relate to liability for
information retrieved from or transmitted over the Internet, online content
regulation, user privacy, taxation and the quality of products and services.
Moreover, the applicability to the Internet of existing laws governing
intellectual property ownership and infringement, copyright, trademark, trade
secret, obscenity, libel, employment, personal privacy and other issues is
uncertain and developing.
ABOUT MAY BE LIABLE FOR THE CONTENT IT MAKES AVAILABLE ON THE INTERNET.
About makes content available on About.com and on the web sites of its
advertisers and distribution and syndication partners. The availability of this
content could result in claims against About based on a variety of theories,
including defamation, obscenity, negligence, copyright or trademark
infringement. Other claims may be brought based on the nature, publication and
distribution of the content of the About.com web site, or based on errors or
false or misleading information
28
provided on About.com, including information deemed to constitute professional
advice such as legal, medical, financial or investment advice. About could also
be exposed to liability for third-party content accessed through About.com's
links to other web sites or posted by users in chat rooms or bulletin boards
offered on its topic-specific sites. About's financial condition could be
materially adversely affected if it were found liable for information that it
makes available. Implementing measures to reduce the exposure of the company to
this liability may require About to spend substantial resources and limit the
attractiveness of its services to customers.
IF ABOUT IS UNABLE TO SUCCESSFULLY INTEGRATE ACQUISITIONS INTO ITS OPERATION,
THERE COULD BE AN ADVERSE EFFECT ON ITS BUSINESS AND RESULTS OF OPERATIONS.
About has acquired, and, if the merger with PRIMEDIA is not completed, may
continue to acquire, complementary businesses, products and technologies in the
future. Some of the risks attendant to these acquisitions are:
- difficulties and expenses of integrating the operations and personnel of
acquired companies into About's operations while preserving the goodwill
of the acquired entity;
- the additional financial resources that may be needed to fund the
operations of acquired companies;
- the potential disruption of About's business;
- the ability of the management of About to maximize About's financial and
strategic position by incorporating acquired technology or businesses;
- the difficulty of maintaining uniform standards, controls, procedures and
policies;
- the potential loss of the key employees of the acquired companies;
- the impairment of relationships with employees and customers as a result
of changes in management of the acquired companies; and
- increasing competition with other entities for desirable acquisition
targets.
Any of the above risks could prevent About from realizing significant
benefits, or any benefits at all, from its acquisitions. In addition, the
issuance of About stock in acquisitions will dilute the interests of About
stockholders, while the use of cash will deplete its cash reserves. Finally, if
About is unable to account for its acquisitions under the "pooling of interests"
method of accounting, About may incur significant one-time write-offs and
amortization charges. These write-offs and charges could decrease About's future
earnings or increase About's future losses.
ABOUT DEPENDS ON ITS KEY EXECUTIVES AND WILL NEED ADDITIONAL PERSONNEL TO GROW
ITS BUSINESS.
About's future success depends, in part, on the continued service of its key
management personnel, particularly Scott P. Kurnit, Chairman and Chief Executive
Officer of About, and William C. Day, the President and Chief Operating Officer
of About. Although About is the beneficiary of a key person life insurance
policy on Mr. Kurnit's life, the loss of his services, or the services of other
key employees, would have a material adverse effect on its business, results of
operations and financial condition. About's future success also depends on its
ability to attract, retain and motivate highly skilled employees, including
advertising sales personnel. Competition for employees in About's industry is
intense. About may be unable to attract, assimilate or retain other highly
qualified employees in the future. About has, from time to time in the past,
experienced, and it expects to continue to experience in the future, difficulty
in hiring and retaining highly skilled employees with appropriate
qualifications.
29
THE PERFORMANCE OF ABOUT.COM IS CRITICAL TO ABOUT'S BUSINESS AND TO ITS
REPUTATION.
Any system failure, including network, software or hardware failure, that
causes an interruption in the About.com network or a decrease in responsiveness
of About.com could result in reduced user traffic on About.com and reduced
revenue. About.com has in the past experienced slower response times and
interruptions in service for a variety of reasons. About.com could also be
affected by computer viruses, electronic break-ins or other similar disruptions.
About's insurance policies have low coverage limits and therefore its insurance
may not adequately compensate us for any losses that may occur due to any
interruptions to the About.com network.
In January 1998, About entered into an Internet-hosting agreement with
GlobalCenter, Inc. to maintain all of About's production servers at
GlobalCenter's Manhattan Data Center. This agreement was extended in
August 2000 and is terminable by either party upon 90 days' notice. In addition,
in September 2000, Exodus Communications, Inc. announced that it would acquire
GlobalCenter in a transaction expected to be completed in the first quarter of
2001. About's operations depend on GlobalCenter's ability to protect its and
About's systems against damage from fire, power loss, water damage,
telecommunications failures, vandalism and other malicious acts, and similar
unexpected adverse events. Any disruption in the Internet access provided by
GlobalCenter could have a material adverse effect on About's business, results
of operations and financial condition.
About.com users and About's guides depend on Internet service providers,
online service providers and other web site operators for access to About.com.
Each of these providers has experienced significant outages in the past, and
could experience outages, delays and other difficulties due to system failures
unrelated to About's systems.
ABOUT MAY BE UNABLE TO PROTECT ITS INTELLECTUAL PROPERTY AND IT MAY BE LIABLE
FOR INFRINGING THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS.
Third parties may infringe or misappropriate About's patents, trademarks or
other intellectual property, which could have a material adverse effect on its
business, results of operations or financial condition. While About enters into
confidentiality agreements with its material employees, guides, consultants and
strategic partners, and generally controls access to and distribution of its
proprietary information, the steps About has taken to protect its intellectual
property may not prevent misappropriation. In addition, About does not know
whether it will be able to defend its proprietary rights since the validity,
enforceability and scope of protection of proprietary rights in Internet-related
industries is still evolving.
Third parties may assert infringement claims against About. From time to
time in the ordinary course of business About has been, and it expects to
continue to be, subject to claims of alleged infringement of the trademarks and
other intellectual property rights of third parties. These claims and any
resultant litigation, should it occur, could subject About to significant
liability for damages. In addition, even if About prevails, litigation could be
time-consuming and expensive to defend, and could result in the diversion of
About's time and attention. Any claims from third parties may also result in
limitations on About's ability to use the intellectual property subject to these
claims unless it is able to enter into agreements with the third parties making
these claims.
SEASONAL FACTORS MAY AFFECT ABOUT'S QUARTERLY OPERATING RESULTS.
Seasonality of user traffic on About.com and About's advertising revenues
may cause its total revenues to fluctuate. User traffic on web sites has
typically declined during the summer and year-end vacation and holiday periods.
About believes that advertising sales in traditional media, such as television
and radio, generally are lower in the first and third calendar quarters of each
year. Similar seasonal or other patterns may develop in About's business.
30
ABOUT CANNOT PREDICT ITS FUTURE CAPITAL NEEDS AND IT MAY NOT BE ABLE TO SECURE
ADDITIONAL FINANCING.
If the merger with PRIMEDIA is not completed, About may need to raise
additional funds in the future in order to fund more aggressive brand promotion
or more rapid expansion, to develop new or enhanced services, to respond to
competitive pressures or to make acquisitions. Any required additional financing
may not be available on terms favorable to About, or at all. If adequate funds
are not available on acceptable terms, About may be unable to fund its
expansion, successfully promote its brand, develop or enhance its services,
respond to competitive pressures or take advantage of acquisition opportunities,
any of which could have a material adverse effect on its business, results of
operations and financial condition. If additional funds are raised by the
issuance of equity securities of About, stockholders may experience dilution of
their ownership interest and the newly issued securities may have rights
superior to those of the common stock. If additional funds are raised by the
issuance of debt, About may be subject to limitations on its operations,
including limitations on the payment of dividends.
ABOUT'S STOCK PRICE HAS BEEN AND MAY CONTINUE TO BE VOLATILE.
The market price of About's stock has fluctuated in the past and is likely
to continue to be highly volatile and could be subject to wide fluctuations. In
addition, the Nasdaq National Market, where most publicly held Internet
companies are traded, has experienced extreme price and volume fluctuations.
These fluctuations often have been unrelated or disproportionate to the
operating performance of these companies. These broad market and industry
factors may materially adversely affect the market price of About stock,
regardless of About's actual operating performance. In the past, following
periods of volatility in the market price of a company's securities, securities
class action litigation often has been instituted against that company.
Litigation like this, if instituted, could result in substantial costs and a
diversion of About's management's attention and resources.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This joint proxy statement-consent solicitation-prospectus contains or
incorporates by reference some forward-looking statements within the meaning of
federal securities laws concerning PRIMEDIA's and About'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 PRIMEDIA's or About's control, and
reflect future business decisions which are subject to change. Some of these
assumptions may not materialize and unanticipated events may occur which can
affect PRIMEDIA's or About's results. Important factors that could cause
PRIMEDIA's or About's actual results to differ from PRIMEDIA's or About's
expectations are discussed in more detail in this prospectus under the caption
"Risk Factors" and in the documents incorporated by reference in this
prospectus. When considering these forward-looking statements you should keep in
mind the risk factors and other cautionary statements contained or incorporated
by reference in this prospectus. These forward-looking statements are made as of
the date of this joint proxy statement-consent solicitation-prospectus or the
documents incorporated by reference in this joint proxy statement-consent
solicitation-prospectus and PRIMEDIA and About assume no obligation to update
them.
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THE PRIMEDIA CONSENT SOLICITATION
As permitted under Delaware law, PRIMEDIA is soliciting consents to the
issuance of PRIMEDIA common stock in connection with the merger agreement in
lieu of calling a special stockholders meeting. The issuance of PRIMEDIA common
stock in connection with the merger agreement requires the approval of the
holders of a majority in voting power of the outstanding common stock of
PRIMEDIA. PRIMEDIA established a record date of November 9, 2000, and, on
November 9, 2000, investment partnerships of which KKR Associates, L.P., a New
York limited partnership or KKR Associates 1996 L.P., a Delaware limited
partnership, both affiliates of Kohlberg Kravis Roberts & Co., L.P., is the
general partner, holders of an aggregate of 123,552,932 shares of common stock
of PRIMEDIA (representing approximately 74.0% of the outstanding common stock of
PRIMEDIA), executed and delivered to PRIMEDIA an irrevocable written consent in
favor of the issuance of PRIMEDIA common stock in connection with the merger
agreement. Accordingly, under Delaware law, PRIMEDIA has received sufficient
consents to the issuance of PRIMEDIA common stock in connection with the merger
agreement and does not require the affirmative vote or consent of any other
stockholder. Although according to Delaware law no further consents are
required, the NYSE has required PRIMEDIA to solicit written consents from the
other stockholders of PRIMEDIA.
In accordance with the rules of the NYSE and the Securities Exchange Act,
PRIMEDIA will solicit additional consents to the issuance of PRIMEDIA common
stock in connection with the merger agreement for 20 business days following the
date of this joint proxy statement-consent solicitation-prospectus. Stockholders
of record of PRIMEDIA common stock at the close of business on November 9, 2000
are entitled to receive the consent materials.
Stockholders may respond to the consent solicitation by completing, signing
and returning the consent card in the enclosed return envelope. A stockholder
may revoke its consent at any time by sending a written notice of revocation to
Georgeson Shareholder Communications, Inc. or by sending a later dated consent
card by the close of business on February 20, 2001.
This joint proxy statement-consent solicitation-prospectus is first being
furnished to stockholders of PRIMEDIA on or about January 19, 2001.
32
THE ABOUT SPECIAL MEETING
JOINT PROXY STATEMENT-CONSENT SOLICITATION-PROSPECTUS
This joint proxy statement-consent solicitation-prospectus is being
furnished to you in connection with the solicitation of proxies by About's board
of directors in connection with About's special meeting of its stockholders.
This joint proxy statement-consent solicitation-prospectus is first being
furnished to stockholders of About on or about January 19, 2001.
DATE, TIME AND PLACE OF THE SPECIAL MEETING
The About special meeting is scheduled to be held as follows:
February 20, 2001
10:00 a.m., local time
Hotel Intercontinental
111 East 48th Street
New York, New York
PURPOSE OF THE SPECIAL MEETING
At the About special meeting, About's stockholders will be asked to:
- consider and vote upon a proposal to adopt the merger agreement; and
- transact any other business that properly comes before the About special
meeting or any adjournment or postponement of the About special meeting.
RECORD DATE FOR THE SPECIAL MEETING
The board of directors of About has fixed the close of business on
January 16, 2001, as the record date for determination of stockholders entitled
to notice of and to vote at the special meeting of stockholders. On the record
date, there were 22,310,360 shares of About stock outstanding, held by
approximately 404 holders of record.
VOTE REQUIRED
A majority of the outstanding shares of About stock must be represented,
either in person or by proxy, to constitute a quorum at the About special
meeting. The affirmative vote of the holders of a majority of the outstanding
shares of About stock outstanding as of the record date is required to adopt the
merger agreement. At the About special meeting each share of About stock is
entitled to one vote on all matters properly submitted to the About
stockholders.
As of the record date, About directors and executive officers and their
affiliates owned and were entitled to vote less than 6.4% of the outstanding
shares of About stock. From December 11, 2000 to January 16, 2001, Abra LLC, an
affiliate of Kohlberg Kravis Roberts & Co., L.P. purchased an aggregate of
2,532,200 shares of About stock for cash in the open market and PRIMEDIA
purchased an aggregate of 316,500 shares of About stock for cash in the open
market. As of the record date, the shares purchased by Abra LLC and PRIMEDIA in
the open market represented approximately 12.8% of the outstanding shares of
About stock entitled to vote at the special meeting. Holders of approximately
17.7% of the outstanding shares of About stock have already agreed to vote in
favor of adopting the merger agreement. These holders include Abra LLC, who
holds approximately 11.4% of About common stock.
33
For information regarding stock ownership of certain beneficial owners of
About stock, see About's proxy statement for its 2000 annual meeting of
stockholders, which is incorporated by reference.
ADJOURNMENT OR POSTPONEMENT. The About special meeting may be adjourned or
postponed, including by About's chairman, in order to permit further
solicitation of proxies.
PROXIES
All shares of About stock represented by properly executed proxies or voting
instructions (including those given through electronic voting through the
Internet or by telephone) received before or at About's special meeting will,
unless the proxies or voting instructions are revoked, be voted in accordance
with the instructions indicated on those proxies or voting instructions. If no
instructions are indicated on a properly executed proxy card or voting
instruction, the shares will be voted FOR the adoption of the merger agreement.
We urge you to mark each applicable box on the proxy card or voting instruction
to indicate how to vote your shares.
If you return a properly executed proxy card or voting instruction and have
abstained from voting on a particular matter, your About stock represented by
the proxy or voting instruction will be considered present at the applicable
special meeting for purposes of determining a quorum, but will not be considered
to have been voted in favor of that matter. If your shares are held in an
account at a brokerage firm or bank, you must instruct the broker or bank on how
to vote your shares. If an executed proxy card returned by a broker or bank
holding shares indicates that the broker or bank does not have discretionary
authority to vote on a particular matter, the shares will be considered present
at the meeting for purposes of determining the presence of a quorum, but will
not be considered to have been voted in favor of that matter. Your broker or
bank will vote your shares only if you provide instructions on how to vote by
following the instructions provided to you by your broker or bank.
Because approval of the matters expected to be voted on at the special
meeting requires the affirmative vote of a majority of the outstanding shares of
About stock, abstentions, failures to vote and broker non-votes will have the
same effect as a vote against the particular matter.
About does not expect that any matter other than the adoption of the merger
agreement will be brought before its special meeting. If, however, other matters
are properly presented, the persons named as proxies will vote in accordance
with their judgment with respect to those matters, unless you withhold authority
to do so on the proxy card.
The persons named as proxies may vote for one or more adjournments of the
About special meeting to permit further solicitations in favor of the proposals
to be submitted at those meetings. However, no proxy that is voted against the
proposal described in this joint proxy statement-consent solicitation-prospectus
will be voted in favor of an adjournment.
You may revoke your proxy at any time before it is voted by:
- filing a revocation of proxy with the Secretary of About, 1440 Broadway,
19th Floor, New York, New York 10018;
- granting a subsequently dated proxy; or
- appearing in person and voting at the special meeting if you are a holder
of record.
Attendance at the special meeting will not in and of itself constitute
revocation of a proxy.
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VOTING ELECTRONICALLY OR BY TELEPHONE
Because Delaware, the state in which About is incorporated, permits
electronic submission of proxies through the Internet or by telephone, instead
of submitting proxies by mail on the enclosed proxy card or voting instructions,
stockholders of record and many stockholders who hold their shares through a
broker or bank will have the option to submit their proxies or voting
instructions electronically through the Internet or by telephone. Please note
that there are separate arrangements for using the Internet and telephone
depending on whether your shares are registered in About's stock records in your
name or in the name of a brokerage firm or bank. Stockholders should check their
proxy card or voting instructions forwarded by their broker, bank or other
holder of record to see which options are available.
About stockholders of record may submit their proxies:
- through the Internet by visiting a website established for that purpose at
www.voteproxy.com and following the instructions; or
- by telephone by calling the toll-free number 1-800-PROXIES in the United
States on a touch-tone phone and following the recorded instructions.
Stockholders residing outside the United States must either vote through
the Internet or by mail.
SOLICITATION OF PROXIES
PRIMEDIA and About will share equally the expenses incurred in connection
with the printing and mailing of this joint proxy statement-consent
solicitation-prospectus. About has retained Beacon Hill Partners, Inc., for a
fee of $7,500 plus reimbursement of expenses, to assist in the solicitation of
proxies. About and Beacon Hill Partners will also request banks, brokers and
other intermediaries holding shares of About stock beneficially owned by others
to send this joint proxy statement-consent solicitation-prospectus to, and
obtain proxies from, the beneficial owners and will reimburse the holders for
their reasonable expenses in so doing. Solicitation of proxies by mail may be
supplemented by telephone and other electronic means, advertisements and
personal solicitation by the directors, officers or employees of PRIMEDIA and
About. No additional compensation will be paid to directors, officers or
employees for solicitation.
YOU SHOULD NOT SEND IN ANY STOCK CERTIFICATES WITH YOUR PROXY CARD. A
TRANSMITTAL LETTER WITH INSTRUCTIONS FOR THE SURRENDER OF STOCK CERTIFICATES
WILL BE MAILED TO ABOUT STOCKHOLDERS AS SOON AS PRACTICABLE AFTER COMPLETION OF
THE MERGER.
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THE MERGER
THIS SECTION OF THE JOINT PROXY STATEMENT-CONSENT SOLICITATION-PROSPECTUS
DESCRIBES MATERIAL ASPECTS OF THE PROPOSED MERGER, INCLUDING THE MERGER
AGREEMENT. WHILE WE BELIEVE THAT THE DESCRIPTION COVERS THE MATERIAL TERMS OF
THE MERGER, THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. YOU SHOULD CAREFULLY READ THIS ENTIRE JOINT PROXY
STATEMENT-CONSENT SOLICITATION-PROSPECTUS AND THE OTHER DOCUMENTS WE REFER YOU
TO FOR A MORE COMPLETE UNDERSTANDING OF THE MERGER. IN ADDITION, WE INCORPORATE
IMPORTANT BUSINESS AND FINANCIAL INFORMATION ABOUT EACH OF US INTO THIS JOINT
PROXY STATEMENT-CONSENT SOLICITATION-PROSPECTUS BY REFERENCE. YOU MAY OBTAIN THE
INFORMATION INCORPORATED BY REFERENCE INTO THIS JOINT PROXY STATEMENT-CONSENT
SOLICITATION-PROSPECTUS WITHOUT CHARGE BY FOLLOWING THE INSTRUCTIONS IN THE
SECTION ENTITLED "WHERE YOU CAN FIND MORE INFORMATION" THAT BEGINS ON PAGE 98 OF
THIS JOINT PROXY STATEMENT-CONSENT SOLICITATION-PROSPECTUS.
WHAT YOU WILL RECEIVE IN THE MERGER
At the effective time of the merger, a newly-formed, wholly owned subsidiary
of PRIMEDIA will merge with About. About will survive as a wholly owned
subsidiary of PRIMEDIA.
In the merger, each outstanding share of About stock will be converted into
2.3409 shares of common stock of PRIMEDIA. No fractional PRIMEDIA shares will be
issued and cash (without interest) will be paid instead of fractional shares.
BACKGROUND OF THE MERGER
In February 2000, Scott P. Kurnit, Chairman and Chief Executive Officer of
About, and Thomas S. Rogers, Chairman and Chief Executive Officer of PRIMEDIA,
met to discuss a possible strategic commercial alliance between the companies in
the business-to-business arena. No agreement was reached as a result of this
meeting and there was no discussion of a merger or acquisition during this
conversation.
Between April and July 2000, representatives of About met or spoke with
numerous parties about the possibility of various strategic transactions with
About. Some of these meetings and conversations remained at a general level
while others involved more detailed discussion and limited business due
diligence. During this period, About began consulting with Donaldson, Lufkin &
Jenrette Securities Corporation, its financial advisor, and Brobeck, Phleger &
Harrison LLP, its legal advisor, about issues raised in these discussions and
worked with its advisors to analyze possible transactions with a number of these
parties. In addition, PRIMEDIA began consulting with Wit SoundView Corporation
and Merrill Lynch & Co., its financial advisors, and Simpson Thacher & Bartlett,
its legal advisor, about issues raised in discussions with About, began
conducting its due diligence investigation of About, and worked with its
advisors to analyze a potential strategic transaction with About. No agreement
was reached as a result of these meetings and conversations.
On June 23, 2000, Mr. Kurnit met with Mr. Rogers and representatives of
PRIMEDIA. At this time, Mr. Kurnit discussed in detail the business of About and
Messrs. Kurnit and Rogers agreed to focus on what type of relationship might
present an attractive opportunity for both companies. In late June and early
July, Messrs. Kurnit and Rogers had additional conversations to discuss further
the matters raised at the June 23 meeting.
On July 24, 2000, Messrs. Kurnit and Rogers and Alan P. Blaustein, President
Worldwide Corporate Development, of About, had a telephone conversation about
the possible structures and benefits of a strategic alliance between the
companies. The conversation ended with an intention to pursue discussions
further and on July 27, 2000, About and PRIMEDIA entered into a confidentiality
agreement governing the exchange of information between them.
On July 28, 2000 and August 2, 2000, Messrs. Kurnit, Blaustein, Rogers,
Charles McCurdy, President of PRIMEDIA, and Mark Colodny, Senior Vice President
of Business Development of PRIMEDIA, met at the offices of PRIMEDIA to hold
further discussions on the strategic rationale for
36
an alliance between the companies. After these meetings, About began conducting
its due diligence investigation of PRIMEDIA and consulting with its legal and
financial advisors about issues raised at the meeting. These consultations
continued throughout the remaining discussions between PRIMEDIA and About.
On August 9, 2000, Messrs. Kurnit and Blaustein and certain members of
About's corporate development team and representatives of Donaldson, Lufkin &
Jenrette met with Mr. McCurdy and members of PRIMEDIA's corporate development
team to further discuss strategic benefits of an alliance and to conduct due
diligence. Over the next two weeks, Messrs. Kurnit and Rogers and other
representatives of PRIMEDIA and About held several discussions focusing
specifically on due diligence and the advantages and disadvantages of an
alliance between the companies. No specific agreements were reached as a result
of these discussions.
Throughout late August 2000 and the month of September 2000, About continued
to meet or speak with several parties to explore potential strategic
transactions. Some of these meetings and conversations remained at a general
level, while others involved more detailed discussion and business due
diligence. During this period, About held discussions, internally and with their
legal and financial advisors, concerning potential alternatives for a strategic
transaction involving About. No agreement was reached with any of these parties
as a result of these meetings and conversations other than to continue
discussions in the future.
On September 5, 2000, representatives of About's and PRIMEDIA's corporate
development teams met to conduct additional diligence.
On September 22, 2000, Messrs. Kurnit and Rogers held extensive discussions
regarding the terms, financial and otherwise, of an alliance between the
companies, including a possible combination. The conversations concluded with no
agreement on the financial terms but additional meetings and discussions were
scheduled. On September 28, 2000, Messrs. Kurnit and Rogers met again to discuss
a possible strategic transaction between the companies as well as the progress
of due diligence between the companies.
On September 30, 2000, Messrs. Blaustein and Colodny met to continue the
September 22 conversations between Messrs. Kurnit and Rogers. This meeting did
not result in any agreement on any terms.
On October 2, 2000, Mr. Blaustein and other members of About's corporate
development team had additional conversations with several parties that had
earlier expressed an interest in a strategic transaction with About. On that
same day, Messrs. Kurnit and Blaustein met with representatives of Donaldson,
Lufkin & Jenrette to consider the possible alternatives for a strategic
transaction involving About and to evaluate the proposed arrangements with
various parties.
On October 3, 2000, representatives of About, PRIMEDIA and each of their
respective legal and financial advisors met at the offices of Brobeck,
Phleger & Harrison to conduct due diligence for a possible combination between
PRIMEDIA and About.
On October 3 and 4, 2000, Messrs. Kurnit and Blaustein held additional
discussions with several other parties with which About had been exploring a
possible strategic transaction. These discussions continued on a daily basis
through mid-October.
On October 4 and 5, 2000, representatives of About and PRIMEDIA, including
each of their legal and financial advisors, met at the offices of Brobeck,
Phleger & Harrison to discuss preliminary terms for a potential combination,
coordinate the due diligence process, discuss a schedule for additional
discussions between the parties and begin preparing documentation. During the
meeting, Messrs. Kurnit and Rogers, and other representatives of both About and
PRIMEDIA, discussed their businesses and operations in greater detail, and
Messrs. Kurnit and Rogers and representatives of Donaldson, Lufkin & Jenrette
discussed, but did not agree to, financial terms and a governance and management
structure for the combined entity.
37
On October 6, 2000, About's board of directors held a telephonic meeting to
discuss, among other things, potential alternative transactions involving About.
At this meeting, Mr. Kurnit informed the board of the status of discussions with
all the parties that had expressed interest in a possible strategic alliance
with About. The board held an extensive discussion regarding the relative merits
and risks of a transaction with any of the parties, including the valuation and
risks associated with each party. No resolution was reached at this meeting, but
the board authorized Mr. Kurnit to continue discussions with the various parties
about a possible alliance with About.
On October 9, 10 and 11, 2000, representatives of About and PRIMEDIA
continued to meet and conduct due diligence and to negotiate documentation for a
combination between PRIMEDIA and About.
On October 12, 2000, About's board of directors held its quarterly meeting
at the offices of About. At this meeting, among other things, Mr. Kurnit updated
the board on the status of discussions with all parties concerning a possible
strategic alliance with About. The board again held further discussions
regarding the relative merits and risks of a transaction with any of the
parties, including the valuation and risks associated with each party. No
resolution was reached at this meeting but the board authorized Mr. Kurnit to
continue discussions with the various parties about a possible alliance with
About.
On October 13, 2000, Messrs. Kurnit, Blaustein, Rogers, McCurdy and Colodny,
representatives of Donaldson, Lufkin & Jenrette and other representatives of
About and PRIMEDIA met at the offices of Wit SoundView to generally discuss the
proposed combination of PRIMEDIA and About. The parties did not discuss any
specific terms of the combination at this meeting.
On October 16, 2000, Messrs. Kurnit and Rogers met to further discuss the
potential combination, its strategic rationale, presentation to the public and
other specific terms of the combination. They also discussed, but did not agree
upon, an appropriate exchange ratio.
Between October 16, 2000 and October 25, 2000, representatives of About and
Donaldson, Lufkin & Jenrette met with representatives of several other parties
to further discuss a potential strategic transaction with About. Some of these
meetings and conversations remained at a general level while others involved
more detailed discussion and business due diligence. In addition, Mr. Kurnit
held several informal discussions with members of the board of directors of
About to update them on the status of discussions with all parties.
On October 26 and 27, 2000, Mr. Kurnit had additional conversations with
representatives of several parties he had earlier met or spoke with about
strategic transactions with About. No agreement was reached as a result of these
discussions.
Beginning on October 27, 2000, About, PRIMEDIA and their respective advisors
intensified due diligence activities, communications coordination and
preparation of definitive documentation. On October 28, 2000, PRIMEDIA retained
Goldman, Sachs & Co. as an additional financial advisor. On October 28, 2000,
representatives of About, PRIMEDIA and their respective advisors met to conduct
final due diligence, negotiate the merger agreement and related agreements and
plan and prepare the announcement of the merger. Mr. Kurnit held several
informal conversations with the board of directors of About to specifically
update them on the status of negotiations with PRIMEDIA.
These activities continued throughout the weekend, with negotiations on the
merger agreement and related agreements, including various commercial
arrangements between the companies, continuing through the afternoon of
October 29, 2000, at which time Messrs. Kurnit and Rogers agreed that About
would become a subsidiary of PRIMEDIA and the exchange ratio for exchanging
shares of About stock for shares of PRIMEDIA common stock would be 2.3409. They
also agreed in principle on the principal terms of the merger, subject to the
approval of each company's board of directors and negotiation of definitive
agreements.
On October 29, 2000, the board of directors of PRIMEDIA met beginning at
3:30 p.m. All of the members of the board were present in person or by
telephone. At this meeting, Mr. Rogers and other
38
members of PRIMEDIA management reviewed the transaction with the board.
Presentations regarding certain financial analyses related to the transaction
were made by representatives from Merrill Lynch & Co. and Wit SoundView
Corporation. Representatives from Goldman, Sachs & Co. joined the meeting and
explained their views on the impact the transaction would have on the stock of
PRIMEDIA and About. Representatives of Simpson Thacher & Bartlett answered
questions about the merger agreement. At the conclusion of this meeting, the
board of directors unanimously approved the merger agreement, the related
agreements and the transactions contemplated by those agreements.
Also on October 29, 2000, About's board of directors held a telephonic board
meeting beginning at 9:00 p.m. One of the directors, Daphne Kis, was unable to
join the telephonic board meeting due to a transatlantic flight, although
Mr. Kurnit spoke with Ms. Kis at length about the proposed transaction earlier
in the day. At this meeting, Mr. Kurnit and other members of management reviewed
the transaction with the board, including the results of discussions with
parties other than PRIMEDIA, the strategic reasons for the combination with
PRIMEDIA, the principal terms of the proposed transaction, a financial review of
the combination, a review of PRIMEDIA's financial conditions and business
operations and the results of About's due diligence review.
Representatives of Brobeck, Phleger & Harrison discussed the board's
fiduciary duties in considering a strategic business combination and further
discussed the terms of the merger agreement and related documents.
Representatives of Donaldson, Lufkin & Jenrette presented to About's board of
directors financial analyses related to the proposed transaction. In addition,
Donaldson, Lufkin & Jenrette delivered its opinion that, as of October 29, 2000,
and based on and subject to the assumptions, limitations and qualifications set
forth in its opinion, the consideration to be received by holders of About stock
pursuant to the merger agreement was fair to such stockholders from a financial
point of view. Representatives of Donaldson, Lufkin & Jenrette and Brobeck,
Phleger & Harrison also discussed and answered questions concerning the terms
and conditions of various commercial transactions to be entered into with
PRIMEDIA simultaneously with the execution of the merger agreement, as well as
the terms and conditions of the employment agreements and share lock-up
agreements between PRIMEDIA and each of Mr. Kurnit and William C. Day, President
and Chief Operating Officer of About. Upon completing its deliberations, the
board of directors of About (other than Ms. Kis) unanimously approved the merger
agreement and the related agreements and the transactions contemplated by those
agreements, declared them advisable and resolved to recommend that About
stockholders adopt the merger agreement. Subsequent to the meeting, all the
directors of About, including Ms. Kis, ratified the actions of the About board
of directors taken at the October 29 meeting.
After the meeting, Donaldson, Lufkin & Jenrette informed its publishing and
internet research analysts about the proposed merger.
After negotiating the final terms of the merger agreement and related
agreements, representatives of About and representatives of PRIMEDIA executed
the agreements. In addition, Messrs. Kurnit and Day, members of the About board
of directors and certain substantial stockholders of PRIMEDIA entered into
voting agreements pursuant to which they each agreed to vote the shares of their
companies held by them in favor of adoption of the merger agreement and issuance
of the PRIMEDIA common stock in the merger, respectively.
On October 30, 2000, About and PRIMEDIA issued a joint press release
announcing the proposed merger of PRIMEDIA and About.
PRIMEDIA'S REASONS FOR THE MERGER; RECOMMENDATION OF PRIMEDIA'S BOARD OF
DIRECTORS
At a meeting held on October 29, 2000, the board of directors of PRIMEDIA
concluded that the merger, the merger agreement and each of the transactions
contemplated in the merger agreement were in the best interests of PRIMEDIA and
its stockholders and determined to recommend that the stockholders consent to
the issuance of PRIMEDIA common stock in connection with the merger agreement.
39
The decision of the board of directors of PRIMEDIA was based upon several
potential benefits of the merger, including the following:
- PRIMEDIA believes that the merger will position it to obtain new
subscribers for its magazines by leveraging About's user base through,
among other things, a direct marketing campaign targeted at About's
registered users;
- PRIMEDIA believes that the merger will enable it to become a competitive
participant in the Internet market. PRIMEDIA believes that the merger will
provide it the opportunity to offer Internet users a quality Internet
experience through the combination of PRIMEDIA's and About's content
offerings;
- The merger will provide PRIMEDIA with access to important features and
applications including integrated on-line communities;
- PRIMEDIA believes that the combination of PRIMEDIA's and About's sales
forces will enable PRIMEDIA to better service advertisers due to its
ability to offer promotional packages that include both traditional and
on-line components;
- The merger will provide PRIMEDIA with improved advertising tools and
technologies to assist advertisers in efficiently spending their
advertising dollars; and
- PRIMEDIA believes that the merger will provide it the opportunity to
increase the number of its relationships with strategic e-commerce and
content partners.
In its evaluation of the merger, PRIMEDIA's board of directors reviewed
several factors, including, but not limited to, the following:
- historical information concerning PRIMEDIA's and About's respective
businesses, financial performance and condition, operations, technology
and management, including reports concerning results of operations during
the most recent fiscal year and fiscal quarter for each company filed with
the SEC;
- PRIMEDIA management's view of the financial condition, results of
operations and businesses of PRIMEDIA and About before and after giving
effect to the merger and the PRIMEDIA board's determination of the
merger's effect on stockholder value;
- current financial market conditions and historical market prices,
volatility and trading information;
- the consideration About stockholders will receive in the merger in light
of comparable merger transactions;
- the opinion of Wit SoundView Corporation, as more fully described in
"Opinion of Wit SoundView Corporation," that, as of the date of such
opinion and subject to the considerations described therein, the exchange
ratio in the merger is fair from a financial point of view to PRIMEDIA and
PRIMEDIA's common stockholders;
- the opinion of Merrill Lynch & Co., as more fully described in "Opinion of
Merrill Lynch & Co.," that, as of the date of such opinion, and based upon
the assumptions made, matters considered and limits of review described
therein, the exchange ratio was fair from a financial point of view to
PRIMEDIA;
- the belief that the terms of the merger agreement are reasonable;
- the impact of the merger on PRIMEDIA's customers and employees;
- reports from management, legal, financial and accounting advisors as to
the results of the due diligence investigation of About; and
- the expectation that the merger will be accounted for as a purchase.
40
The PRIMEDIA board of directors also identified and considered a number of
potentially negative factors in its deliberations concerning the merger
including the following:
- the risk that the potential benefits of the merger may not be realized;
- the possibility that the merger may not be consummated, even if approved
by PRIMEDIA's and About's stockholders;
- the effect of the public announcement of the merger on About's and
PRIMEDIA's stock prices;
- the risk of management and employee disruption associated with the merger,
including the risk that despite the efforts of the combined company, key
technical, sales and management personnel might not remain employed by the
combined company;
- the risk that the merger could adversely affect PRIMEDIA's relationship
with certain of its customers and strategic partners; and
- other applicable risks described in this joint proxy statement-consent
solicitation-prospectus under "Risk Factors."
The board concluded however, that, on balance, the potential benefits to
PRIMEDIA and its stockholders of the merger outweighed the risks associated with
the merger.
The discussion of the information and factors considered by the PRIMEDIA
board is not intended to be exhaustive. In view of the variety of factors
considered in connection with its evaluation of the merger, the PRIMEDIA board
did not find it practicable to, and did not quantify or otherwise assign
relative weight to, the specific factors considered in reaching its
determination.
After careful consideration, the PRIMEDIA board of directors has determined
the merger agreement and the merger to be fair to and in the best interests of
the PRIMEDIA stockholders. IN CONNECTION WITH THE MERGER, PRIMEDIA'S BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE PRIMEDIA STOCKHOLDERS CONSENT TO THE
ISSUANCE OF SHARES OF PRIMEDIA COMMON STOCK IN CONNECTION WITH THE MERGER
AGREEMENT.
ABOUT'S REASONS FOR THE MERGER; RECOMMENDATION OF ABOUT'S BOARD OF DIRECTORS
The About board of directors has determined that the merger, the merger
agreement and each of the transactions contemplated in the merger agreement are
fair to and in the best interests of About and its stockholders.
At a meeting held on October 29, 2000, the About board of directors, with
the assistance of outside financial and legal advisors, considered the
financial, legal and other terms of the merger. The decision of the About board
of directors to adopt the merger agreement and to approve the merger and each of
the transactions contemplated in the merger agreement, and its conclusion that
the merger, the merger agreement and each of the transactions contemplated in
the merger agreement are fair to and in the best interest of About and its
stockholders, was based on several potential benefits of the merger and involved
the consideration of a number of factors, including the following:
- the opportunity to create a leading online and offline company in the
targeted media marketing industry upon consummation of the merger;
- the opportunity to dramatically broaden relationships between About and
its advertisers and to provide integrated marketing solutions for
transaction-based advertisers;
- the potential for About to offer advertisers promotional packages which
integrate on-line and traditional components;
- the opportunity to allow About to become part of a significantly larger
organization with greater resources, scope of operation and access to
capital on attractive terms;
- the opportunity for About's stockholders to participate in the potential
growth of the surviving corporation after the merger;
41
- the exchange ratio in the merger and the implied per share price, which
compared favorably to transactions comparable to the merger, and a
discounted cash flow, according to a number of applicable valuation
methodologies including an analysis of companies comparable to About;
- the About board's belief that the analysis of Donaldson, Lufkin & Jenrette
Securities Corporation supported the board's conclusion that the
consideration to be received by the holders of About stock pursuant to
merger agreement was fair to the holders of About stock from a financial
point of view;
- the view of About's management of the financial condition, the competitive
position and prospects, the results of operations and the businesses of
PRIMEDIA and About before and after giving effect to the merger, and the
determination of About's board of directors of the merger's effect on
stockholder value;
- the relative trading prices and volumes (as well as prospects for future
growth in value) of About's common stock as compared with PRIMEDIA's
common stock;
- the current financial market conditions and the historical stock market
prices, the volatility and the trading information associated with the
common stock of PRIMEDIA and About;
- the belief that the terms of the merger agreement were reasonable;
- the impact of the merger on About's customers and employees;
- the results of due diligence investigations of PRIMEDIA conducted by
About's outside financial and legal advisors; and
- the structure of the merger, which permits About stockholders to exchange
their About stock for PRIMEDIA common stock on a tax-free basis.
The decision of About's board of directors was the result of its careful
consideration of a range of strategic alternatives in the pursuit of a long-term
business strategy for About. The board's primary consideration was to identify
and secure the alternative that would provide the best strategic fit for About
and to provide long-term value to About's stockholders. The About board also
reviewed with its financial and legal advisors:
- historical information concerning PRIMEDIA's and About's respective
businesses, financial performance and condition, operations, technology
and management;
- the terms and conditions of the merger agreement;
- the terms and conditions of the advertising agreements executed
simultaneously with the execution of the merger agreement, pursuant to
which About agreed to issue shares of its common stock in exchange for
advertising and promotional services by PRIMEDIA;
- the terms and conditions of the sales representation agreement executed
simultaneously with the execution of the merger agreement, pursuant to
which About engaged PRIMEDIA as About's advertising sales representative
for specified types of advertising;
- the opinion of Donaldson, Lufkin & Jenrette Securities Corporation, more
fully described in "Opinion of Donaldson, Lufkin & Jenrette Securities
Corporation," that, as of October 29, 2000, and based on and subject to
the assumptions, limitations and qualifications set forth in its opinion,
the consideration to be received by the holders of About stock pursuant to
the merger agreement was fair to the holders of About stock from a
financial point of view;
- the terms and conditions of the right of first offer agreement executed
simultaneously with the execution of the merger agreement, pursuant to
which About granted to PRIMEDIA a right of first offer to provide various
content;
- the terms and conditions of the employment agreements and share lock-up
agreements of Scott P. Kurnit, About's Chairman and Chief Executive
Officer, and William C. Day, About's President and Chief Operating
Officer, particularly in light of the fact that, as a result of these
42
agreements, Messrs. Kurnit and Day may have interests in the merger that
are different from or are in addition to the interests of the other About
stockholders;
- the amount of the termination fee and the events triggering the payment of
such fee; and
- the limitation on the ability of About to negotiate with other companies
regarding an alternative transaction, and the potential effects that this
limitation would have on About's receipt of alternative proposals that
could be superior to the merger with PRIMEDIA.
The About board also considered a number of potentially negative factors in
its deliberations concerning the merger, including:
- the volatility of the market value of PRIMEDIA common stock, including the
risk that the announcement of the merger would have an adverse effect on
the market price of PRIMEDIA common stock;
- the risk that, because the share exchange ratio would not be adjusted for
changes in the market price of the common stock of either PRIMEDIA or
About, the per share value of the consideration to be receive by About
stockholders might be significantly less than the price per share implied
by the exchange ratio immediately prior to the announcement of the merger
to the public;
- the risk that the merger might not be consummated;
- the potential loss of revenues and business opportunities for About as a
result of confusion in the marketplace arising out of the announcement of
the merger to the public, and the possible exploitation of such confusion
by the competitors of PRIMEDIA and About;
- the possibility of management disruption associated with the merger and
with the integration of the companies' operations;
- the risk that, despite the efforts of the surviving corporation, key
management and technical personnel of About might not continue with the
surviving corporation;
- the risk that the benefits sought to be achieved by the merger would not
be realized; and
- the other applicable risks described in this joint proxy statement-consent
solicitation-prospectus under "Risk Factors."
The About board of directors, however, concluded that, on balance, the
merger's potential benefits to About and its stockholders outweighed the
associated risks. The above discussion of the information and facts considered
by About's board of directors is not intended to be exhaustive. In view of the
variety of factors to be considered in connection with its evaluation of the
merger, the About board of directors did not find it practicable to, and did not
quantify or otherwise assign relative weight to, the specific facts considering
in reaching its decision.
Following careful and thorough consideration, the About board of directors
determined that the merger agreement and the merger are fair to and in the best
interests of About and its stockholders. THE ABOUT BOARD OF DIRECTORS RECOMMENDS
THAT THE ABOUT STOCKHOLDERS VOTE FOR ADOPTION OF THE MERGER AGREEMENT.
OPINION OF WIT SOUNDVIEW CORPORATION
Under an engagement letter dated August 30, 2000, PRIMEDIA retained Wit
SoundView Corporation to provide financial advisory services and a financial
fairness opinion in connection with the merger. PRIMEDIA's board of directors
selected Wit SoundView to act as PRIMEDIA's financial advisor based on Wit
SoundView's qualifications, expertise and reputation and its knowledge of
Internet and Internet content industries. At a meeting of PRIMEDIA's board of
directors on October 29, 2000, Wit SoundView rendered its oral opinion,
subsequently confirmed in writing, that, as of October 29, 2000 and based upon
and subject to the various considerations set forth in the written opinion, the
exchange ratio pursuant to the merger agreement was fair to PRIMEDIA and to
PRIMEDIA's stockholders from a financial point of view.
43
The full text of the written opinion of Wit SoundView, dated October 29,
2000, is attached as Annex A to this joint proxy statement-consent
solicitation-prospectus and sets forth, among other things, the assumptions
made, procedures followed, matters considered and limitations of the review
undertaken by Wit SoundView in rendering its opinion. PRIMEDIA stockholders are
urged to, and should, read the opinion carefully and in its entirety. Wit
SoundView's opinion is directed to PRIMEDIA's board of directors and addresses
only the fairness to PRIMEDIA and PRIMEDIA's common stockholders from a
financial point of view of the exchange ratio pursuant to the merger agreement
as of the date of the opinion. It does not address any other aspect of the
merger and does not constitute a recommendation to any holder of PRIMEDIA common
stock or About stock as to how to vote in either the PRIMEDIA consent
solicitation or at the About special meeting.
The summary of the opinion of Wit SoundView set forth in this document is
qualified in its entirety by reference to the full text of the written opinion.
In connection with its opinion, Wit SoundView, among other things:
- reviewed certain publicly available financial statements and other
information relating to PRIMEDIA and About;
- reviewed certain internal financial statements and other data relating to
the business and financial prospects of PRIMEDIA, including estimates and
financial forecasts prepared by the management of PRIMEDIA, that were
provided to Wit SoundView and not publicly available;
- reviewed certain internal financial statements and other data relating to
the business and financial prospects of About, including estimates and
financial forecasts prepared by the managements of PRIMEDIA and About and
not publicly available;
- conducted discussions with members of the senior managements of PRIMEDIA
and About;
- reviewed publicly available financial and stock market data with respect
to certain other companies in lines of business which Wit SoundView
believed to be generally relevant;
- compared the financial terms of the transaction with the publicly
available financial terms of certain other transactions which Wit
SoundView believed to be generally relevant;
- considered certain pro forma effects of the transaction on PRIMEDIA's
financial statements and reviewed certain estimates of synergies prepared
by PRIMEDIA management;
- reviewed drafts of the merger agreement dated as of October 29, 2000; and
- conducted such other financial studies, analyses, and investigations, and
considered such other information as Wit SoundView deemed necessary or
appropriate.
Wit SoundView assumed and relied upon, without independent verification, the
accuracy and completeness of the information reviewed by it for the purposes of
its opinion. Wit SoundView did not make any independent valuation or appraisal
of the assets or liabilities of About or PRIMEDIA, nor was Wit SoundView
furnished with any such appraisals. With respect to the financial forecasts,
estimates, pro forma effects and calculations of synergies referred to above,
Wit SoundView assumed that they were reasonably prepared on bases reflecting the
best currently available estimates and judgments of the managements of PRIMEDIA
and About as to the future financial performance of their respective companies.
Wit SoundView's opinion was necessarily based on economic, monetary, market and
other conditions as in effect on, and the information made available to Wit
SoundView as of, the date of its opinion.
The following is a brief summary of certain of the analyses performed by Wit
SoundView in connection with its oral opinion and the preparation of its written
opinion dated October 29, 2000. Certain of these summaries of financial analyses
include information presented in tabular format. In order to understand fully
the financial analyses used by Wit SoundView, the tables must be read together
with the text of each summary. The tables alone do not constitute a complete
description of the financial analyses.
44
EXCHANGE RATIO ANALYSIS. Wit SoundView reviewed the implied exchange ratios
of the closing prices of About stock to the corresponding closing prices of
PRIMEDIA common stock over various periods from April 27, 2000 through
October 27, 2000. Wit SoundView examined the premiums represented by the
transaction exchange ratio of 2.3409x over the averages of these daily implied
exchange ratios over various periods:
PERIOD AVERAGE
PERIOD ENDED EXCHANGE TRANSACTION EXCHANGE
OCTOBER 27, 2000 RATIO RATIO PREMIUM
---------------- -------------- --------------------
October 27, 2000............................. 1.566x 49.5%
Last 10 Trading Days......................... 1.438 62.8%
Last 30 Trading Days......................... 1.740 34.5%
Last 2 Months................................ 1.880 24.5%
Last 3 Months................................ 1.785 31.1%
Last 6 Months................................ 1.776 31.8%
ABOUT TRADING RANGE. Wit SoundView reviewed the range of closing prices of
About stock prior to and including October 27, 2000. Wit SoundView observed the
following:
PERIOD INTRADAY LOW PERIOD INTRADAY HIGH
------------------------ ------------------------
IMPLIED OFFER IMPLIED OFFER
PERIOD ENDED PREMIUM / PREMIUM /
10/27/00 PRICE (DISCOUNT) PRICE (DISCOUNT)
------------ -------- ------------- -------- -------------
Last 10 Trading Days............... $16.00 123.1% $ 27.75 28.6 %
Last 30 Trading Days............... $16.00 123.1% $ 39.88 (10.5)%
Last 2 Months...................... $16.00 123.1% $ 45.88 (22.2)%
Last 3 Months...................... $16.00 123.1% $ 45.88 (22.2)%
Last 6 Months...................... $16.00 123.1% $ 52.00 (31.3)%
Last 12 Months..................... $16.00 123.1% $105.81 (66.3)%
High............................... 123.1% 28.6 %
Low................................ 123.1% (66.3)%
COMPARABLE COMPANY TRADING ANALYSIS. Wit SoundView compared certain
publicly available financial information of About with publicly available
information for selected companies comparable to the business or businesses of
About. The following table lists the relevant comparable companies analyzed by
Wit SoundView:
- Ask Jeeves, Inc.
- Excite@Home Corporation
- GoTo.com, Inc.
- LookSmart Ltd.
- NBC Internet, Inc.
- Lycos, Inc.
- CNET Networks, Inc.
- Lifeminders, Inc.
Wit SoundView used publicly available financial projections by equity
analysts covering each comparable company to determine the ratio of enterprise
value to projected revenues and the ratio of enterprise value to projected gross
profit for the 2001 calendar year for each company. The enterprise value of a
company is equal to the value of its fully-diluted common equity plus debt, the
liquidation value of outstanding preferred stock, if any, plus minority
interests, if any, minus cash and the value of certain other assets, including
equity investments in affiliates. In conducting its analysis, Wit SoundView
applied the relevant enterprise value multiples of the comparable companies to
PRIMEDIA
45
management's estimates of various financial statistics for About. Wit SoundView
then estimated the implied value per share of About as of October 27, 2000. Wit
SoundView estimated the following:
COMPARABLE IMPLIED VALUE
CALENDAR YEAR FINANCIAL STATISTIC COMPANY MULTIPLE PER SHARE OF ABOUT
--------------------------------- ---------------- ------------------
2001 Estimated Revenues......................... 2.0x - 6.0x $20 - $43
2001 Estimated Gross Profit..................... 3.0x - 8.0x $20 - $40
Based on the comparable company analysis, Wit SoundView estimated an implied
value range per share of About of $20 to $43.
No company utilized in the comparable company analysis is identical to About
or PRIMEDIA. In evaluating the comparable companies, Wit SoundView made
judgments and assumptions with regard to industry performance, general business,
economic, market and financial conditions and other matters, many of which are
beyond the control of About and PRIMEDIA, such as the impact of competition on
the businesses of About or PRIMEDIA and the industry in general, industry growth
and the absence of any material adverse change in the financial condition and
prospects of About or PRIMEDIA or the industry or in the financial markets in
general. Mathematical analysis, such as determining the average or median, is
not in itself a meaningful method of using comparable company data.
PRECEDENT TRANSACTIONS ANALYSIS. Based on publicly available information as
of October 27, 2000, Wit SoundView compared the premiums paid in selected
precedent merger and acquisition transactions to the relevant financial
statistics for About implied by the exchange ratio and the share price of
PRIMEDIA common stock as of October 27, 2000. The following table presents the
precedent transactions analyzed by Wit SoundView:
TARGET/ACQUIROR:
- Go2Net, Inc./InfoSpace, Inc.
- Ziff-Davis Inc.--ZDNET/CNET Networks, Inc.
- Lycos, Inc./Terra Networks S.A.
- Broadcast.com, Inc./Yahoo! Inc.
- GeoCities.com, Inc./Yahoo! Inc.
- Excite Inc./@Home Corporation
Based on its analysis of the precedent transactions, Wit SoundView
considered the following premiums, represented by the transaction exchange ratio
to the average historical implied exchange ratio, in evaluating the transaction
exchange ratio premium to the About/PRIMEDIA average historical implied exchange
ratio:
ABOUT TRANSACTION
TRANSACTION EXCHANGE EXCHANGE RATIO
RATIO PREMIUM TO PREMIUM TO ABOUT
HISTORICAL IMPLIED HISTORICAL IMPLIED
TRADING PERFORMANCE STATISTIC EXCHANGE RATIO EXCHANGE RATIO
----------------------------- -------------------- ------------------
About Current Price (As of Oct. 27,
2000)................................ 10% - 70% 50%
10 Trading Day Average Exchange
Ratio................................ 15% - 100% 65%
30 Trading Day Average Exchange
Ratio................................ 35% - 135% 35%
2 Month Average Exchange Ratio......... 40% - 135% 25%
3 Month Average Exchange Ratio......... 30% - 155% 30%
6 Month Average Exchange Ratio......... 25% - 95% 30%
46
No transaction utilized in the precedent transactions analysis is identical
to the merger. In evaluating the transactions listed above, Wit SoundView made
judgments and assumptions with regard to industry performance, general business,
economic, market and financial conditions and other matters, many of which are
beyond the control of PRIMEDIA and About, such as the impact of competition on
the businesses of About or PRIMEDIA and the industry in general, industry growth
and the absence of any material adverse change in the financial condition and
prospects of PRIMEDIA or About or the industry or in the financial markets in
general. Mathematical analysis, such as determining the average or median, is
not in itself a meaningful method of using comparable transaction data.
DISCOUNTED CASH FLOW ANALYSIS. Wit SoundView performed a discounted cash
flow analysis of About, without giving effect for the merger, for the years 2001
through 2005 to estimate the present value per share of About. The projections
of financial performance were made by PRIMEDIA's management, based on the
guidance provided by About's senior management. Wit SoundView calculated a range
of equity values per share for About based upon the sum of the discounted net
present value of About's five-year stream of projected unlevered free cash flows
plus the discounted net present value of the terminal value based on a range of
multiples of its projected 2005 EBITDA.
Using discount rates ranging from 16% to 20% and terminal value multiples of
estimated 2005 EBITDA ranging from 16.0x to 18.0x, Wit SoundView calculated the
following range of implied equity values per share for About stock:
LOW ($) HIGH ($)
-------- --------
Implied Equity Value Per Share of About Stock.............. $ 41 $ 51
Implied Offer Price Premium/(Discount)..................... (13)% (30)%
Wit SoundView compared the implied valuation range from the About discounted
cash flow analysis to the implied valuation range from the PRIMEDIA discounted
cash flow analysis, as summarized below.
PRIMEDIA TRADING RANGE. Wit SoundView reviewed the range of closing prices
of PRIMEDIA common stock prior to October 27, 2000. Wit SoundView observed the
following:
PERIOD PRIOR TO OCTOBER 27, 2000 VALUE PER SHARE
-------------------------------- -----------------
52 Week Range............................................... $10.94 - $34.88
1 Week Average.............................................. $15.83
1 Month Average............................................. $15.78
3 Month Average............................................. $17.74
6 Month Average............................................. $19.30
DISCOUNTED CASH FLOW ANALYSIS. Wit SoundView performed a discounted cash
flow analysis of PRIMEDIA, without giving effect to the merger, for the years
2001 through 2005. The projections of financial performance were made by
PRIMEDIA's management. Wit SoundView calculated a range of equity values per
share for PRIMEDIA based upon the sum of the discounted net present value of
PRIMEDIA's five-year stream of projected unlevered free cash flows plus the
discounted net present value of the terminal value based on a range of multiples
of its projected 2005 EBITDA.
47
Using discount rates ranging from 10.0% to 14.0% and terminal value
multiples of estimated 2005 EBITDA ranging from 12.0x to 14.0x, Wit SoundView
calculated the following range of implied equity values per share for PRIMEDIA
common stock:
LOW ($) HIGH ($)
-------- --------
Implied Equity Value Per Share of PRIMEDIA Common Stock.... $15 $24
Wit SoundView compared the implied valuation range from the PRIMEDIA
discounted cash flow analysis to the implied valuation range from the About
discounted cash flow analysis, as summarized above.
RELATIVE DISCOUNTED CASH FLOW ANALYSIS. Wit SoundView, utilizing the
stand-alone discounted cash flow analyses (as described in this section)
calculated the implied exchange ratio, by the division of the discounted cash
flow equity value per share of About by the discounted equity value per share of
PRIMEDIA. Based upon this analysis, Wit SoundView calculated the following
implied exchange ratio range:
LOW ($) HIGH ($)
-------- --------
Implied Discounted Cash Flow Analysis Exchange Ratio...... 2.1229x 2.6534x
Wit SoundView observed that the transaction exchange ratio was in the range
of the implied discounted cash flow exchange ratio.
PRO FORMA MERGER ANALYSIS. Wit SoundView analyzed the pro forma impact of
the merger on PRIMEDIA's combined projected EBTDA per share for the calendar
years 2001, 2002 and 2003. EBTDA is defined as earnings before taxes,
depreciation, amortization, non-cash compensation and deferred financing costs
(and after preferred dividends). Such analysis was based on projections of
PRIMEDIA made by PRIMEDIA's management and projections of About made by
PRIMEDIA's management, based on the guidance provided by About's senior
management. Using the projections and expected synergies provided by the
management of PRIMEDIA, Wit SoundView observed the following:
ACCRETION/(DILUTION)
PERIOD OF TIME EBTDA PER SHARE
-------------- --------------------
Calendar Year 2001......................................... (8.2)%
Calendar Year 2002......................................... 9.9%
Calendar Year 2003......................................... 7.2%
In arriving at its opinion, Wit SoundView considered the results of all of
its analyses as a whole and did not attribute any particular weight to any
analysis or factor considered by it.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Wit
SoundView believes that selecting any portion of its analyses, without
considering all analyses, would create an incomplete view of the process
underlying its opinion. In addition, Wit SoundView may have given various
analyses and factors more or less weight than other analyses and factors, and
may have deemed various assumptions more or less probable than other
assumptions, so that the ranges of valuations resulting from any particular
analysis described above should not be taken to be Wit SoundView's view of the
actual value of PRIMEDIA or About. In performing its analyses, Wit SoundView
made numerous assumptions with respect to industry performance, general business
and economic conditions and other matters, many of which are beyond the control
of PRIMEDIA or About. Any estimates contained in Wit SoundView's analyses are
not necessarily indicative of future results or actual values, which may be
significantly more or less favorable than those suggested by such estimates.
48
The analyses performed were prepared solely as part of Wit SoundView's
analysis of the fairness from a financial point of view to PRIMEDIA and
PRIMEDIA's stockholders of the exchange ratio pursuant to the merger agreement
and were conducted in connection with the delivery of Wit SoundView's opinion.
The analyses do not purport to be appraisals or to reflect the prices at which
PRIMEDIA or About might actually be sold.
The exchange ratio pursuant to the merger agreement was determined through
arm's-length negotiations between PRIMEDIA and About and was approved by the
PRIMEDIA board of directors. Wit SoundView provided advice to PRIMEDIA during
such negotiations.
In addition, Wit SoundView's opinion and presentation to the PRIMEDIA board
of directors was one of many factors taken into consideration by PRIMEDIA's
board of directors in making its decision to approve the merger. Consequently,
the Wit SoundView analyses as described above should not be viewed as
determinative of the opinion of the PRIMEDIA board of directors with respect to
the merger or of whether the PRIMEDIA board of directors would have been willing
to agree to a transaction with a different form or amount of consideration.
The PRIMEDIA board of directors retained Wit SoundView based upon Wit
SoundView's qualifications, experience and expertise in Internet and Internet
content. Wit SoundView is an internationally recognized investment banking and
advisory firm. Wit SoundView, as part of its investment banking business, is
regularly engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. In the ordinary course of Wit
SoundView's trading and brokerage activities, Wit SoundView or its affiliates
may at any time hold long or short positions, may trade or otherwise effect
transactions, for its own account or for the account of customers in the
securities of PRIMEDIA, About or their respective affiliates.
Under the engagement letter, Wit SoundView provided financial advisory
services and the financial fairness opinion in connection with the merger, and
PRIMEDIA agreed to pay Wit SoundView a customary fee. A substantial portion of
Wit SoundView's fee will be paid upon consummation of the merger. In addition,
PRIMEDIA has agreed to reimburse Wit SoundView for any out-of-pocket expenses
incurred by Wit SoundView in connection with its engagement and to indemnify Wit
SoundView and its affiliates, their respective directors, officers, agents and
employees and each person, if any, controlling Wit SoundView or any of its
affiliates against certain liabilities and expenses, including certain
liabilities under the federal securities laws, related to or arising out of Wit
SoundView's engagement.
OPINION OF MERRILL LYNCH & CO.
PRIMEDIA retained Merrill Lynch & Co. to act as financial advisor with
respect to the merger. As part of the engagement, PRIMEDIA requested that
Merrill Lynch deliver an opinion as to whether the exchange ratio in the merger
was fair from a financial point of view to PRIMEDIA. At the meeting of the board
of directors of PRIMEDIA on October 29, 2000, Merrill Lynch rendered its oral
opinion to the board of directors of PRIMEDIA (subsequently confirmed in
writing) that, as of that date and based upon the assumptions made, matters
considered and limits of review set forth in its written opinion, the exchange
ratio in the merger was fair from a financial point of view to PRIMEDIA.
The full text of Merrill Lynch's opinion, which sets forth, among other
things, the assumptions made, matters considered and limitations on the scope of
review undertaken by Merrill Lynch in rendering its opinion, is included as
Annex B and is incorporated by reference into this joint proxy statement-consent
solicitation-prospectus. This description of Merrill Lynch's opinion is
qualified in its entirety by reference to the full text of the opinion, and you
are urged to read the opinion and consider it carefully. Merrill Lynch's opinion
is addressed to PRIMEDIA's board of directors and evaluates only
49
the fairness from a financial point of view to PRIMEDIA of the exchange ratio in
the merger. Merrill Lynch's opinion does not address the merits of the
underlying decision by PRIMEDIA to engage in the merger and does not constitute
a recommendation to any shareholder of PRIMEDIA as to how to vote on the
proposed issuance of shares of PRIMEDIA common stock in the merger or any
related matter.
In arriving at its opinion, Merrill Lynch, among other things:
- reviewed certain publicly available business and financial information
relating to PRIMEDIA and About that Merrill Lynch deemed to be relevant;
- reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets and prospects of PRIMEDIA and
About, as well as the amount and timing of any cost savings and synergies
expected to result from the merger (which are referred to as the "Expected
Synergies"), furnished to Merrill Lynch by PRIMEDIA and About;
- conducted discussions with members of senior management of PRIMEDIA and
About concerning their respective businesses and prospects before and
after giving effect to the merger and the Expected Synergies;
- reviewed the historical market prices and trading activity for shares of
PRIMEDIA common stock and shares of About stock and compared them with
that of certain publicly traded companies that Merrill Lynch deemed to be
reasonably similar to PRIMEDIA and About, respectively;
- compared the results of operations of PRIMEDIA and About with that of
certain companies that Merrill Lynch deemed to be reasonably similar to
PRIMEDIA and About, respectively;
- compared the proposed financial terms of the transactions contemplated by
the merger agreement with the financial terms of certain other mergers and
acquisitions that Merrill Lynch deemed to be relevant;
- considered the pro forma effect of the merger on PRIMEDIA;
- reviewed the merger agreement; and
- reviewed such other financial studies, analyses and performed such other
investigations and took into account such other matters as Merrill Lynch
deemed necessary, including its assessment of general economic, market and
monetary conditions.
In preparing its opinion, Merrill Lynch relied on the accuracy and
completeness of all information supplied or otherwise made available to it,
discussed with or reviewed by or for it, or publicly available, and Merrill
Lynch did not assume any responsibility for independently verifying such
information or undertake an independent evaluation or appraisal of the assets or
liabilities of PRIMEDIA or About, nor was Merrill Lynch furnished with any such
evaluation or appraisal. With respect to the financial forecasts and Expected
Synergies furnished by PRIMEDIA and About, Merrill Lynch assumed that this
information had been reasonably prepared and reflected the best currently
available estimates and judgment of PRIMEDIA's or About's management as to the
expected future financial performance of PRIMEDIA or About, as the case may be,
and the Expected Synergies. Merrill Lynch further assumed that the merger will
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended.
Merrill Lynch's opinion was necessarily based upon market, economic and
other conditions as they existed and could be evaluated on, and on the
information made available to Merrill Lynch as of, the date of its opinion.
Merrill Lynch assumed that in the course of obtaining the necessary regulatory
or other consents or approvals (contractual or otherwise) for the merger, no
restrictions, including any divestiture requirements or amendments or
modifications, would be imposed that would have a material adverse effect on the
contemplated benefits of the merger. Merrill Lynch also assumed that
50
the merger would be consummated in accordance with the terms of the merger
agreement without waiver of any material condition.
At the meeting of PRIMEDIA's board of directors held on October 29, 2000,
Merrill Lynch presented certain financial analyses accompanied by written
materials in connection with the delivery of its oral opinion at that meeting
and its written opinion as of October 29, 2000.
The following is a summary of the material financial and comparative
analyses performed by Merrill Lynch in arriving at its opinion. Some of the
summaries of financial analyses include information presented in tables. In
order to fully understand the financial analyses performed by Merrill Lynch, the
tables must be read together with the accompanying text of each summary. The
tables alone do not constitute a complete description of the financial analyses,
including the methodologies and assumptions underlying the analyses, and viewed
in isolation could create a misleading or incomplete view of the financial
analyses performed by Merrill Lynch.
TRADING HISTORY ANALYSIS. Merrill Lynch reviewed the per share closing
price trading data of shares of About stock for the 52-week period prior to and
including the final trading day prior to October 29, 2000. This analysis
indicated the following range:
PERIOD LOW ($) HIGH ($)
------ -------- --------
52 Week.................................................... $16.00 $105.81
Merrill Lynch observed that the implied offer price per share of About stock
was within the range implied by this analysis.
COMPARABLE PUBLIC COMPANY ANALYSIS. Using publicly available information,
Merrill Lynch compared selected financial data of About, based on projections
provided by the management of PRIMEDIA, with corresponding data for selected
publicly traded companies that Merrill Lynch deemed to be reasonably similar to
About. These companies were:
- Yahoo! Inc.
- Excite@Home Corporation
- NBC Internet, Inc.
- CNET Networks, Inc.
- Sportsline.com, Inc.
- Netcentives Inc.
- LifeMinders, Inc.
- DoubleClick, Inc.
- 24/7 Media, Inc.
- Engage, Inc.
- Ask Jeeves, Inc.
- GoTo.com, Inc.
- LookSmart, Ltd.
Merrill Lynch selected these companies because they engage in businesses and
have operating profiles reasonably similar to those of About. Merrill Lynch used
publicly available financial projections by equity analysts covering each
comparable company to determine the ratio of market value to projected revenues
and the ratio of market value to projected gross profit for the 2001 calendar
year for each of these companies. Merrill Lynch then estimated the implied value
ranges per share of About stock as of October 27, 2000 set forth below.
IMPLIED VALUE PER SHARE
CALENDAR YEAR FINANCIAL STATISTIC COMPARABLE COMPANY MULTIPLE OF ABOUT
--------------------------------- --------------------------- -----------------------
2001 Estimated Revenues......................... 2.0x - 4.0x $17.05 - $27.35
2001 Estimated Gross Profit..................... 2.5x - 5.0x $15.35 - $24.00
Merrill Lynch observed that the implied offer price per share of About stock
was above the ranges implied by this analysis.
51
SELECTED PRECEDENT TRANSACTION ANALYSIS. Based on the publicly available
information available as of October 27, 2000, Merrill Lynch calculated the
premium of the implied exchange ratio for each of the selected precedent
stock-for-stock merger and acquisition transactions, based on the price paid per
share of common stock to the issuing company's stock price, to the 1-day prior
exchange ratio and the prior 30-day average exchange ratio, using the ratio of
the target's stock price to the acquiror's stock price over each relevant time
period. The following table represents certain of the precedent transactions
analyzed by Merrill Lynch:
TARGET/ACQUIROR:
- Go2Net, Inc./InfoSpace, Inc.
- Ziff-Davis Inc.--ZDNET/CNET Networks, Inc.
- Lycos, Inc./Terra Networks S.A.
- Flycast Communications Corporation/CMGI, Inc.
- MSN Sidewalk Corporation/Ticketmaster Online Corporation
- NetGravity, Inc./DoubleClick, Inc.
- GeoCities.com, Inc./Yahoo! Inc.
- Excite Inc./@Home Corporation
All premiums paid for the selected transactions were based on public
information available at the time of public announcement. Based on its analysis
of the precedent transactions, Merrill Lynch applied the following premiums to
the relevant financial statistics for About implied by the exchange ratio and
the share price of PRIMEDIA common stock as of October 27, 2000. This analysis
indicated the following results:
IMPLIED VALUE PER SHARE
TRADING PERFORMANCE STATISTICS PREMIUM OF ABOUT
------------------------------ ---------- -----------------------
1-day Prior Exchange Ratio (as of October 27, 2000)......... 45% - 65% $34.65 - $39.40
30-day Average Exchange Ratio............................... 40% - 90% $37.15 - $50.40
Merrill Lynch observed that the implied offer price per share of About stock
was within the range implied by the 1-day prior exchange ratio premium analysis
and below the range implied by the 30-day average exchange ratio premium
analysis.
DISCOUNTED CASH FLOW ANALYSIS. Merrill Lynch performed a discounted cash
flow analysis of About both before and after giving effect to 50% of the
Expected Synergies for the years 2001 through 2005. The projections of financial
performance for About and the Expected Synergies were provided by the management
of PRIMEDIA. Merrill Lynch calculated a range of equity values per share of
About stock based upon the sum of the discounted net present value of About's
five-year stream of projected unlevered free cash flows plus the discounted net
present value of About's terminal value based on a range of multiples of its
projected 2005 EBITDA. Using discount rates ranging from 18% to 22% and terminal
value multiples of 2005 EBITDA ranging from 16.0x to 18.0x, Merrill Lynch
calculated the following range of implied equity values per share of About
stock:
LOW ($) HIGH ($)
-------- --------
Implied Equity Value Per Share of About Stock (excluding
Expected Synergies)....................................... 38.98 47.42
Implied Equity Value Per Share of About Stock (including 50%
of the Expected Synergies)................................ 51.69 63.71
Merrill Lynch observed that the implied offer price per share of About stock
was below the ranges of implied equity value implied by this analysis.
52
ANALYST PRICE TARGET ANALYSIS. Merrill Lynch reviewed the price targets of
selected equity research analysts for About stock. The range of analyst price
targets, as of October 27, 2000, was $70.00 to $75.00 per share.
Merrill Lynch observed that the implied offer price per share of About stock
was below the range implied by this analysis.
EXCHANGE RATIO ANALYSIS. Merrill Lynch also reviewed certain historical
ratios of the price of About stock to the price of PRIMEDIA common stock over
various periods ending October 27, 2000. The following table sets forth the
high, low and average ratios of closing prices of About stock to PRIMEDIA common
stock for the following periods ending October 27, 2000:
RATIO OF CLOSING PRICES OF
ABOUT STOCK
TO PRIMEDIA COMMON
STOCK
PERIOD ENDING ------------------------------
OCTOBER 27, 2000 HIGH AVERAGE LOW
---------------- -------- -------- --------
Since IPO (March 24, 1999).................................. 6.667x 2.917x 1.203x
1 Year...................................................... 5.760x 2.740x 1.203x
6 Months.................................................... 2.550x 1.776x 1.203x
3 Months.................................................... 2.484x 1.785x 1.203x
1 Month..................................................... 2.330x 1.611x 1.203x
Merrill Lynch observed that the merger exchange ratio was within the ranges
of exchange ratio implied by this analysis.
RELATIVE DISCOUNTED CASH FLOW ANALYSIS. Merrill Lynch utilized the About
stand-alone discounted cash flow analysis (as described in this section) and the
discounted cash flow analysis of PRIMEDIA described below to calculate the
implied exchange ratio, dividing the discounted equity value per share of About
stock by the discounted equity value per share of PRIMEDIA common stock.
In performing the PRIMEDIA discounted cash flow analysis without giving
effect to the Expected Synergies, for the years 2001 through 2005, Merrill Lynch
calculated a range of equity values per share of PRIMEDIA common stock based
upon the sum of the discounted net present values of PRIMEDIA's 5-year stream of
projected unlevered free cash flows plus the discounted net present value of
PRIMEDIA's terminal value based on a range of multiples of its 2005 EBITDA.
Using projections provided by the management of PRIMEDIA, discount rates of
10.0% to 14.0% and terminal value multiples of 2005 EBITDA ranging from 12.0x to
14.0x, Merrill Lynch calculated a range of implied equity values per share of
PRIMEDIA common stock of $15.95 to $24.67.
Based upon these analyses, Merrill Lynch calculated the following implied
exchange ratio range:
IMPLIED DISCOUNTED CASH FLOW LOW HIGH
---------------------------- -------- --------
Analysis Exchange Ratio (excluding Expected Synergies)...... 1.580x 2.973x
Merrill Lynch observed that the merger exchange ratio was within the range
of the implied discounted cash flow exchange ratio implied by this analysis.
PRO FORMA MERGER ANALYSIS. Merrill Lynch analyzed the pro forma impact of
the merger on PRIMEDIA's combined after tax cash flow per year for 2001, 2002
and 2003. After tax cash flow is defined as net income plus depreciation,
amortization, non-cash compensation and deferred financing
53
costs. Using the projections and Expected Synergies provided by the management
of PRIMEDIA, the analyses indicated the following:
ACCRETION/(DILUTION%)
CALENDAR YEARS
------------------------------------
FINANCIAL STATISTIC 2001 2002 2003
------------------- -------- -------- --------
After Tax Cash Flow Per Share (Dilution %) (excluding
Expected Synergies)....................................... (21.8%) (9.0%) (6.0%)
After Tax Cash Flow Per Share Accretion % (including
Expected Synergies)....................................... 0.2% 17.8% 15.7%
Merrill Lynch also calculated a range of implied equity values per share of
PRIMEDIA common stock on a pro forma basis giving effect to the merger using a
multiple of revenue analysis, excluding Expected Synergies, and a multiple of
EBITDA analysis, including Expected Synergies, as provided by the management of
PRIMEDIA. Merrill Lynch then compared this range to the market price of PRIMEDIA
common stock as of October 27, 2000.
Utilizing pro forma projected revenues for PRIMEDIA after giving effect to
the merger, which were provided by the management of PRIMEDIA, Merrill Lynch
calculated PRIMEDIA's implied equity value on a per share basis as a multiple of
2001 pro forma revenues of 2.25x to 3.0x. This analysis resulted in an equity
price value per share of PRIMEDIA common stock of $11.22 to $18.03.
Utilizing pro forma projected EBITDA, including Expected Synergies, for
PRIMEDIA after giving effect to the merger, both of which were provided by the
management of PRIMEDIA, Merrill Lynch calculated PRIMEDIA's implied equity value
on a per share basis as a multiple of 2001 EBITDA of 15.0x to 30.0x. This
analysis resulted in an equity price value per share of PRIMEDIA common stock of
$12.81 to $34.83.
The summary set forth above does not purport to be a complete description of
the analyses performed by Merrill Lynch in arriving at its opinion. The
preparation of a fairness opinion is a complex process involving various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to partial or summary
description. In arriving at its opinion, Merrill Lynch made qualitative
judgments as to the significance and relevance of each analysis and factor
considered by it. Accordingly, Merrill Lynch believes that its analyses must be
considered as a whole and that selecting portions of its analyses and factors,
without considering all analyses and factors, could create a misleading view of
the analytic processes underlying Merrill Lynch's opinion.
In performing its analysis, Merrill Lynch made judgments and assumptions
with regard to industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
About, such as the impact of competition on the business of About and the
industry generally, industry growth and the absence of any material change in
the financial condition and prospects of About or the industry or in the
financial markets in general. No comparable company identified above is
identical to About, and no selected precedent transaction identified above is
identical to the merger. A complete analysis involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the comparable companies, or the companies included in the selected precedent
transactions, and other factors that could affect the public trading values of
such comparable companies to which they are being compared or the premiums paid
in such comparable transactions to which the merger is being compared;
mathematical analysis (such as determining the mean or the median) is not in
itself a meaningful method of using selected company data or selected precedent
transaction data.
PRIMEDIA has agreed to pay Merrill Lynch a customary fee for its services
and has also agreed to reimburse Merrill Lynch for reasonable out-of-pocket
expenses incurred in connection with its engagement as financial advisor. A
substantial portion of Merrill Lynch's fee will be paid upon
54
consummation of the merger. In addition, PRIMEDIA has agreed to indemnify
Merrill Lynch for certain liabilities arising out of its engagement.
Merrill Lynch has, in the past, provided financial advisory and financing
services to PRIMEDIA and to affiliates of its principal shareholder, KKR
Associates, L.P., and may continue to do so and has received, and may receive,
fees for the rendering of such services. In addition, in the ordinary course of
its business, Merrill Lynch may actively trade shares of PRIMEDIA common stock,
as well as shares of About stock, for its own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
these securities.
OPINION OF DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
About asked Donaldson, Lufkin & Jenrette Securities Corporation, in its role
as financial advisor to About, to render an opinion to the About board as to the
fairness, from a financial point of view, to the holders of About stock of the
consideration to be received by the holders of About stock in the merger. On
October 29, 2000, Donaldson, Lufkin & Jenrette delivered to the About board its
oral opinion, which was subsequently confirmed in writing, to the effect that,
as of that date, based on and subject to the assumptions, limitations and
qualifications set forth in its written opinion, the consideration to be
received by the holders of About stock pursuant to the merger agreement was fair
to the holders of About stock from a financial point of view.
The full text of Donaldson, Lufkin & Jenrette's opinion is attached as Annex
C to this joint proxy statement-consent solicitation-prospectus. Holders of
About stock are urged to read the Donaldson, Lufkin & Jenrette opinion carefully
in its entirety for the procedures followed, assumptions made, other matters
considered and limits of the review by Donaldson, Lufkin & Jenrette in
connection with its opinion. About and PRIMEDIA determined the consideration to
be received by the holders of About stock in arms' length negotiations between
About and PRIMEDIA in which Donaldson, Lufkin & Jenrette advised About.
In arriving at its opinion, Donaldson, Lufkin & Jenrette:
- reviewed the draft dated October 29, 2000 of the merger agreement and
assumed the final form of the merger agreement would not vary in any
respect material to Donaldson, Lufkin & Jenrette's analysis;
- reviewed financial and other information that was publicly available or
that About and PRIMEDIA furnished to it, including information provided
during discussions with their respective managements. Included in the
information provided during discussions with the respective managements
were financial projections of About for the period beginning October 1,
2000 and ending December 31, 2001 prepared by the management of About and
financial projections of PRIMEDIA for the period beginning October 1, 2000
and ending December 31, 2005 prepared by the management of PRIMEDIA;
- reviewed the reported price and trading activity of About stock and
PRIMEDIA common stock;
- compared financial and securities data of About and PRIMEDIA with similar
information with various other companies the securities of which are
publicly traded;
- reviewed the financial terms of selected recent business combinations in
the Internet content industry specifically and in other industries
generally; and
- performed such other financial studies, analyses and investigations as
Donaldson, Lufkin & Jenrette considered appropriate for the purposes of
rendering its opinion.
In rendering its opinion, Donaldson, Lufkin & Jenrette relied upon and
assumed the accuracy and completeness of all of the financial and other
information that was available to it from public sources, that was provided to
it by About and PRIMEDIA or their respective representatives, or that was
55
otherwise reviewed by Donaldson, Lufkin & Jenrette. With respect to the
financial projections supplied to Donaldson, Lufkin & Jenrette, Donaldson,
Lufkin & Jenrette relied on representations of About and PRIMEDIA, as the case
may be, that the projections were reasonably prepared on bases reflecting the
best currently available estimates and judgments of the management of About and
PRIMEDIA, as the case may be, as to the future operating and financial
performance of About and PRIMEDIA, respectively. Donaldson, Lufkin & Jenrette
did not assume responsibility for making any independent evaluation of any
assets or liabilities or for making any independent verification of any of the
information Donaldson, Lufkin & Jenrette reviewed. Donaldson, Lufkin & Jenrette
relied as to certain legal matters on advice of counsel to About.
Donaldson, Lufkin & Jenrette necessarily based its opinion on economic,
market, financial and other conditions as they existed on, and on the
information made available to Donaldson, Lufkin & Jenrette as of, the date of
its opinion. Donaldson, Lufkin & Jenrette states in its opinion that, although
subsequent developments may affect the conclusions reached in its opinion,
Donaldson, Lufkin & Jenrette does not have any obligation to update, revise or
reaffirm its opinion.
Donaldson, Lufkin & Jenrette expressed no opinion as to what the value of
PRIMEDIA common stock will be when issued to About's stockholders or as to the
prices at which PRIMEDIA common stock would actually trade at any time.
Donaldson, Lufkin & Jenrette's opinion did not address the relative merits of
the merger and any other business strategies considered by the About board.
Donaldson, Lufkin & Jenrette's opinion was solely for the information of the
About board and did not constitute a recommendation to any About stockholder as
to how any stockholder should vote on the merger.
About selected Donaldson, Lufkin & Jenrette as its financial advisor because
Donaldson, Lufkin & Jenrette is an internationally recognized investment banking
firm that has substantial experience providing strategic advisory services.
Donaldson, Lufkin & Jenrette was not retained as an advisor or agent to the
stockholders of About or any other person. As part of its investment banking
business, Donaldson, Lufkin & Jenrette is regularly engaged in the valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. About did
not impose any restrictions or limitations upon Donaldson, Lufkin & Jenrette
with respect to the investigations made or the procedures followed by Donaldson,
Lufkin & Jenrette in rendering its opinion.
The following is a summary of the financial analyses Donaldson, Lufkin &
Jenrette presented to the About board on October 29, 2000 in connection with the
preparation of Donaldson, Lufkin & Jenrette's opinion. No company or transaction
used in the analyses described below is directly comparable to About, PRIMEDIA
or the contemplated transaction. In addition, mathematical analysis such as
determining the mean or median is not in itself a meaningful method of using
selected company or transaction data. The analyses performed by Donaldson,
Lufkin & Jenrette are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than suggested by
these analyses. The information summarized in the tables which follow should be
read in conjunction with the accompanying text.
COMMON STOCK TRADING HISTORY. Donaldson, Lufkin & Jenrette examined the
historical closing prices of About stock from October 26, 1999 to October 27,
2000. During this time period, About stock reached a high of $105.81 per share
and a low of $16.00 per share. Donaldson, Lufkin & Jenrette also examined the
historical closing prices of PRIMEDIA common stock from October 26, 1999 to
October 27, 2000. During this time period, PRIMEDIA common stock reached a high
of $34.88 per share and a low of $11.00 per share.
56
ANALYSIS OF ABOUT.
COMPARABLE PUBLICLY TRADED COMPANY ANALYSIS. Donaldson, Lufkin & Jenrette
analyzed the market values and trading multiples of selected publicly traded
Internet Portal companies that Donaldson, Lufkin & Jenrette believed were
reasonably comparable to About. The first group of comparable companies,
categorized as small and middle capitalization Internet Portals, consisted of:
- Ask Jeeves, Inc.
- CNET Networks, Inc.
- GoTo.com, Inc.
- NBC Internet, Inc.
- Ticketmaster-CitySearch, Inc.
- Walt Disney Internet Group
The second group of comparable companies, categorized as large
capitalization Internet Portals, consisted of:
- America Online, Inc.
- Terra Networks S.A.
- Yahoo! Inc.
In examining these comparable companies, Donaldson, Lufkin & Jenrette
calculated the enterprise value of each company as a multiple of its respective
projected calendar year 2000 and 2001 revenue. The enterprise value of a company
is equal to the value of its fully-diluted common equity plus debt, the
liquidation value of outstanding preferred stock, if any, plus minority
interests, if any, minus cash and the value of certain other assets, including
equity investments in affiliates. All historical data was derived from publicly
available sources and all projected data was obtained from Wall Street research
reports. Donaldson, Lufkin & Jenrette's analysis of the comparable companies
yielded the following multiple ranges:
ENTERPRISE VALUE
-------------------
2000E 2001E
REVENUE REVENUE
-------- --------
Selected High.............................................. 5.0x 3.5x
Selected Low............................................... 2.5x 2.0x
Based on an analysis of this data and About's projected results for
comparable periods, Donaldson, Lufkin & Jenrette estimated a value per share of
About stock ranging from approximately $24.00 to approximately $35.00, compared
to the proposed price of $35.70 per share of About stock to be received in the
merger.
PRECEDENT MERGER AND ACQUISITION TRANSACTION ANALYSIS. Donaldson, Lufkin &
Jenrette reviewed selected acquisitions involving companies in the Internet
Portal industry that Donaldson, Lufkin & Jenrette believed are reasonably
comparable to the merger. These transactions consisted of:
TARGET/ACQUIROR:
- NetCreations, Inc./DoubleClick, Inc.
- Ziff-Davis Inc.--ZDNET/CNET Networks, Inc.
- Lycos, Inc./Terra Networks S.A.
- Cybergold, Inc./Mypoints.com, Inc.
- uBid, Inc./CMGI, Inc.
- MapQuest.com, Inc./America Online, Inc.
- YesMail.com/CMGI, Inc.
- Flycast Communications Corp./CMGI, Inc.
57
- Adforce, Inc./CMGI, Inc.
- NetGravity, Inc./DoubleClick, Inc.
- MovieFone, Inc./America Online, Inc.
- Geocities.com, Inc./Yahoo! Inc.
- Excite, Inc./@Home Corporation
- CitySearch, Inc./Ticketmaster Online Corporation
In examining these acquisitions, Donaldson, Lufkin & Jenrette calculated the
enterprise value of the acquired company implied by each of these transactions
as a multiple of projected calendar year 2000 and 2001 revenue. Donaldson,
Lufkin & Jenrette's analysis of these comparable acquisitions yielded the
following multiple ranges:
ENTERPRISE VALUE
-------------------
2000E 2001E
REVENUE REVENUE
-------- --------
Selected High.............................................. 5.0x 4.0x
Selected Low............................................... 2.5x 2.0x
Based on an analysis of this data and About's projected operating results
for comparable periods, Donaldson, Lufkin & Jenrette estimated a value per share
of About stock ranging from approximately $24.00 to approximately $40.00,
compared to the proposed price of $35.70 per share of About stock to be received
in the merger.
ANALYSIS OF PRIMEDIA. Donaldson, Lufkin & Jenrette conducted its analysis
of PRIMEDIA for the purpose of providing information relating to the trading
price of PRIMEDIA common stock on October 27, 2000. Donaldson, Lufkin & Jenrette
did not attempt to determine what the actual value of PRIMEDIA common stock
should be at any given date.
SUM-OF-THE PARTS ANALYSIS. Donaldson, Lufkin & Jenrette performed a
"sum-of-the-parts" analysis of PRIMEDIA by valuing each of its individual
business segments individually and then deriving a range of values for PRIMEDIA
as a whole. The PRIMEDIA business segments considered were its traditional
publishing business and its Internet business.
Traditional Publishing Business. Donaldson, Lufkin & Jenrette valued
PRIMEDIA's traditional publishing business by analyzing the market values
and trading multiples of selected publicly traded media and publishing
companies that Donaldson, Lufkin & Jenrette believed were reasonably
comparable to PRIMEDIA's traditional publishing business. These comparable
companies consisted of:
- Meredith Corporation
- Penton Media, Inc.
- McGraw-Hill Companies, Inc.
- Pearson PLC
- VNU N.V.
Donaldson, Lufkin & Jenrette reviewed the multiples of enterprise value
to estimated 2001 EBITDA represented by the share prices of the analyzed
companies. EBITDA means earnings before interest expense, taxes,
depreciation and amortization. Using this information and other factors
relevant in the valuation of PRIMEDIA's traditional publishing business,
Donaldson, Lufkin & Jenrette determined an estimated 2001 EBITDA multiple
range of 11.0x to 15.0x. This analysis resulted in an enterprise value for
PRIMEDIA's traditional publishing business ranging from approximately
$4.3 billion to approximately $5.8 billion.
Internet Business. Donaldson, Lufkin & Jenrette valued PRIMEDIA's
Internet business by analyzing the market values and trading multiples of
selected publicly traded Internet Portal
58
companies that Donaldson, Lufkin & Jenrette believed were reasonably
comparable to PRIMEDIA's Internet business. These comparable companies
consisted of the same group of companies that were evaluated under the
"Comparable Publicly Traded Company Analysis" for About discussed above.
Donaldson, Lufkin & Jenrette reviewed the multiples of enterprise value
to estimated 2001 revenue represented by the share prices of the analyzed
companies. Using this information and other factors relevant in the
valuation of PRIMEDIA's Internet business, Donaldson, Lufkin & Jenrette
determined an estimated 2001 revenue multiple range of 2.0x to 3.5x. This
analysis resulted in a enterprise value for PRIMEDIA's Internet business
ranging from approximately $188.2 million to approximately $329.4 million.
Total Sum-of-the-Parts Valuation. Based on the results of valuation of
PRIMEDIA's traditional publishing business and Internet business, and
including the approximate $50.0 million market value of PRIMEDIA's equity
investments, the sum-of-the-parts analysis resulted in an enterprise value
for PRIMEDIA ranging from approximately $4.4 billion to approximately
$6.1 billion, and a range of implied prices per share for PRIMEDIA common
stock ranging from approximately $13.49 to approximately $23.35, as compared
to a market price per share of $15.25 on October 27, 2000.
DISCOUNTED CASH FLOW ANALYSIS. Donaldson, Lufkin & Jenrette performed a
discounted cash flow analysis of the projected cash flows of PRIMEDIA for the
fiscal years ending December 31, 2001 through December 31, 2005 using
projections and assumptions provided by the management of PRIMEDIA. Donaldson,
Lufkin & Jenrette estimated the discounted cash flows for PRIMEDIA using
discount rates ranging from 10.5% to 12.5%, based on estimates relating to the
theoretical weighted average costs of capital of PRIMEDIA, and terminal
multiples of estimated EBITDA for PRIMEDIA's fiscal year ending December 31,
2005 ranging from 12.0x to 14.0x. Based on this analysis, Donaldson, Lufkin &
Jenrette estimated a value per share of PRIMEDIA common stock ranging from
approximately $18.09 to approximately $24.83, as compared to a market price per
share of $15.25 on October 27, 2000.
PRO FORMA FINANCIAL IMPACT ANALYSIS. Donaldson, Lufkin & Jenrette analyzed
selected pro forma financial effects resulting from the merger. In conducting
its analysis, Donaldson, Lufkin & Jenrette relied upon financial projections
provided by the managements of About and PRIMEDIA. Donaldson, Lufkin & Jenrette
analyzed the pro forma effect of the merger on projected cash earnings per share
of the combined company for 2000 and 2001. Cash earnings per share means
earnings per share before goodwill amortization. The analysis estimates that
without synergies the cash earnings per share to each PRIMEDIA stockholder is
accretive in pro forma 2000 and 2001, respectively.
MISCELLANEOUS. The summary set forth above does not purport to be a
complete description of the analyses performed by Donaldson, Lufkin & Jenrette
but describes, in summary form, the material elements of the presentation that
Donaldson, Lufkin & Jenrette made to the About board on October 29, 2000 in
connection with the preparation of Donaldson, Lufkin & Jenrette's fairness
opinion. The preparation of a fairness opinion involves various determinations
as to the most appropriate and relevant methods of financial analysis and the
application of these methods to the particular circumstances and, therefore,
such an opinion is not readily susceptible to summary description. Donaldson,
Lufkin & Jenrette conducted each of the analyses in order to provide a different
perspective on the transaction and to add to the total mix of information
available. Donaldson, Lufkin & Jenrette did not form a conclusion as to whether
any individual analysis, considered in isolation, supported or failed to support
an opinion as to fairness from a financial point of view. Rather, in reaching
its conclusion, Donaldson, Lufkin & Jenrette considered the results of the
analyses in light of each other and ultimately reached its opinion based on the
results of all analyses taken as a whole. Donaldson, Lufkin & Jenrette did not
place any particular reliance or weight on any
59
individual analysis, but instead concluded that its analyses, taken as a whole,
supported its determination. Accordingly, notwithstanding the separate factors
summarized above, Donaldson, Lufkin & Jenrette has indicated to About that it
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and the factors considered by it, without considering
all analyses and factors, could create an incomplete view of the evaluation
process underlying its opinion.
ENGAGEMENT LETTER. Pursuant to the terms of an engagement agreement dated
August 30, 2000, About has agreed to pay a fee that is customary in transactions
of this nature, a substantial portion of which is contingent upon the
consummation of the merger. In addition, About agreed to reimburse Donaldson,
Lufkin & Jenrette, upon Donaldson, Lufkin & Jenrette's request from time to
time, for all out-of-pocket expenses, including the reasonable fees and expenses
of counsel, Donaldson, Lufkin & Jenrette incurred in connection with its
engagement thereunder and to indemnify Donaldson, Lufkin & Jenrette and related
persons against certain liabilities in connection with its engagement, including
liabilities under U.S. federal securities laws. Donaldson, Lufkin & Jenrette and
About management negotiated the terms of the fee arrangement.
OTHER RELATIONSHIPS. In the ordinary course of business, Donaldson, Lufkin
& Jenrette and its affiliates may actively trade the debt and equity securities
of About and PRIMEDIA for their own and such affiliates' accounts and for the
accounts of their customers and, accordingly, may at any time hold a long or
short position in About or PRIMEDIA securities.
Donaldson, Lufkin & Jenrette has performed investment banking and other
services for About in the past, including lead managing a follow-on offering in
October 1999 and has been compensated for these services. Donaldson, Lufkin &
Jenrette has also performed investment banking and other services for affiliates
of KKR Associates, L.P. including but not limited to advising affiliates of
KKR Associates, L.P. with respect to mergers and acquisitions transactions and
equity and debt financings, and has been compensated for these services.
INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER
ABOUT. In considering the recommendation of the board of directors of About
to vote for the proposal to adopt the merger agreement, stockholders of About
should be aware that Scott P. Kurnit, Chairman and Chief Executive Officer of
About, and William C. Day, the President and Chief Operating Officer of About,
have agreements or arrangements that provide them with interests in the merger
that differ from those of About stockholders and which are described below. In
addition, certain options issued to directors of About accelerate upon a change
of control. The About board of directors was aware of these agreements and
arrangements during its deliberations of the merits of the merger and in
determining to recommend to the stockholders of About that they vote to adopt
the merger agreement.
MANAGEMENT POSITIONS. As described below under "Board of Directors and
Management after the Merger," under the merger agreement, Mr. Kurnit will
become a member of PRIMEDIA's board of directors, Chief Internet Officer of
PRIMEDIA and Chief Executive Officer of About following the merger. In
addition, Mr. Day will continue as the President and Chief Operating Officer
of About following the merger. Each will also receive options under the
PRIMEDIA option plan and restricted stock units of PRIMEDIA common stock.
60
ABOUT DIRECTOR STOCK OPTIONS. As of the record date, an aggregate of
approximately 97,800 shares of About stock were subject to options granted to
the About directors (other than Mr. Kurnit) under one of its equity-based
compensation plans. Upon a change of control, which will occur upon the approval
by the About stockholders of a transaction such as the merger, the vesting
schedules for 72,800 of these options will accelerate. Consequently, if the
adoption of the merger agreement is approved by the stockholders of About,
immediately prior to the effective time of the merger, these 72,800 options
granted to the About directors (other than Mr. Kurnit) shall become immediately
vested and exercisable.
ABOUT EMPLOYEE STOCK OPTIONS. As of the record date, approximately
1,089,122 shares of About stock were subject to options granted to executive
officers under About's equity-based compensation plans. The vesting schedules
for these options do not accelerate upon a change in control of About, if these
options are assumed by the successor or replaced with comparable stock options
(or other rights) with respect to shares of the successor. However, if an
employee of About is involuntarily terminated or voluntarily terminates for a
permitted reason within 12 months of the merger, the existing About stock option
plans call for the employee's unvested stock options to become vested and
exercisable.
Pursuant to the merger agreement, About will take all action necessary so
that each About stock option shall cease to represent a right to acquire shares
of About stock and will be converted into an option to acquire an appropriate
number of shares of PRIMEDIA common stock, with corresponding adjustments to the
exercise price of such options. Each such option will be assumed by PRIMEDIA.
See "The Merger--Treatment of Stock Options and Other Rights."
EMPLOYMENT AGREEMENTS. On October 29, 2000, Messrs. Kurnit and Day entered
into four year employment agreements, which become effective on the closing of
the merger. Pursuant to the terms of his employment agreement, as amended,
Mr. Kurnit will become a member of PRIMEDIA's board of directors, the Chief
Executive Officer of About following the merger and the Chief Internet Officer
of PRIMEDIA. Mr. Kurnit will receive a sign-on bonus of $36,483, an annual base
salary of $600,000 and will be eligible for an annual bonus of at least
$1,650,000 based upon the achievement of performance goals established by the
CEO of PRIMEDIA. As of the effective date of the merger, Mr. Kurnit will be
granted options to purchase 2,605,300 shares of PRIMEDIA common stock at an
exercise price equal to 30% of the fair market value per share on that date and
2,211,100 shares of restricted PRIMEDIA common stock. The options and restricted
shares shall vest at a rate of 25% per year, subject to Mr. Kurnit's continued
employment.
Pursuant to the terms of his employment agreement, as amended, Mr. Day will
continue as the President and Chief Operating Officer of About following the
merger. Mr. Day will receive a sign-on bonus of $12,282, an annual base salary
of $350,000 and will be eligible for an annual bonus of at least $650,000 based
upon the achievement of performance goals established by the CEO of About. As of
the effective date of the merger, Mr. Day will be granted options to purchase
877,000 shares of PRIMEDIA common stock at an exercise price equal to 30% of the
fair market value per share on that date and 744,350 shares of restricted
PRIMEDIA common stock. The options and restricted shares shall vest at a rate of
25% per year, subject to Mr. Day's continued employment.
Each employment agreement may be terminated by either party at any time. If
during the term of the agreement PRIMEDIA terminates the executive's employment
without cause, the executive terminates his employment for good reason,
following a change in control of PRIMEDIA the executive terminates his
employment for any reason or the agreement is terminated by reason of the
executive's death or disability, the executive (or his estate) will be entitled
to the following severance payments and benefits:
- any accrued but unpaid compensation;
61
- continued payment of base salary and minimum bonus for the remainder of
the employment term under the agreement; and
- accelerated vesting of all unvested stock options and restricted shares
granted in connection with the agreement.
Each employment agreement also provides that if the executive terminates his
employment due to his position being diminished the executive will be entitled
to the following severance payments and benefits:
- any accrued but unpaid compensation;
- continued payment of one-half of base salary and minimum bonus for the
remaining employment term under the agreement; and
- accelerated vesting of one half of all unvested stock options and one half
of all restricted shares.
Each employment agreement also contains customary provisions regarding
noncompetition, nonsolicitation and confidentiality.
SHARE LOCK-UP AGREEMENTS. On October 29, 2000, each of Mr. Kurnit and
Mr. Day also entered into a share lock-up agreement, as amended, with PRIMEDIA,
pursuant to which each agreed to specific restrictions regarding the
transferability of his shares of PRIMEDIA common stock issued in the merger.
Under the terms of these agreements, during the first year after the closing of
the merger, Messrs. Kurnit and Day may sell a portion of their shares of
PRIMEDIA common stock, subject to PRIMEDIA's right of first refusal with respect
to any sale. In the event that the gross proceeds received by Messrs. Kurnit and
Day from these sales during this first year are less than $25,000,000 and
$8,125,000, respectively, PRIMEDIA will pay them the amount of any shortfall.
The remainder of their shares of PRIMEDIA common stock are subject to certain
lock-up restrictions until the second anniversary of the closing of the merger.
INDEMNIFICATION AND INSURANCE. The merger agreement provides that, upon
completion of the merger, the surviving corporation will indemnify and hold
harmless, and provide advancement of expenses to, all past and present officers,
directors and employees of About and its subsidiaries:
- to the same extent those persons were indemnified or entitled to
advancement of expenses under About's certificate of incorporation,
by-laws and indemnification agreements; and
- to the fullest extent permitted by law.
The merger agreement also provides that the surviving corporation will cause
to be maintained, for a period of six years after completion of the merger, the
current policies of directors' and officers' liability insurance maintained by
About, or policies with a substantially comparable insurer of at least the same
coverage and amounts containing terms and conditions which are no less
advantageous to the insured, with respect to claims arising from facts or events
that occurred on or before the completion of the merger, although the surviving
corporation will not be required to make annual premium payments in excess of
150% of the annual premiums currently paid by About for directors' and officers'
liability insurance.
BOARD OF DIRECTORS AND MANAGEMENT AFTER THE MERGER
BOARD OF DIRECTORS. Under the merger agreement, upon completion of the
merger the board of directors of PRIMEDIA will be comprised of ten individuals,
nine of whom will be the existing members of PRIMEDIA's board of the directors,
and the tenth of whom will be Scott P. Kurnit of About. The existing members of
the board of directors are Thomas S. Rogers, Beverly C. Chell, Meyer Feldberg,
H. John Greeniaus, Perry Golkin, Henry R. Kravis, Charles G. McCurdy, George R.
Roberts and Michael T. Tokarz.
62
Biographical information with respect to the current directors of PRIMEDIA
is contained in PRIMEDIA's annual report on Form 10-K for the year ended
December 31, 1999 and PRIMEDIA's proxy statement for its 2000 annual meeting of
stockholders dated April 19, 2000, and is incorporated herein by reference.
Biographical information with respect to Mr. Kurnit is contained in About's
annual report on Form 10-K for the year ended December 31, 1999 and About's
proxy statement for its 2000 annual meeting of stockholders dated April 10,
2000, and is incorporated herein by reference.
MANAGEMENT. Mr. Kurnit will remain as Chief Executive Officer of About and
he will also become Chief Internet Officer of PRIMEDIA. William C. Day will
remain as Chief Operating Officer of About.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
In the opinion of Simpson Thacher & Bartlett, special tax counsel to
PRIMEDIA, and Brobeck, Phleger & Harrison LLP, special tax counsel to About, the
following discussion summarizes the material United States federal income tax
consequences of the merger that will generally apply to U.S. holders of About
stock.
For purposes of this discussion, a U.S. holder means:
- an individual citizen or resident of the United States;
- a corporation or other entity taxable as a corporation created or
organized under the laws of the United States or any of its political
subdivisions;
- a trust, if a U.S. court is able to exercise primary supervision over the
administration of the trust and one or more U.S. persons have the
authority to control all substantial decisions of the trust; or
- an estate that is subject to United States federal income tax on its
income regardless of its source.
This discussion does not address any tax consequences arising under the laws
of any state, locality or foreign jurisdiction. This discussion is not a
comprehensive description of all of the tax consequences that may be relevant to
you. For example, we have not described tax consequences that arise from rules
that apply to some classes of taxpayers. We have also not described tax
consequences that we assume to be generally known by investors. This discussion
is based upon the Internal Revenue Code of 1986, as amended (the "Code"), the
regulations of the United States Treasury Department and court and
administrative rulings and judicial decisions in effect on the date of this
prospectus. These laws may change, possibly retroactively, and any change could
affect the continuing validity of this discussion.
This discussion assumes that you hold your shares of About stock as a
capital asset and does not address the tax consequences that may be relevant to
you in light of your particular circumstances. In addition, it does not present
a description of the United States federal income tax laws applicable to you if
you are subject to special treatment under the United States federal income tax
laws, including if you are:
- a financial institution;
- a tax-exempt organization;
- an S corporation or other pass-through entity;
- an insurance company;
- a dealer in securities or foreign currencies;
- a trader in securities that elects the mark-to-market method of accounting
for your securities;
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- a person that has a functional currency other than the U.S. dollar;
- an investor in a pass-through entity;
- an About stockholder who received your About stock through the exercise of
employee stock options or otherwise as compensation;
- an About stockholder who holds About stock as part of a hedge, straddle or
conversion transaction; or
- a person subject to the alternative minimum tax provisions of the Code.
The summary that follows sets out the material United States federal income
tax consequences to U.S. holders who exchange their About stock for PRIMEDIA
common stock. As a condition to the closing, Simpson Thacher & Bartlett, tax
counsel to PRIMEDIA, and Brobeck, Phleger & Harrison LLP, tax counsel to About,
must render tax opinions that the merger will constitute a reorganization with
the meaning of Section 368(a) of the Code. The opinions of counsel will be based
upon (i) certain factual representations made by PRIMEDIA, About and Abracadabra
Acquisition Corporation, and (ii) the assumption that the transactions described
herein will be consummated in accordance with the terms of the merger agreement
and related agreements. PRIMEDIA and About will not seek a ruling from the
Internal Revenue Service concerning the tax consequences of the transactions
described herein. An opinion of counsel is not binding on the Internal Revenue
Service and we can give no assurance that the Internal Revenue Service will not
take a position contrary to one or more positions reflected in the opinions or
that the courts will uphold such opinions if challenged by the Internal Revenue
Service.
If the merger qualifies as a reorganization:
- you will not recognize gain or loss when you exchange your About stock
solely for PRIMEDIA common stock;
- if you receive cash instead of a fractional share of PRIMEDIA common stock
you will be treated as having received the cash in exchange for the
fractional share interest and generally will recognize capital gain or
loss on the deemed exchange in an amount equal to the difference between
the amount of cash received and the basis of the About stock allocable to
that fractional share;
- the aggregate tax basis of PRIMEDIA common stock you receive will be the
same as the aggregate tax basis of the About stock you surrender in the
exchange, decreased by the tax basis allocated to any fractional share
interest exchanged for cash; and
- the holding period of PRIMEDIA common stock you receive will include the
holding period of shares of About stock you surrender in the exchange.
BACKUP WITHHOLDING. If you are a noncorporate holder of About stock you may
be subject to backup withholding at a 31% rate on any cash payments received in
lieu of a fractional share interest in About stock. You will not be subject to
backup withholding, however, if you:
- furnish a correct taxpayer identification number and certify that you are
not subject to backup withholding on the substitute Form W-9 or successor
form included in the letter of transmittal to be delivered to you
following the completion of the merger;
- provide a certification of foreign status on Form W-8 or a successor form;
or
- are otherwise exempt from backup withholding.
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Any amounts withheld under the backup withholding rules will be allowed as a
refund or credit against your United States federal income tax liability,
provided you furnish the required information to the Internal Revenue Service.
REPORTING REQUIREMENTS. You may be required to retain records relating to
your About stock, and file with your U.S. federal income tax return a statement
setting forth facts relating to the merger.
TAX MATTERS ARE VERY COMPLICATED, AND THE TAX CONSEQUENCES OF THE MERGER TO
YOU WILL DEPEND UPON THE FACTS OF YOUR PARTICULAR SITUATION. WE ENCOURAGE YOU TO
CONSULT YOUR OWN TAX ADVISORS REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE
MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE APPLICABILITY OF
FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS AND THE EFFECT OF ANY PROPOSED CHANGE
IN THE TAX LAWS.
ACCOUNTING TREATMENT OF THE MERGER
PRIMEDIA intends to account for the merger as the accounting acquiror in a
purchase business combination for financial reporting and accounting purposes,
under generally accepted accounting principles. After the merger, the results of
operations of About will be included in the consolidated financial statements of
PRIMEDIA.
REGULATORY APPROVALS
HART-SCOTT-RODINO.
Effective November 9, 2000, PRIMEDIA and About filed their respective
Pre-Merger Notification and Report Forms with the Federal Trade Commission or
the Department of Justice under the Hart-Scott-Rodino Act. The companies were
notified on November 22, 2000 that early termination of the waiting period was
granted. The Antitrust Division of the Department of Justice and the Federal
Trade Commission, as well as a state antitrust authority or private person, may
challenge the merger at any time before or after the merger is completed.
OTHER APPROVALS. In addition, the merger will require certain notices to be
filed in Delaware and notices or approvals in certain of the other states where
PRIMEDIA and About are engaged in business.
The approval of an application means only that the regulatory criteria for
approval have been satisfied or waived. It does not mean that the approving
authority has determined that the consideration to be received by About
stockholders is fair. Regulatory approval does not constitute an endorsement or
recommendation of the merger.
EXCHANGE OF ABOUT STOCK CERTIFICATES
When the merger is completed, if you are an About stockholder, the exchange
agent will mail to you a letter of transmittal and instructions for use in
surrendering your About stock certificates in exchange for statements indicating
book-entry ownership of PRIMEDIA stock or, if requested, stock certificates.
When you deliver your stock certificates to the exchange agent along with a
properly executed letter of transmittal and any other required documents, your
stock certificates will be canceled and you will receive statements indicating
book-entry ownership of PRIMEDIA common stock or, if requested, stock
certificates representing the number of full shares of PRIMEDIA stock to which
you are entitled under the merger agreement. About stockholders will receive
payment in cash, without interest, instead of any fractional shares of PRIMEDIA
common stock that would have been otherwise issuable to them as a result of the
merger. The amount of cash payable to any About stockholder will be an amount
equal to the product of any fractional share of PRIMEDIA common stock which the
holder would have been entitled to receive MULTIPLIED BY the closing price on
the New York Stock Exchange for a share of PRIMEDIA common stock as reported by
The Wall Street Journal on the closing date of the merger, rounded down to the
nearest cent.
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YOU SHOULD NOT SUBMIT YOUR ABOUT STOCK CERTIFICATES FOR EXCHANGE UNTIL YOU
RECEIVE THE TRANSMITTAL INSTRUCTIONS AND A FORM OF LETTER OF TRANSMITTAL FROM
THE EXCHANGE AGENT.
You are not entitled to receive any dividends or other distributions on
PRIMEDIA stock until the merger is completed and you have surrendered your About
stock certificates in exchange for PRIMEDIA stock certificates.
If there is any dividend or other distribution on PRIMEDIA stock with a
record date after the date on which the merger is completed and a payment date
prior to the date you surrender your About stock certificates in exchange for
PRIMEDIA stock certificates, you will receive the dividend or distribution,
without interest, with respect to the whole shares of PRIMEDIA stock issued to
you promptly after they are issued. If there is any dividend or other
distribution on PRIMEDIA stock with a record date after the date on which the
merger is completed and a payment date after the date you surrender your About
stock certificates in exchange for PRIMEDIA stock certificates, you will receive
the dividend or distribution, without interest, with respect to the whole shares
of PRIMEDIA stock issued to you promptly after the payment date.
PRIMEDIA will only issue PRIMEDIA shares or cash instead of a fractional
share in a name other than the name in which a surrendered About stock
certificate is registered if you present the exchange agent with all documents
required to show and effect the unrecorded transfer of ownership and show that
you paid any applicable stock transfer taxes.
TREATMENT OF STOCK OPTIONS AND OTHER RIGHTS
When the merger is completed, PRIMEDIA will assume each outstanding About
employee stock option and each option will be deemed to constitute an option to
acquire a number of shares of PRIMEDIA common stock equal to the number of
shares of About subject to the option multiplied by the exchange ratio, rounded
down if necessary to the nearest whole share. The exercise price per share for
the assumed options will be the exercise price per share under the About stock
options divided by the exchange ratio, rounded down to the nearest cent. If an
employee of About is involuntarily terminated or voluntarily terminates for a
permitted reason within 12 months of the merger, the employee's unvested stock
options become vested and exercisable. The other material terms of all assumed
About options referred to above will continue to apply.
If necessary, PRIMEDIA will file a registration statement covering the
issuance of the shares of PRIMEDIA common stock subject to each converted About
option and will maintain the effectiveness of that registration statement for as
long as any of the options remain outstanding.
Immediately prior to the effective time of the merger, the vesting schedule
for options granted to the directors of About (other than Mr. Kurnit) under the
Automatic Option Grant Program under About's Amended and Restated 1998 Stock
Option/Stock Issuance Plan shall accelerate if the About stockholders approve
the adoption of the merger agreement. These options may be exercised immediately
prior to the effective time of the merger and exchanged for shares of PRIMEDIA
common stock in the merger. If they are not exercised, these options will
terminate upon completion of the merger.
Immediately prior to the merger, each outstanding purchase right under
About's employee stock purchase plan will be exercised for shares of About at
the price per share under the plan. The shares will then be considered
outstanding for purposes of the merger.
RESTRICTIONS ON SALES OF SHARES OF AFFILIATES OF PRIMEDIA AND ABOUT
The shares of PRIMEDIA common stock to be issued in connection with the
merger will be registered under the Securities Act and will be freely
transferable under the Securities Act, except for shares issued to any person
who is deemed to be an "affiliate" of About at the time of its special
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meeting. About expects that each of those affiliates will agree with PRIMEDIA
that the affiliate will not transfer any shares of PRIMEDIA stock received in
the merger except in compliance with the Securities Act. This joint proxy
statement-consent solicitation-prospectus does not cover resales of PRIMEDIA
common stock by affiliates of PRIMEDIA and About.
STOCK EXCHANGE LISTING
PRIMEDIA will use its reasonable efforts to cause the following shares of
PRIMEDIA to be approved for listing on the New York Stock Exchange, subject to
official notice of issuance, before the completion of the merger:
- PRIMEDIA common stock to be issued in the merger; and
- PRIMEDIA common stock reserved for issuance upon exercise of About stock
options.
It is a condition to completion of the merger that the listing of the
PRIMEDIA common stock to be issued in the merger be effected.
APPRAISAL RIGHTS
Under Delaware law, the common stockholders of PRIMEDIA and About are not
entitled to appraisal rights in connection with the merger.
DELISTING AND DEREGISTRATION OF ABOUT STOCK AFTER THE MERGER
When the merger is completed, the About stock will be delisted from the
Nasdaq National Market and deregistered under the Securities Exchange Act.
THE MERGER AGREEMENT
This section of the joint proxy statement-consent solicitation-prospectus
describes the material terms of the merger agreement. The following summary is
qualified in its entirety by reference to the complete text of the merger
agreement, which is incorporated by reference and attached as Annex D to this
joint proxy statement-consent solicitation-prospectus. We urge you to read the
full text of the merger agreement.
COMPLETION OF THE MERGER. The merger will be completed when we file a
certificate of merger with the Delaware Secretary of State. However, we may
agree to a later time for completion of the merger and specify that time in the
certificate of merger. We will file the certificate of merger as soon as
practicable after the satisfaction or waiver of the closing conditions in the
merger agreement, which are described below.
We expect to complete the merger by February 26, 2001.
CONDITIONS TO COMPLETION OF THE MERGER.
CONDITIONS TO BOTH PARTIES' OBLIGATIONS. We may not complete the merger
unless each of the following conditions is satisfied:
- the merger agreement has been adopted by the stockholders of About;
- no restraining order or injunction prohibiting completion of the merger is
in effect;
- any waiting period applicable to the merger under the federal antitrust
laws shall have terminated or expired;
- the registration statement of which this joint proxy statement-consent
solicitation-prospectus is a part has been declared effective by the
Securities and Exchange Commission and is not subject
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to any stop order or proceedings seeking a stop order and PRIMEDIA has
received all state securities and blue sky permits necessary to issue the
PRIMEDIA common stock in the merger;
- the shares of PRIMEDIA common stock issuable to the holders of About stock
pursuant to the merger agreement have been approved for listing on the New
York Stock Exchange, subject to official notice of issuance; and
- any waiting period under the proxy rules applicable to PRIMEDIA shall have
expired.
CONDITIONS TO EACH PARTY'S OBLIGATIONS. Each party's obligation to
complete the merger is also subject to the satisfaction or waiver of the
following additional conditions:
- the representations and warranties of the other party must be true and
correct as of the date of the merger agreement and, unless the
representations and warranties speak as of an earlier date, as of the
closing date of the merger, subject, in most cases, to any exceptions that
do not have, and could not reasonably be expected to have, individually or
in the aggregate, a material adverse effect on the other party;
- each party has received an opinion from its tax counsel that the merger
will be treated as a tax-free reorganization for United States federal
income tax purposes;
- at any time on or after the date of the merger agreement no condition or
event has occurred which could, individually or in the aggregate,
reasonably be likely to have a material adverse effect on either party;
- no governmental authority has threatened to or brought an action before
any United States court or other governmental body of competent
jurisdiction which challenges or seeks to restrain or prohibit the
consummation of the merger; and
- all approvals or consents of any governmental authority in connection with
the merger and the other transactions contemplated by the merger agreement
must have been obtained, and all approvals or consents must be in full
force and effect.
In addition, PRIMEDIA's obligation to complete the merger is subject to the
satisfaction or waiver of the following additional conditions:
- PRIMEDIA has received from About a letter identifying all affiliates of
About and a letter from each affiliate;
- PRIMEDIA has received comfort letters from About's accountants;
- Each member of the board of directors of About has delivered to About his
or her written resignation as a director of About; and
- Messrs. Kurnit and Day have been employed by About and shall be ready,
willing and able to begin employment with PRIMEDIA.
For purposes of the merger agreement, the term "material adverse effect"
means, with respect to either of us, a material adverse change or effect that
would be materially adverse to the business, properties, assets, condition
(financial or otherwise), or results of operations of our respective companies
and subsidiaries taken as a whole or that would materially impair the ability of
our respective companies to perform our obligations under the merger agreement.
However, any change or event caused by or resulting from the following will not
be deemed to have a material adverse effect:
- any employee attrition after the date of the merger agreement;
- any change arising from the public announcement of the merger and the
transactions contemplated by the merger agreement;
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- any change in the market price or trading volume of our respective common
stock; or
- any adverse effect attributable solely to conditions affecting the
business-to-consumer Internet industry or the publishing business, as
applicable, the United States economy as a whole or foreign economies in
locations where either of us or our affiliates has material operations or
sales (and not having a disproportionate effect on either of us).
NO SOLICITATIONS OF ALTERNATIVE TRANSACTIONS. The merger agreement contains
detailed provisions prohibiting About from seeking an alternative transaction to
the merger. Under these "no solicitation" provisions, About has agreed that it
will not:
- initiate, solicit, knowingly encourage or otherwise facilitate any
inquires or the making of an acquisition proposal, as described below; or
- have any discussions with, or provide any confidential information or data
to, any person relating to an acquisition proposal, or engage in any
negotiations concerning an acquisition proposal, or knowingly facilitate
any effort or attempt to make or implement an acquisition proposal or
accept an acquisition proposal.
For purposes of the merger agreement, the term "acquisition proposal" means
any proposal or offer with respect to, or a transaction to effect:
- a merger, reorganization, share exchange, consolidation, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving About or any of its subsidiaries; or
- any purchase or sale of all or any significant portion of About's assets
or 15% or more of the equity securities of About or any of its
subsidiaries.
The merger agreement permits About to comply with Rule 14e-2 under the
Securities Exchange Act with regard to an acquisition proposal. In addition, if
About receives an unsolicited bona fide written acquisition proposal, it may
engage in discussions or negotiations with, or provide information to, the
person making that acquisition proposal if:
- About has not yet held its stockholder meeting to vote on the adoption of
the merger agreement;
- the acquisition proposal is a superior proposal, as described below, and
was not solicited by the board of directors or the result of a breach of
About's confidentiality obligations under the merger agreement;
- About's board of directors determines in good faith, based on the advice
of its outside legal advisors, that the failure to participate in
discussions or negotiations with, or to provide information to the person
making the superior proposal would be in violation of its fiduciary duties
under applicable law;
- before providing any information or data, About enters into a
confidentiality agreement with the person making the proposal having terms
that are no less favorable to About than those in the confidentiality
agreement between About and PRIMEDIA; and
- before providing any information or data to any person or entering into
discussions or negotiations with any person, the board of directors of
About notifies PRIMEDIA promptly of:
- inquiries, proposals or offers received by, any information requested
from, or any discussions or negotiations sought to be initiated or
continued with, any of its representatives; and
- the identity of the person and the material terms and conditions of any
proposals or offers.
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About will also inform PRIMEDIA reasonably promptly of any material change in
the terms of any proposal or offer and in any event notify PRIMEDIA 24 hours in
advance before an agreement is reached.
For purposes of the merger agreement, "superior proposal" means a bona fide
written acquisition proposal to acquire a majority of the assets or voting power
of About which the board of directors of About concludes in good faith, after
consultation with a financial advisor, taking into account all legal, financial,
regulatory and other aspects of the proposal and the person making the proposal:
- is more favorable to the stockholders of About from a financial point of
view than the merger; and
- is reasonably capable of being completed.
About has agreed in the merger agreement that:
- it will immediately terminate any activities, discussions or negotiations
existing as of the date of the merger agreement with any parties conducted
before that date with respect to any acquisition proposal; and
- it will promptly inform its directors, officers, employees and
representatives of the foregoing restrictions in the merger agreement.
Nothing contained in the "no solicitation" provisions of the merger
agreement will permit About to terminate the merger agreement or affect any of
its other obligations under the merger agreement.
BOARD OF DIRECTOR'S COVENANT TO RECOMMEND MERGER. In the merger agreement,
About's board of directors agreed to recommend to its stockholders that they
vote to adopt the merger agreement at the special stockholder's meeting that it
will hold for that purpose and to take all reasonable and lawful action to
solicit stockholder approval. About's board of directors may not withdraw, amend
or modify its recommendation in a manner that is adverse to PRIMEDIA, except if:
- it has complied with the "no-solicitation" provisions described above;
- an unsolicited superior proposal is pending at the time of the withdrawal,
amendment or modification;
- it notifies PRIMEDIA of the superior proposal at least three business days
in advance of the withdrawal, amendment or modification; and
- PRIMEDIA has not, during the period before the withdrawal, amendment or
modification, offered to enter into a transaction with About on
substantially the same or more favorable financial terms to About as the
superior proposal.
In the event that About's board of directors makes a withdrawal, amendment
or modification, About still must call a special meeting of its stockholders to
consider and vote upon the merger agreement. About is not relieved from its
obligations described above by the commencement, public proposal, public
disclosure or communication of any acquisition proposal.
TERMINATION. We may terminate the merger agreement at any time prior to the
completion of the merger, whether before or after the About stockholder approval
has been obtained, by mutual written consent.
In addition, either of us may terminate the merger agreement:
- if the merger is not completed on or before June 30, 2001, except that
this right to terminate will not be available to any party whose failure
to perform its obligations under the merger agreement has been the cause
of the failure of the merger to be completed by June 30, 2001;
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- if the approval of the stockholders of About is not obtained by reason of
the failure to obtain the required vote at its stockholders' meeting; or
- if any governmental entity of competent jurisdiction issues a final order
or ruling or takes any other final action restraining, enjoining or
otherwise prohibiting the merger, and the order, ruling or other action
has become final and nonappealable.
About may terminate the merger agreement:
- if PRIMEDIA breaches any of its representations and warranties contained
in the merger agreement which could reasonably be expected to have a
material adverse effect upon PRIMEDIA, as described above, or materially
adversely affect or delay the completion of the merger; or
- if PRIMEDIA fails to cure within ten days following notice of any breach
of a covenant or agreement contained in the merger agreement which could
reasonably be expected to have a material adverse effect upon PRIMEDIA, as
described above, or materially adversely affect or delay the completion of
the merger.
PRIMEDIA may terminate the merger agreement:
- if About breaches any of its representations and warranties contained in
the merger agreement which could reasonably be expected to have a material
adverse effect upon About, as described above, or materially adversely
affect or delay the completion of the merger;
- if About fails to cure within ten days following notice of any breach of a
covenant or agreement contained in the merger agreement which could
reasonably be expected to have a material adverse effect upon About, as
described above, or materially adversely affect or delay the completion of
the merger;
- if About's board of directors fails to recommend or withdraws, modifies or
amends in any respect adverse to PRIMEDIA its approval or recommendation
of the merger agreement, the merger, or any of the transactions
contemplated thereby, or approves or recommends a superior proposal;
- if About breaches any of its obligations under the "no solicitation"
provisions described above; or
- if any person or group becomes the beneficial owner of at least 25% of
About's stock or acquires 25% or more of the assets of About and its
subsidiaries, taken as a whole.
TERMINATION FEES. The merger agreement provides that About may be required
to pay a termination fee to PRIMEDIA of $23.5 million within two business days
in the following circumstances:
- About's board of directors fails to recommend or withdraws, modifies or
amends in any respect adverse to PRIMEDIA its approval or recommendation
of the merger agreement, the merger, or any of the transactions
contemplated thereby, or approves or recommends a superior proposal;
- any person or group becomes the beneficial owner of at least 25% of
About's stock or acquires 25% or more of the assets of About and its
subsidiaries, taken as a whole; or
- About enters into an alternative transaction within 18 months after the
termination of the merger agreement by:
- either party because the approval of the stockholders of About is not
obtained by reason of the failure to obtain the required vote at its
stockholders' meeting;
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- PRIMEDIA because About breaches any of its representations and
warranties contained in the merger agreement which could reasonably be
expected to have a material adverse effect upon About, as described
above, or materially adversely affect or delay the completion of the
merger; or
- PRIMEDIA because About fails to cure within ten days following notice
of any breach of a covenant or agreement contained in the merger
agreement which could reasonably be expected to have a material adverse
effect upon About, as described above, or materially adversely affect
or delay the completion of the merger.
About will also pay PRIMEDIA's out-of-pocket expenses and fees in connection
with the transactions contemplated by the merger agreement up to $1 million
within two business days if the merger agreement is terminated because:
- the approval of the stockholders of About is not obtained by reason of the
failure to obtain the required vote at its stockholders' meeting;
- About breaches any of its representations and warranties contained in the
merger agreement which could reasonably be expected to have a material
adverse effect upon About, as described above, or materially adversely
affect or delay the completion of the merger;
- About fails to cure within ten days following notice of any breach of a
covenant or agreement contained in the merger agreement which could
reasonably be expected to have a material adverse effect upon About, as
described above, or materially adversely affect or delay the completion of
the merger;
- About's board of directors fails to recommend or withdraws, modifies or
amends in any respect adverse to PRIMEDIA its approval or recommendation
of the merger agreement, the merger, or any of the transactions
contemplated thereby, or approves or recommends a superior proposal;
- About breaches any of its obligations under the "no solicitation"
provisions described above; or
- any person or group becomes the beneficial owner of at least 25% of
About's stock or acquires 25% or more of the assets of About and its
subsidiaries, taken as a whole.
CONDUCT OF BUSINESS PENDING THE MERGER. Under the merger agreement, each of
us has agreed to various specific restrictions relating to the conduct of our
businesses before the completion of the merger.
About has agreed to operate its business in the ordinary course and in a
manner consistent with past practice. Among other matters, without the prior
written consent of PRIMEDIA, About or its subsidiaries will not:
- amend its certificate of amendment, by-laws or other organizational
documents;
- issue or sell capital stock other than specified stock options issued to
employees;
- pay dividends;
- reclassify, combine, split, subdivide redeem or otherwise acquire any
capital stock;
- acquire any business or division;
- sell any assets or rights;
- incur any indebtedness;
- enter into, amend or terminate any material contract or agreement except
in the ordinary course of business consistent with past practice;
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- enter into agreements with affiliates;
- enter into material commitments;
- enter into any new material line of business;
- change the form guide agreements used by About and its subsidiaries;
- make capital expenditures in excess of specified amounts;
- increase or amend the compensation or benefits of any of its employees,
grant any severance, establish new employee benefits plans, or amend the
terms of any outstanding options;
- change accounting policies or principles;
- take any action that would prevent the transaction from qualifying as a
reorganization under sections 368(a)(1)(A) and 368(a)(2)(E) of the
Internal Revenue Code;
- make or change any material tax election inconsistent with past practice
or settle or compromise any tax liabilities;
- settle or compromise any pending or threatened material suit, action or
claim;
- adopt a plan of complete or partial liquidation, restructuring or
reorganization;
- pay liabilities other than in the ordinary course of business and
consistent with past practice;
- effectuate a "plant closing" or a "mass layoff" as defined in the WARN
Act;
- fail to maintain existing insurance policies; or
- take any action described above or any action which would make the
representations and warranties of About in the merger agreement untrue and
incorrect.
PRIMEDIA has agreed that, without the prior consent of About, it will not:
- amend its organizational documents in any manner adverse to holders of its
common stock;
- combine, reclassify, split or subdivide the PRIMEDIA common stock;
- take any action that would make any of the representations and warranties
of PRIMEDIA in the merger agreement untrue and incorrect;
- issue or sell shares to a record or beneficial owner of 5% or more of its
voting securities except on an arm's length basis;
- adopt a plan of complete or partial liquidation, restructuring or
reorganization; or
- take any action that would prevent the transaction from qualifying as a
reorganization under sections 368(a)(1)(A) and 368(a)(2)(E) of the
Internal Revenue Code.
ADDITIONAL AGREEMENTS. Each of us has agreed to cooperate with the other
and to use our reasonable best efforts to take all actions necessary to comply
promptly with applicable laws and regulations to complete the merger as soon as
practicable including:
- preparing and filing this joint proxy statement-consent
solicitation-prospectus and required filings under the Hart-Scott-Rodino
Act (which filings have been approved); and
- making all required regulatory filings and applications and obtaining all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental entities and parties to contracts with About and
its subsidiaries as are necessary for the consummation of the transactions
contemplated by the merger agreement and the fulfillment of the conditions
to the merger.
BENEFITS MATTERS. Until December 31, 2001, PRIMEDIA will provide
compensation and benefits to About employees on terms no less favorable in the
aggregate to the benefit plans in effect immediately prior to the completion of
the merger (other than equity-based compensation). For purposes of determining
eligibility to participate and vesting in benefit plans, PRIMEDIA will give
effect to years of service with About in the same manner that credit for years
of service was given by About. No employee electing coverage under the medical
insurance plans of PRIMEDIA will be excluded from coverage on the bases of a
pre-existing condition that was not also excluded under About's medical
insurance plan.
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AMENDMENT, EXTENSION AND WAIVER. We may amend the merger agreement by
action taken or authorized by our respective boards of directors, at any time
before or after adoption of the merger agreement by About's stockholders. After
adoption of the merger agreement by About's stockholders, no amendment may be
made which by law requires further approval by About's stockholders, unless that
further approval is obtained. All amendments to the merger agreement must be in
writing signed by both of us.
At any time before the completion of the merger, we may:
- extend the time for the performance of any of the obligations or other
acts provided for in the merger agreement;
- waive any inaccuracies in the representations and warranties contained
in the merger agreement or in any document delivered pursuant to the
merger agreement; and
- waive compliance with any of the agreements or conditions contained in
the merger agreement, subject to the requirements of applicable law.
The failure of either of us to assert any of our rights under the merger
agreement or otherwise does not constitute a waiver of those rights.
FEES AND EXPENSES. Except in certain cases where About is responsible for
up to $1 million of PRIMEDIA's expenses, whether or not the merger is completed,
all costs and expenses incurred in connection with the merger agreement and the
merger will be paid by the party incurring the expenses. However, each of
PRIMEDIA and About will pay one-half of the costs and expenses incurred in
printing and mailing this joint proxy statement-consent solicitation-prospectus.
REPRESENTATIONS AND WARRANTIES. The merger agreement contains customary and
generally reciprocal representations and warranties by each of us relating to,
among other things:
- corporate organization and similar corporate matters;
- capital structure;
- authorization and absence of conflicts;
- compliance with applicable laws;
- documents filed with the SEC and the preparation of financial
statements;
- information supplied in connection with this joint proxy
statement-consent solicitation-prospectus and the registration
statement of which it is a part;
- absence of specified changes or events;
- legal proceedings;
- employee benefits;
- taxes;
- opinion of financial advisor;
- brokers and finders;
- affiliate transactions;
- required stockholder approvals; and
- reorganization qualification.
In addition, About has provided representations and warranties relating to:
- subsidiaries;
- environmental matters;
- takeover laws;
- material contracts;
- guide agreements;
- absence of breaches or defaults of material contracts or guide
agreements;
- intellectual property;
74
- insurance; and
- labor matters.
THE VOTING AGREEMENTS
This section of the joint proxy statement-consent solicitation-prospectus
describes the material terms of the voting agreements. The following summary is
qualified in its entirety by reference to the complete text of the voting
agreements, which are incorporated by reference and attached as Annex E,
Annex F and Annex G to this joint proxy statement-consent
solicitation-prospectus. We urge you to read the voting agreements.
PRIMEDIA VOTING AGREEMENT WITH ABOUT STOCKHOLDERS. In order to induce
PRIMEDIA to enter into the merger agreement, Mr. Kurnit, four other directors of
About and Mr. Day entered into a voting agreement with PRIMEDIA under which they
agreed to vote their shares of About stock in favor of the merger and of the
execution and delivery by About of the merger agreement and the approval of the
terms of the merger agreement and each of the other transactions contemplated by
the merger agreement. (The sixth director does not own any shares of About
stock.) These stockholders also agreed to vote their About shares against any
competing transaction or any proposal which would prevent or interfere with or
delay the merger, the merger agreement or any of the transactions contemplated
by the merger agreement. These stockholders also granted to designees of
PRIMEDIA irrevocable proxies to vote their About shares, in the complete
discretion of PRIMEDIA, at any meeting of About stockholders or in any other
circumstances upon which their vote, consent or approval is sought regarding the
matters described above.
These stockholders also agreed not to sell, transfer or otherwise dispose of
their About shares or take any other action that would restrict, limit or
interfere with their performance under this voting agreement. As of the record
date, these stockholders of About own a total of 1,422,088 shares of About
stock, representing approximately 6.4% of the About stock outstanding as of the
record date.
ABOUT VOTING AGREEMENT WITH ABRA LLC. Abra LLC entered into a voting
agreement with About under which Abra LLC agreed to vote its shares of About
stock in favor of the merger and the approval of the terms of the merger
agreement and each of the other transactions contemplated by the merger
agreement. Abra LLC also agreed to vote its About shares against any competing
transaction or any proposal which would prevent or interfere with or delay the
merger, the merger agreement or any of the transactions contemplated by the
merger agreement. Abra LLC also granted to designees of About irrevocable
proxies to vote its About shares, in the complete discretion of About, at any
meeting of About stockholders or in any other circumstances upon which their
vote, consent or approval is sought regarding the matters described above.
Abra LLC also agreed not to sell, transfer or otherwise dispose of its About
shares or take any other action that would restrict, limit or interfere with its
performance under this voting agreement. As of the record date, Abra LLC owned a
total of 2,532,200 shares of About stock, representing approximately 11.4% of
the About stock outstanding as of the record date.
ABOUT VOTING AGREEMENT WITH PRIMEDIA STOCKHOLDERS. In order to induce About
to enter into the merger agreement, the following stockholders of PRIMEDIA
entered into a voting agreement with About: 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. Under this voting
agreement, these stockholders agreed to deliver to PRIMEDIA their written
consent to authorize the issuance of PRIMEDIA common stock in the merger as
contemplated by the merger agreement, which consent was delivered on
November 9, 2000. These stockholders also agreed to vote their PRIMEDIA shares
against any proposal which would prevent or interfere with or delay the merger,
the merger agreement or any of the transactions contemplated by the merger
agreement.
As of the record date, these stockholders of PRIMEDIA owned a total of
123,552,932 shares of PRIMEDIA common stock, representing approximately 74.0% of
the PRIMEDIA common stock outstanding as of the record date.
75
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma statements of consolidated operations for the nine
months ended September 30, 2000 and the year ended December 31, 1999 give effect
to the acquisition of all of the outstanding common stock of About as if it had
occurred on January 1, 1999. The unaudited pro forma consolidated balance sheet
as of September 30, 2000 gives effect to the acquisition of About as if it had
occurred on September 30, 2000 based on the purchase method of accounting.
PRIMEDIA believes the accounting used for the pro forma adjustments provides
a reasonable basis on which to present the unaudited pro forma consolidated
financial statements. The pro forma adjustments do not include any synergies
expected to be derived from the merger. In addition, the pro forma adjustments
do not include the pro forma impact of PRIMEDIA's and About's acquisitions
during 1999 and 2000 because the impact of such acquisitions is not significant
to the consolidated entity. The pro forma statements of consolidated operations
and pro forma consolidated balance sheet are unaudited and were derived by
adjusting the historical consolidated financial statements of PRIMEDIA and
About. THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS ARE PROVIDED
FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED TO BE INDICATIVE OF
PRIMEDIA'S CONSOLIDATED FINANCIAL POSITION OR RESULTS OF OPERATIONS HAD THE
TRANSACTION BEEN CONSUMMATED ON THE DATE ASSUMED AND DO NOT PROJECT PRIMEDIA'S
CONSOLIDATED FINANCIAL POSITION OR RESULTS OF OPERATIONS FOR ANY FUTURE DATE OR
PERIOD.
The unaudited pro forma consolidated financial statements and accompanying
notes should be read in conjunction with the PRIMEDIA historical consolidated
financial statements and notes thereto included in PRIMEDIA's Annual Report on
Form 10-K for the year ended December 31, 1999 and in PRIMEDIA's Quarterly
Report on Form 10-Q for the quarter ended September 30, 2000, as well as the
About historical consolidated financial statements and notes thereto included in
About's Annual Report on Form 10-K for the year ended December 31, 1999 and in
About's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000.
76
PRIMEDIA INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AT SEPTEMBER 30, 2000
(DOLLARS IN THOUSANDS)
HISTORICAL
------------------------ PRO FORMA PRO FORMA
PRIMEDIA ABOUT ADJUSTMENTS CONSOLIDATED
-------- ---------- ----------- ------------
ASSETS
Current assets:
Cash and cash equivalents........................... $ 29,661 $ 53,225 $ 2,362 (a) $ 85,248
Other investments................................... -- 66,589 -- 66,589
Accounts receivable, net............................ 260,751 14,977 -- 275,728
Inventories, net.................................... 30,150 -- -- 30,150
Net assets held for sale............................ 48,596 -- -- 48,596
Prepaid expenses and other.......................... 53,983 2,466 -- 56,449
----------- --------- --------- -----------
Total current assets.............................. 423,141 137,257 2,362 562,760
Property and equipment, net........................... 160,956 22,716 -- 183,672
Other intangible assets, net.......................... 520,823 -- -- 520,823
Excess of purchase price over net assets acquired,
net................................................. 1,099,295 111,262 (111,262)(a) 1,590,698
491,403 (a)
Deferred income tax asset, net........................ 176,200 -- -- 176,200
Other non-current investments......................... 191,256 21,737 -- 212,993
Other non-current assets.............................. 89,870 5,594 -- 95,464
----------- --------- --------- -----------
$ 2,661,541 $ 298,566 $ 382,503 $ 3,342,610
=========== ========= ========= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable.................................... $ 72,377 $ 15,327 $ -- $ 87,704
Accrued interest payable............................ 18,069 -- -- 18,069
Accrued expenses and other.......................... 227,321 1,081 19,000 (a) 247,402
Deferred revenues (a)............................... 263,702 1,666 -- 265,368
Current maturities of long-term debt................ 22,024 579 -- 22,603
----------- --------- --------- -----------
Total current liabilities......................... 603,493 18,653 19,000 641,146
----------- --------- --------- -----------
Long-term debt........................................ 1,605,217 -- -- 1,605,217
----------- --------- --------- -----------
Other non-current liabilities......................... 22,612 149 -- 22,761
----------- --------- --------- -----------
Exchangeable preferred stock.......................... 560,916 -- -- 560,916
----------- --------- --------- -----------
Shareholders' equity (deficiency):
Common stock........................................ 1,669 18 454 (a) 2,123
(18)(b)
Additional paid-in capital.......................... 1,342,626 409,745 642,813 (a) 2,067,684
(409,745)(b)
37,174 (c)
45,071 (d)
Accumulated deficit................................. (1,332,522) (128,372) 128,372 (b) (1,332,522)
Accumulated other comprehensive loss................ (132,619) (40) 40 (b) (132,619)
Unearned stock grant compensation................... (8,188) (1,587) 1,587 (b) (90,433)
(37,174)(c)
(45,071)(d)
Common stock in treasury, at cost................... (1,663) -- -- (1,663)
----------- --------- --------- -----------
Total shareholders' equity (deficiency)........... (130,697) 279,764 363,503 512,570
----------- --------- --------- -----------
$ 2,661,541 $ 298,566 $ 382,503 $ 3,342,610
=========== ========= ========= ===========
See notes to unaudited pro forma consolidated financial statements.
77
PRIMEDIA INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENT OF CONSOLIDATED OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL
------------------------ PRO FORMA PRO FORMA
PRIMEDIA ABOUT ADJUSTMENTS CONSOLIDATED
-------- ---------- ----------- ------------
Sales, net................................ $ 1,716,102 $ 26,962 $ -- $ 1,743,064
Operating costs and expenses:
Cost of goods sold (excluding $3,630 of
non-cash compensation)................ 392,105 11,779 -- 403,884
Marketing and selling................... 315,380 48,597 -- 363,977
Distribution, circulation and
fulfillment........................... 297,372 -- -- 297,372
Editorial............................... 145,957 -- -- 145,957
Product development..................... -- 8,386 -- 8,386
Other general expenses (excluding $1,099
of non-cash compensation)............. 189,748 8,165 445 (e) 198,358
Corporate administrative expenses....... 34,986 -- -- 34,986
Depreciation of property and
equipment............................. 47,653 2,809 -- 50,462
Amortization of intangible assets,
excess of purchase price over net
assets acquired and other............. 176,361 967 162,834 (f) 340,162
Non-cash compensation................... -- 4,729 19,361 (c) 47,564
23,474 (d)
Gain on the sales of businesses and
other, net............................ (235,580) -- -- (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)................... 54,332 (58,470) (206,114) (210,252)
Other income (expense):
Interest income (expense), net.......... (164,909) 3,280 -- (161,629)
Amortization of deferred financing
costs................................. (3,286) -- -- (3,286)
Other, net.............................. 250 95 -- 345
----------- ---------- ----------- -----------
Loss before income tax expense............ (113,613) (55,095) (206,114) (374,822)
Income tax expense........................ (6,500) -- -- (6,500)
----------- ---------- ----------- -----------
Net loss.................................. (120,113) (55,095) (206,114) (381,322)
Preferred stock dividends:
Cash.................................... (53,062) -- -- (53,062)
Cumulative dividends and accretion of
convertible preferred stock to
liquidation value..................... -- (660) -- (660)
----------- ---------- ----------- -----------
Loss applicable to common shareholders.... $ (173,175) $ (55,755) $ (206,114) $ (435,044)
=========== ========== =========== ===========
Basic and diluted loss applicable to
common shareholders per common share
(g)..................................... $ (1.19) $ (5.30) -- $ (2.51)
=========== ========== =========== ===========
Basic and diluted common shares
outstanding............................. 145,418,441 10,518,713 (10,518,713)(b) 173,167,564
=========== ========== ===========
27,749,123 (g)
===========
See notes to unaudited pro forma consolidated financial statements.
78
PRIMEDIA INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENT OF CONSOLIDATED OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL
-------------------------- PRO FORMA PRO FORMA
PRIMEDIA ABOUT ADJUSTMENTS CONSOLIDATED
------------ ----------- ----------- ------------
Sales, net.......................................... $ 1,231,624 $ 62,755 $ -- $ 1,294,379
Operating costs and expenses:
Cost of goods sold (excluding $3,049 of non-cash
compensation)................................... 299,560 20,645 -- 320,205
Marketing and selling............................. 289,944 34,675 -- 324,619
Distribution, circulation and fulfillment......... 189,011 -- -- 189,011
Editorial......................................... 94,027 -- -- 94,027
Product development............................... -- 13,973 -- 13,973
Other general expenses (excluding $665 of non-cash
compensation)................................... 162,126 12,457 300(e) 174,883
Corporate administrative expenses (excluding
$19,500 of non-cash compensation)............... 24,632 -- -- 24,632
Depreciation of property and equipment............ 39,760 4,385 -- 44,145
Amortization of intangible assets, excess of
purchase price over net assets acquired and
other........................................... 98,279 26,326 96,525(f) 221,130
Non-cash compensation and non-cash non-recurring
charges......................................... 26,900 3,714 7,551(c) 47,320
9,155(d)
Provision for severance, closures and integration
costs........................................... 19,008 -- -- 19,008
Gain on sale of businesses and other, net......... (26,824) -- -- (26,824)
------------ ----------- ----------- ------------
Operating income (loss)............................. 15,201 (53,420) (113,531) (151,750)
Other income (expense):
Interest income (expense), net.................... (109,434) 6,800 -- (102,634)
Amortization of deferred financing costs.......... (2,899) -- -- (2,899)
Other, net........................................ 7,614 -- -- 7,614
------------ ----------- ----------- ------------
Net loss............................................ (89,518) (46,620) (113,531) (249,669)
Preferred stock dividends--cash..................... (39,797) -- -- (39,797)
------------ ----------- ----------- ------------
Loss applicable to common shareholders.............. $ (129,315) $ (46,620) $ (113,531) $ (289,466)
============ =========== =========== ============
Basic and diluted loss applicable to common
shareholders per common share (g)................. $ (0.81) $ (2.64) -- $ (1.42)
============ =========== =========== ============
Basic and diluted common shares outstanding......... 158,977,115 17,676,390 (17,676,390)(b) 203,481,644
============ =========== ============
44,504,529 (g)
===========
See notes to unaudited pro forma consolidated financial statements.
79
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(a) For purposes of these pro forma consolidated financial statements,
PRIMEDIA has assumed that the value of the total purchase consideration based on
shares to be issued in order to consummate the acquisition of About would be
approximately $536,000. PRIMEDIA has assumed that it will issue 2.3409 shares of
PRIMEDIA common stock for each share of About stock. Under the terms of the
arrangement, stockholders of About will receive approximately 45,200,000 shares
of PRIMEDIA common stock. PRIMEDIA has assumed that the value of its shares of
common stock to be issued will be $11.81 per share, based on the
weighted-average market values for the two days prior and two days succeeding
the acquisition announcement date. In addition, upon the completion of the
merger, certain options previously granted to the About directors will become
immediately vested and exercisable. The shares of PRIMEDIA common stock to be
issued in connection with these stock option exercises were included in the
determination of purchase price, net of the related cash proceeds from the
exercises.
PRIMEDIA will replace outstanding options to purchase shares of About common
stock held by certain individuals with options to purchase shares of PRIMEDIA
common stock. The PRIMEDIA options will have the same terms and conditions as
the About stock options, except that the number of options and their exercise
price will be adjusted based on the exchange ratio (2.3409 to 1) used to
consummate the merger. The following assumptions were used regarding the
PRIMEDIA options to be issued based on About's outstanding options at
September 30, 2000.
WEIGHTED-AVERAGE
EXERCISE PRICE OF
NUMBER OF PRIMEDIA
ORIGINAL NUMBER PRIMEDIA OPTIONS OPTIONS
OF ABOUT OPTIONS TO BE ISSUED TO BE ISSUED
---------------- ---------------- -----------------
Vested................................ 953,613 2,232,312 $ 8.93
Unvested.............................. 4,202,879 9,838,521 $14.94
--------- ----------
Total................................. 5,156,492 12,070,833 $13.83
========= ==========
The estimated fair value of the fully vested and unvested options to be
issued is approximately $107,000. This value was determined using a Black
Scholes pricing model based on the following weighted-average assumptions:
Risk free interest rate of 5.84%;
Volatility of 72.47%;
Expected term ranging from 6.66 to 9.75 years;
Expected dividend yield of 0%; and
Value of PRIMEDIA common stock of $11.81 per share.
It has been assumed that on the date that the Company grants these unvested
replacement options, there is no intrinsic value of the unvested replacement
options since the weighted-average exercise price of the replacement options of
$14.94 per share approximates the assumed fair market value of PRIMEDIA common
stock of $15.25 per share, which corresponds to PRIMEDIA's October 27, 2000 (the
date of the merger agreement) closing price. Further, the annual expense which
would result had any intrinsic value been attributed to the unvested replacement
options is inconsequential and approximates the amortization of the related
goodwill. Accordingly, no allocation of fair value has been made for the
intrinsic value of unvested options.
80
The following is a summary of the calculation of the purchase price, as
described above, as well as the allocation of the purchase price to the fair
value of the net assets acquired:
Total number of shares of PRIMEDIA common stock to be issued
to consummate the acquisition............................. 45,200,000
Shares to be issued in connection with options which are
vested or will become vested prior to or as a result of
the merger................................................ 170,418
-----------
Total shares of PRIMEDIA common stock to be issued.......... 45,370,418
Assumed fair value per share of PRIMEDIA common stock....... $ 11.81
-----------
Value of shares of PRIMEDIA common stock to be issued....... $ 535,825
Fair value of replacement options to be issued.............. 107,442
Estimated direct merger costs............................... 12,000
-----------
Total purchase price........................................ 655,267
Less: Estimated cash proceeds from the exercise of stock
options which are vested or will become vested prior to or
as a result of the merger................................. 2,362
Add: Estimated direct merger costs of About................. 7,000
Less: Fair value of net tangible assets of About............ 168,502
-----------
Excess of purchase price over net assets acquired........... $ 491,403
===========
PRIMEDIA's management determined that the utilization of About's historical
net operating losses was not likely. Therefore, no deferred tax assets have been
recorded in connection with the merger.
The purchase price has been allocated based on management's best estimate of
the fair value of assets acquired and the liabilities assumed based on the
historical financial statements of About as of September 30, 2000. The excess
purchase price over the fair value of net tangible assets acquired has been
allocated to goodwill. This adjustment is based upon preliminary estimates to
reflect the allocation of purchase consideration to the acquired assets and
liabilities of About. The final allocation of the purchase consideration will be
determined after the completion of the merger and will be based on appraisals
and a comprehensive final evaluation of the fair values and useful lives of
About's tangible assets acquired, identifiable intangible assets and excess of
purchase price over net assets acquired at the time of the merger. The final
determination may result in asset and liability fair values that are different
than the preliminary estimates of these amounts. For purposes of purchase price
allocation, it has been assumed that the fair value of deferred revenues
approximates About's historical carrying value. At the merger date, the fair
value of About's deferred revenues will represent the fair value of the
contractual performance obligation based upon the nature of the activities to be
performed and the related costs to be incurred. The adjustment to the historical
carrying value, if any, will not have a material impact on PRIMEDIA's financial
position or results of operations.
(b) To eliminate the historical equity accounts of About.
(c) To reflect the unearned compensation expense in connection with the
employment agreements of Scott P. Kurnit and William C. Day. In connection with
their employment agreements, Messrs. Kurnit and Day will be granted options to
purchase 2,605,300 shares and 877,000 shares, respectively, of PRIMEDIA common
stock at an exercise price equal to thirty percent of the fair market value per
share on that date. Accordingly, the adjustment reflects a 70% market value
discount ($10.68 per share) based on a PRIMEDIA per share market value of $15.25
which was the closing price on October 27, 2000. These options vest at a rate of
25% per year and are subject to Messrs. Kurnit's and Day's continued employment.
Accordingly, the compensation expense reflected for the nine months ended
September 30, 2000 and the year ended December 31, 1999 reflects this pro rata
vesting on a graded basis.
A one dollar change in the fair market value of PRIMEDIA common stock would
change the unearned compensation recognized at September 30, 2000 by
approximately $2,400. This same one dollar change would change the compensation
expense recognized during the nine months ended
81
September 30, 2000 and the year ended December 31, 1999 by approximately $495
($.002 per share) and approximately $1,270 ($.01 per share), respectively.
(d) To reflect the unearned compensation expense in connection with the
employment agreements of Messrs. Kurnit and Day. In connection with their
employment agreements, Messrs. Kurnit and Day will be granted 2,211,100 shares
and 744,350 shares, respectively, of restricted PRIMEDIA common stock.
Accordingly, the adjustment assumes a PRIMEDIA per share market value of $15.25,
which was the closing price on October 27, 2000. These shares of restricted
PRIMEDIA common stock vest at a rate of 25% per year and are subject to
Messrs. Kurnit's and Day's continued employment. Accordingly, the compensation
expense reflected for the nine months ended September 30, 2000 and the year
ended December 31, 1999 reflects this pro rata vesting on a graded basis.
A one dollar change in the fair market value of PRIMEDIA common stock would
change the unearned compensation recognized at September 30, 2000 by
approximately $2,955. This same one dollar change would change the compensation
expense recognized during the nine months ended September 30, 2000 and the year
ended December 31, 1999 by approximately $600 ($.003 per share) and
approximately $1,540 ($.01 per share), respectively.
(e) To reflect additional compensation expense to be incurred in connection
with the employment agreements of Messrs. Kurnit and Day.
Potential pro forma adjustments relating to eligible bonuses, the minimum
amount of which is $2,300 ($.01 per share for the year ended December 31, 1999),
have been omitted since the payment of such bonuses is dependent upon the
achievement of performance goals to be established by PRIMEDIA's management.
Potential pro forma adjustments relating to sign-on bonuses for Messrs.
Kurnit and Day totaling $49 have been omitted since the impact would not be
material to the pro forma financial statements.
In addition, Messrs. Kurnit and Day also entered into share lock-up
agreements with PRIMEDIA, pursuant to which each agreed to specific restrictions
regarding the transferability of his shares of PRIMEDIA common stock issued in
the merger. Under the terms of these agreements, during the first year after the
closing of the merger, Messrs. Kurnit and Day may sell a portion of their shares
of PRIMEDIA common stock, subject to PRIMEDIA's right of first refusal with
respect to any sale. In addition, Messrs. Kurnit and Day were guaranteed a
minimum per share sales price of $15.25 on 1,639,344 shares ($25,000) and
532,786 shares ($8,125), respectively. In the event of any per share shortfall
upon sale, PRIMEDIA will pay them the difference between the $15.25 per share
and the actual per share sales price for each share sold and that difference
will be recorded as additional compensation expense for PRIMEDIA. The pro forma
financial statements do not reflect the impact, if any, of these agreements.
(f) To adjust pro forma amortization expense based on the estimated excess
of purchase price over net assets acquired related to the merger. This excess is
assumed to be amortized over an estimated useful life of three years. PRIMEDIA
believes that a three-year life is responsive to the rapid rate of change in the
Internet industry and is consistent with other recent mergers of a comparable
nature. The final allocation of purchase price may result in amortization
expense that is different than the preliminary estimate of this amount. The pro
forma adjustment represents the difference between the amortization of the
$491,403 excess of purchase price over net assets acquired over a three year
period and About's historical amortization.
(g) The pro forma adjustments reflect the additional shares to be issued
based on the exchange ratio used to consummate the merger, include the
additional shares to be issued in connection with options that will become
vested prior to or as a result of the merger and include the additional shares
of restricted PRIMEDIA common stock to be issued to Messrs. Kurnit and Day in
connection with their employment agreements. Pro forma loss per share has been
determined based on pro forma net loss after preferred stock dividends divided
by the weighted average number of shares of PRIMEDIA common stock outstanding
for all periods presented. Stock options were not included in the computation of
pro forma loss per share because the effect of their inclusion would be
antidilutive.
82
DESCRIPTION OF PRIMEDIA CAPITAL STOCK
GENERAL
As of September 30, 2000, PRIMEDIA had 300,000,000 shares of authorized
capital stock. Those shares consisted of:
- 250,000,000 shares of common stock, of which 166,765,849 shares were
outstanding; and
- 50,000,000 shares of preferred stock, of which:
- 2,000,000 shares were designated Series D Exchangeable Preferred Stock,
all which were outstanding;
- 1,250,000 shares were designated Series F Exchangeable Preferred Stock,
all which were outstanding; and
- 2,500,000 shares were designated Series H Exchangeable Preferred Stock,
all which were outstanding.
DESCRIPTION OF PRIMEDIA COMMON STOCK
The rights of About stockholders who acquire shares of PRIMEDIA common stock
offered by this joint proxy statement-consent solicitation-prospectus will be
governed by PRIMEDIA's certificate of incorporation and by-laws and Delaware
corporate law. We have summarized below provisions of our certificate of
incorporation. This summary does not contain all of the provisions that you may
want to consider as an investor in PRIMEDIA's securities. You may wish to review
our certificate of incorporation and by-laws. PRIMEDIA has filed a copy of its
certificate of incorporation and by-laws with the SEC. See "Where You Can Find
More Information."
DIVIDENDS. The owners of PRIMEDIA common stock may receive dividends when
declared by the board of directors out of funds legally available for the
payment of dividends. PRIMEDIA has no present intention of declaring and paying
cash dividends on the common stock at any time in the foreseeable future. The
terms of PRIMEDIA's credit agreements, indentures and preferred stocks restrict
PRIMEDIA from declaring and paying cash dividends on the common stock. See "Risk
Factors."
VOTING RIGHTS. Each share of common stock is entitled to one vote in the
election of directors and all other matters submitted to stockholder vote. There
are no cumulative voting rights.
LIQUIDATION RIGHTS. If PRIMEDIA liquidates, dissolves or winds-up its
business, whether voluntarily or not, PRIMEDIA's common stockholders will share
equally in the distribution of all assets remaining after payment to creditors
and preferred stockholders.
PREEMPTIVE RIGHTS. The common stock has no preemptive or similar rights.
LISTING. PRIMEDIA's common stock is listed on the New York Stock Exchange
under the symbol "PRM."
ANTI-TAKEOVER PROVISIONS. PRIMEDIA is subject to the provisions of Delaware
law described below regarding business combinations with interested
stockholders.
Section 203 of the Delaware General Corporation Law applies to a broad range
of business combinations between a Delaware corporation and an interested
stockholder. The Delaware law definition of "business combination" includes
mergers, sales of assets, issuances of voting stock and certain other
transactions. An "interested stockholder" is defined as any person who owns,
directly or indirectly, 15% or more of the outstanding voting stock of a
corporation.
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Section 203 prohibits a corporation from engaging in a business combination
with an interested stockholder for a period of three years following the date on
which the stockholder became an interested stockholder, unless:
- the board of directors approved the business combination before the
stockholder became an interested stockholder, or the board of directors
approved the transaction that resulted in the stockholder becoming an
interested stockholder;
- upon completion of the transaction which resulted in the stockholder
becoming an interested stockholder, such stockholder owned at least 85% of
the voting stock outstanding when the transaction began other than shares
held by directors who are also officers and other than shares held by
certain employee stock plans; or
- the board of directors approved the business combination after the
stockholder became an interested stockholder and the business combination
was approved at a meeting by at least two-thirds of the outstanding voting
stock not owned by such stockholder.
These limitations on business combinations with interested stockholders do not
apply to a corporation that does not have a class of stock listed on a national
securities exchange, authorized for quotation on an interdealer quotation system
of a registered national securities association or held of record by more than
2,000 stockholders.
DESCRIPTION OF SERIES D EXCHANGEABLE PREFERRED STOCK
RANK. The Series D Preferred Stock ranks as to dividend rights and rights
on liquidation, winding-up or dissolution:
- senior to all classes of common stock and all classes of capital stock or
other series of preferred stock which does not expressly provide that it
ranks senior to or on parity with the Series D Preferred Stock;
- on a parity with the Series F Preferred Stock, the Series H Preferred
Stock, and all classes of capital stock or other series of preferred stock
which expressly provides that it ranks on parity with the Series D
Preferred Stock; and
- junior to each class of capital stock or other series of preferred stock
which expressly provides that it ranks senior to the Series D Preferred
Stock.
DIVIDENDS. Holders of the Series D Preferred Stock are entitled to receive,
when as and if declared by the board of directors of PRIMEDIA, out of funds
legally available for the payment of dividends, dividends in cash at an annual
rate equal to 10% of the liquidation preference. Dividends on the Series D
Preferred Stock are payable quarterly in arrears on February 1, May 1, August 1
and November 1 of each year. Dividends will cumulate without interest until
declared and paid. As of the date of this prospectus, PRIMEDIA has paid all such
dividends.
OPTIONAL REDEMPTION. Subject to contractual and other restrictions and the
existence of legally available funds, PRIMEDIA, at its option, may at any time
on or after February 1, 2001, redeem the Series D Preferred Stock in whole or in
part, at redemption prices declining ratably from $105 beginning on February 1,
2001, to $100 on and after February 1, 2006, plus accrued and unpaid dividends.
MANDATORY REDEMPTION. Subject to contractual and other restrictions and to
the existence of legally available funds, on February 1, 2008, PRIMEDIA will be
required to redeem all outstanding shares of Series D Preferred Stock at a price
equal to $100 per share plus all accumulated and unpaid dividends to the date of
redemption.
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LIQUIDATION PREFERENCE. Upon any voluntary or involuntary liquidation,
dissolution or winding up of PRIMEDIA, holders of Series D Preferred Stock will
be entitled to be paid out of the assets of PRIMEDIA available for distribution
to its stockholders $100 per share, plus any accrued and unpaid dividends to the
date of liquidation, dissolution or winding up.
VOTING RIGHTS. Holders of the Series D Preferred Stock have no voting
rights, except as provided by law or as set forth in the certificate of
designations for the Series D Preferred Stock. Also, when dividends on the
Series D Preferred Stock are in arrears and unpaid for six consecutive quarterly
periods, the board of directors of PRIMEDIA will be increased by two directors
and the holders of a majority of the Series D Preferred Stock, voting as a
class, will be entitled to elect two additional directors of the expanded board
of directors. These voting rights will continue until such time as all dividends
in arrears on the Series D Preferred Stock have been paid in full.
Pursuant to the certificate of designations for the Series D Preferred
Stock, PRIMEDIA may not merge, consolidate with or into, or transfer all or
substantially all of its assets, in one transaction or in a series of related
transactions, to any person without the consent of the holders of a majority of
the issued and outstanding Series D Preferred Stock, voting together with the
holders of all capital stock ranking on parity with the Series D Preferred Stock
issued after the date of issuance of the Series D Preferred Stock, unless:
- PRIMEDIA will be the continuing person, or the person, if other than
PRIMEDIA, formed by the merger or consolidation, or the person to which
the properties and assets of PRIMEDIA are transferred, is a corporation
organized and existing under the laws of the United States or any state in
the United States or the District of Columbia, and the Series D Preferred
Stock will be converted into or exchanged for shares of the successor or
resulting company having substantially the same powers, preferences and
relative participating, optional or other special rights and the same
qualifications, limitations or restrictions that the Series D Preferred
Stock had immediately before the conversion; and
- immediately after giving effect to the transaction on a pro forma basis,
the consolidated net worth of the surviving entity is at least equal to
the lesser of the consolidated net worth of PRIMEDIA immediately before
the transaction and the consolidated net worth of PRIMEDIA on the first
date any Series D Preferred Stock was issued.
The consent of the holders of the Series D Preferred Stock will not be
required if the requisite holders of preferred stock senior to the Series D
Preferred Stock or any indebtedness of PRIMEDIA have consented or granted a
waiver with respect to the transaction in question.
EXCHANGE. PRIMEDIA may, at its option, on any scheduled dividend payment
date, issue 10% Subordinated Debentures due 2008 in exchange for the Series D
Preferred Stock, in whole but not in part. Holders of Series D Preferred Stock
so exchanged will be entitled to receive the principal amount of 10%
Subordinated Debentures equal to $100 for each $100 of liquidation preference of
Series D Preferred Stock held at the time of the exchange plus an amount per
share in cash equal to all accrued but unpaid dividends to the date of the
exchange.
DESCRIPTION OF SERIES F EXCHANGEABLE PREFERRED STOCK
RANK. The Series F Preferred Stock ranks as to dividend rights and rights
on liquidation, winding-up or dissolution:
- senior to all classes of common stock and senior to all classes of capital
stock or other series of preferred stock which does not expressly provide
that it ranks senior to or on parity with the Series F Preferred Stock;
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- on a parity with the Series D Preferred Stock, the Series H Preferred
Stock, and all classes of capital stock or other series of preferred stock
which expressly provides that it ranks on parity with the Series F
Preferred Stock; and
- junior to each class of capital stock or other series of preferred stock
which expressly provides that it ranks senior to the Series F Preferred
Stock.
DIVIDENDS. Holders of the Series F Preferred Stock are entitled to receive,
when, as and if declared by the board of directors of PRIMEDIA, out of funds
legally available for the payment of dividends, dividends in cash at an annual
amount equal to $9.20 per share. Dividends on the Series F Preferred Stock are
payable quarterly in arrears on February 1, May 1, August 1 and November 1 of
each year. Dividends will cumulate without interest until declared and paid. As
of the date of this prospectus, PRIMEDIA has paid all such dividends.
OPTIONAL REDEMPTION. Subject to contractual and other restrictions and to
the existence of legally available funds, prior to November 1, 2002, PRIMEDIA
can redeem the Series F Preferred Stock at its option, in whole or in part, at
any time or from time to time, at a redemption price equal to the amount of the
aggregate liquidation preference of the Series F Preferred Stock plus all
accrued and unpaid dividends plus a specified make-whole premium at the time of
redemption.
Subject to contractual and other restrictions and to the existence of
legally available funds, PRIMEDIA, at its option, may at any time on or after
November 1, 2002, redeem the Series F Preferred Stock, in whole or in part at
redemption prices declining ratably from $104.60 beginning on November 1, 2002
to $100 on and after November 1, 2004, plus accrued and unpaid dividends.
MANDATORY REDEMPTIONS. Subject to contractual and other restrictions and to
the existence of legally available funds, on November 1, 2009, PRIMEDIA will be
required to redeem all outstanding shares of Series F Preferred Stock at a price
equal to $100 per share plus all accumulated dividends to the date of
redemption.
LIQUIDATION PREFERENCE. Upon any voluntary or involuntary liquidation,
dissolution or winding-up of PRIMEDIA, holders of Series F Preferred Stock will
be entitled to be paid out of the assets of PRIMEDIA available for distribution
to its stockholders $100 per share, plus any accrued and unpaid dividends
accrued to the date of liquidation, dissolution or winding-up.
VOTING RIGHTS. Holders of the Series F Preferred Stock have no voting
rights, except as provided by law or as set forth in the certificate of
designations for the Series F Preferred Stock. Also, when dividends on the
Series F Preferred Stock are in arrears and unpaid for six consecutive quarterly
periods, the board of directors of PRIMEDIA will be increased by two directors
and the holders of a majority of the Series F Preferred Stock, voting as a
class, will be entitled to elect two additional directors of the expanded board
of directors.
Without the affirmative vote or consent of the holders of a majority of the
then outstanding shares of Series F Preferred Stock, voting together with the
holders of any capital stock ranking on parity with the Series F Preferred
Stock, PRIMEDIA cannot issue any class of capital stock or series of preferred
stock ranking senior to the Series F Preferred Stock unless PRIMEDIA uses the
proceeds from that issuance to redeem all of the then outstanding shares of
Series F Preferred Stock and any other securities ranking on parity with the
Series F Preferred Stock and entitled to vote on this matter.
Pursuant to the certificate of designations for the Senior F Preferred
Stock, PRIMEDIA may not merge, consolidate with or into, or transfer all or
substantially all of its assets, in one transaction or in a series of related
transactions to any person without the consent of the holders of a majority of
the
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outstanding Series F Preferred Stock, voting together with the holders of all
capital stock ranking on parity with the Series F Preferred Stock, unless:
- PRIMEDIA will be the continuing person, or the person, if other than
PRIMEDIA, formed by the merger or consolidation, or the person to which
the properties and assets of PRIMEDIA are transferred, is a corporation
organized and existing under the laws of the United States or any state in
the United States or the District of Columbia, and the Series F Preferred
Stock will be converted into or exchanged for shares of the successor or
resulting company having substantially the same powers, preferences and
relative participating, optional or other special rights and the same
qualifications, limitations or restrictions that the Series F Preferred
Stock had immediately before the conversion; and
- immediately after giving effect to the transaction on a pro forma basis,
the consolidated net worth of the surviving entity is at least equal to
the lesser of the consolidated net worth of PRIMEDIA immediately prior to
such transaction and the consolidated net worth of PRIMEDIA on the first
date any Series F Preferred Stock was issued.
The consent of the holders of the Series F Preferred Stock will not be
required if the requisite holders of preferred stock senior to the Series F
Preferred Stock or any indebtedness of PRIMEDIA have consented or granted a
waiver with respect to the transaction in question.
EXCHANGE. PRIMEDIA may, at its option, on any scheduled dividend payment
date, issue 9.20% Subordinated Debentures due 2009 in exchange for the Series F
Preferred Stock, in whole but not in part. Holders of Series F Preferred Stock
so exchanged will be entitled to receive the principal amount of 9.20%
Subordinated Debentures equal to $100 for each $100 of liquidation preference of
Series F Preferred Stock held at the time of the exchange plus an amount per
share in cash equal to all accrued but unpaid dividends to the date of the
exchange.
DESCRIPTION OF SERIES H EXCHANGEABLE PREFERRED STOCK
RANK. The Series H Preferred Stock ranks as to dividend rights and rights
on liquidation, winding-up or dissolution:
- senior to all classes of common stock and senior to all classes of capital
stock or other series of preferred stock which does not expressly provide
that it ranks senior to or on parity with the Series H Preferred Stock,
- on a parity with the Series D Preferred Stock, the Series F Preferred
Stock, and all classes of capital stock or other series of preferred stock
which expressly provides that it ranks on parity with the Series H
Preferred Stock; and
- junior to each class of capital stock or other series of preferred stock
which expressly provides that it ranks senior to the Series H Preferred
Stock.
DIVIDENDS. Holders of the Series H Preferred Stock are entitled to receive
when, as and if declared by the board of directors of PRIMEDIA, out of funds
legally available for the payment of dividends, dividends in cash at an annual
amount equal to $8.625 per share. Dividends on the Series H Preferred Stock are
payable quarterly in arrears on February 1, May 1, August 1 and November 1 of
each year. Dividends will cumulate without interest until declared and paid. As
of the date of this prospectus, PRIMEDIA has paid all such dividends.
OPTIONAL REDEMPTION. PRIMEDIA cannot redeem the Series H Preferred Stock
before April 1, 2003. After April 1, 2003, subject to contractual and other
restrictions and the existence of legally available funds, PRIMEDIA, at its
option, may redeem the Series H Preferred Stock, in whole or in part, at
redemption prices declining ratably from $104.313 beginning on April 1, 2003 to
$100 on and after April 1, 2006, plus accrued and unpaid dividends to the date
of redemption.
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In addition, if PRIMEDIA consummates a public equity offering prior to
April 1, 2001, it may redeem at its option up to $125 million 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 out of the net
proceeds of the offering. The redemption must occur within 180 days of the
public equity offering.
MANDATORY REDEMPTION. Subject to contractual and other restrictions and to
the existence of legally available funds, on April 1, 2010, PRIMEDIA will be
required to redeem all outstanding shares of Series H Preferred Stock at a price
equal to $100 per share plus all accumulated and unpaid dividends to the date of
redemption.
LIQUIDATION PREFERENCES. Upon any voluntary or involuntary liquidation,
dissolution or winding-up of PRIMEDIA, holders of Series H Preferred Stock will
be entitled to be paid out of the assets of PRIMEDIA available for distribution
to its stockholders $100 per share, plus any unpaid dividends accrued to the
date of liquidation, dissolution or winding-up.
VOTING RIGHTS. Holders of the Series H Preferred Stock have no voting
rights, except as provided by law or as set forth in the certificate of
designations for the Series H Preferred Stock. Also, when dividends on the
Series H Preferred Stock are in arrears and unpaid for six consecutive quarterly
periods, the board of directors of PRIMEDIA will be increased by two directors
and the holders of a majority of the Series H Preferred Stock, voting as a
class, will be entitled to elect two additional directors of the expanded board
of directors.
Without the affirmative vote or consent of the holders of a majority of the
then outstanding Series H Preferred Stock holders, voting together with the
holders of any capital stock ranking on parity with the Series H Preferred
Stock, PRIMEDIA cannot issue any class of capital stock or series of preferred
stock ranking senior to the Series H Preferred Stock unless PRIMEDIA uses the
proceeds from that issuance to redeem all of the then outstanding shares of
Series H Preferred Stock and any other securities ranking on parity with the
Series H Preferred Stock and entitled to vote on this matter.
Pursuant to the certificate of designations for the Series H Preferred
Stock, PRIMEDIA may not merge, consolidate with or into, or transfer all or
substantially all of its assets, in one transaction or in a series of related
transactions, to any person without the consent of the holders of a majority of
the issued and outstanding Series H Preferred Stock, voting together with the
holders of all capital stock ranking on parity with the Series H Preferred
Stock, unless PRIMEDIA will be the continuing person, or the person, if other
than PRIMEDIA, formed by the merger or consolidation, or the person to which the
properties and assets of PRIMEDIA are transferred, is a corporation organized
and existing under the laws of the United States or any state in the United
States or the District of Columbia, and the Series H Preferred Stock will be
converted into or exchanged for shares of the successor or resulting company
having substantially the same powers, preferences and relative participating,
optional or other special rights and the same qualifications, limitations or
restrictions that the Series H Preferred Stock had immediately before the
conversion.
The consent of the holders of the Series H Preferred Stock will not be
required if the requisite holders of preferred stock senior to the Series H
Preferred Stock or any indebtedness of PRIMEDIA have consented or granted a
waiver with respect to the transaction in question.
EXCHANGE. PRIMEDIA may, at its option, on any scheduled dividend payment
date, issue 8 5/8% Subordinated Debentures due 2010 in exchange for the
Series H Preferred Stock, in whole but not in part. Holders of Series H
Preferred Stock so exchanged will be entitled to receive the principal amount of
8 5/8% Subordinated Debentures equal to $100 for each $100 of liquidation
preference of Series H Preferred Stock held at the time of the exchange plus an
amount per share in cash equal to all accrued but unpaid dividends to the date
of the exchange.
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COMPARISON OF STOCKHOLDER RIGHTS
PRIMEDIA and About are both organized under the laws of the State of
Delaware. Any differences, therefore, in the rights of holders of PRIMEDIA
capital stock and About capital stock arise primarily from differences in their
respective certificates of incorporation and by-laws. After the effective time
of the merger, the rights of About stockholders will be determined by reference
to the PRIMEDIA certificate of incorporation and by-laws.
CAPITALIZATION
PRIMEDIA. The authorized capital stock of PRIMEDIA consists of:
- 250,000,000 shares of PRIMEDIA common stock, par value $.01 per share; and
- 50,000,000 shares of preferred stock, par value $.01 per share.
ABOUT. The authorized capital stock of About consists of:
- 100,000,000 shares of common stock, par value $.001 per share; and
- 5,000,000 shares of preferred stock, par value $.001 per share.
VOTING RIGHTS
In the case of both PRIMEDIA and About, each holder of common stock has the
right to cast one vote for each share of common stock held of record on all
matters submitted to a vote of stockholders, including the election of
directors. Holders of common stock have no cumulative voting rights.
For a description of the voting rights of the PRIMEDIA preferred stock, see
"Description of PRIMEDIA Capital Stock--Description of Series D Exchangeable
Preferred Stock," "--Description of Series F Exchangeable Preferred Stock," and
"--Description of Series H Exchangeable Preferred Stock."
NUMBER AND ELECTION OF DIRECTORS
PRIMEDIA. The board of directors of PRIMEDIA currently has nine members.
The amended and restated by-laws provide that the PRIMEDIA board of directors
will consist of not less than one or more than fifteen directors, the number to
be fixed from time to time by the PRIMEDIA board of directors or the
stockholders.
PRIMEDIA's certificate of incorporation and amended and restated by-laws do
not provide for a staggered board of directors.
ABOUT. The board of directors of About currently has six members. About's
second amended and restated certificate of incorporation states that the number
of directors will in no case be less than five nor more than 15 (exclusive of
directors, if any, to be elected by holders of preferred stock of About, voting
separately as a class).
About's second amended and restated certificate of incorporation and amended
and restated by-laws do not provide for a staggered board of directors.
VACANCIES ON THE BOARD OF DIRECTORS AND REMOVAL OF DIRECTORS
PRIMEDIA. The amended and restated by-laws provide that vacancies and newly
created directorships resulting from any increase in the number of directors may
be filled by a vote of the majority of the board of directors then in office or
by the stockholders. A director may be removed with or without cause by the
stockholders.
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ABOUT. The amended and restated by-laws provide that vacancies and newly
created directorships are filled by a vote of 66.67% of the directors then in
office, for a term expiring at the annual meeting of stockholders, at which time
the director's successor is elected by the stockholders. If there are no
directors in office or if the directors then in office constitute less than a
majority, the vacancy shall be filled pursuant to Delaware law. Any director or
the entire board of directors may be removed at any time, but only for cause and
only by the affirmative vote of the holders of not less than 66.67% of the
outstanding shares of About capital stock entitled to vote in the election of
directors.
AMENDMENTS TO THE CERTIFICATE OF INCORPORATION
PRIMEDIA. The provisions of Delaware law regarding amendments to the
certificate of incorporation govern the amendment of certificates of
incorporation of PRIMEDIA. Under Delaware law, an amendment to the certificate
of incorporation of a corporation requires the approval of the corporation's
board of directors and the approval of holders of a majority of the outstanding
stock entitled to vote upon the proposed amendment, unless a higher vote is
required by the corporation's certificate of incorporation.
ABOUT. About's second amended and restated certificate of incorporation
requires a vote of the holders of not less than 66.67% of the outstanding shares
of capital stock of About in order to alter or amend the provisions of the
certificate of incorporation relating to limitations on directors' liability,
indemnification, amendment of the bylaws, or amendment of the certificate of
incorporation. In all other cases, as provided under Delaware law, a vote of the
holders of not less than a majority of the outstanding shares of capital stock
of About is required.
AMENDMENTS TO BY-LAWS
PRIMEDIA. The PRIMEDIA certificate of incorporation, as amended, authorizes
the board of directors to adopt, amend or repeal any provision of PRIMEDIA's
by-laws by majority vote.
ABOUT. The second amended and restated certificate of incorporation of
About authorizes the board of directors to adopt, amend or repeal any provision
of About's by-laws by vote of 66.67% of the board of directors.
ACTION BY WRITTEN CONSENT
PRIMEDIA. The provisions of Delaware law regarding actions by written
consent govern actions by written consent of PRIMEDIA stockholders. Under
Delaware law, any action which may be taken at an annual meeting or special
meeting of stockholders may be taken without a meeting, if a consent in writing
is signed by the holders of the outstanding stock having the minimum number of
votes necessary to authorize the action at a meeting of the stockholders.
ABOUT. About's second amended and restated certificate of incorporation
prohibits action by written consent of the stockholders in lieu of a meeting.
ABILITY TO CALL SPECIAL MEETINGS
PRIMEDIA. Under the amended and restated by-laws, special meetings of
PRIMEDIA stockholders may be called by the president of PRIMEDIA for any purpose
and shall be called by the president or secretary if directed by the board of
directors or requested in writing by the holders of not less than 25% of
PRIMEDIA's capital stock. A stockholder request must state the purpose of the
proposed meeting.
ABOUT. Under the amended and restated by-laws, special meetings of About
stockholders may be called by the president and shall be called by the president
or secretary at the request in writing of the chairman of the board of directors
or two-thirds of the board of directors. Written notice of a special
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meeting shall be given to each stockholder entitled to vote at the special
meeting not fewer than ten nor more than 60 days before the date of the meeting.
Business transacted at any special meeting shall be limited to the purposes
stated in the notice.
NOTICE OF STOCKHOLDER ACTION
PRIMEDIA. Under PRIMEDIA's amended and restated by-laws, in order for a
stockholder to nominate candidates for election to PRIMEDIA's board of directors
at any meeting of the stockholders, timely written notice must be given to the
secretary of PRIMEDIA. To be timely, a stockholder's notice must be received at
the principal executive offices of PRIMEDIA not less than 60 days nor more than
90 days prior to the meeting at which directors are to be elected. In the event
that less than 70 days' notice of the date of the meeting is given to
stockholders, to be timely, notice by a stockholder must be received by the
secretary no later than the close of business on the tenth day following the day
on which the notice of the meeting was given.
A stockholder's notice to PRIMEDIA must set forth all of the following:
- for each person whom the stockholder wishes to nominate for election or
re-election as a director: the nominee's name, age, business address,
residence address, principal occupation or employment, the class and
number of shares of stock of PRIMEDIA beneficially owned by the nominee,
and all information required to be disclosed in solicitations of proxies
for election of directors, or otherwise required by applicable law; and
- the stockholder's name, record address, and the class and number of shares
of PRIMEDIA which are beneficially owned by the stockholder.
ABOUT. Under About's amended and restated by-laws, any stockholder of About
who was a stockholder of record at the time About gave notice of an annual
meeting may nominate persons for election to the board of directors and propose
business to be considered by the stockholders at an annual meeting, provided
that the stockholder gives timely written notice to the secretary of About. To
be timely, the notice must be delivered to the secretary at the principal
executive offices of About not later than the close of business on the 120th day
nor earlier than the close of business on the 150th day prior to the first
anniversary of the date of the proxy statement delivered to stockholders in
connection with the preceding year's annual meeting. If the date of the annual
meeting is more than 30 days before or more than 60 days after the anniversary
date of the proxy statement delivered to stockholders in connection with the
preceding year's annual meeting, or if no proxy statement was delivered to
stockholders in connection with the preceding year's annual meeting, notice will
also be timely if delivered within earlier than the close of business on the
90th day prior to the annual meeting and not later than the close of business on
the later of the 60th day prior to the annual meeting or the close of business
on the tenth day following the day on which public announcement of the date of
the meeting is first made by About.
In addition, if the number of directors to be elected is increased and no
public announcement is made by About naming all of the nominees or specifying
the size of the increased board of directors at least 70 days before the first
anniversary of the preceding year's annual meeting (or, if the annual meeting is
held more than 30 days before or 60 days after such anniversary date, at least
70 days prior to such annual meeting), a stockholder's notice will be considered
timely, with respect to the nominees for any new positions created by the
increase if it is delivered to the secretary of About not later than the close
of business on the tenth day following the day on which the public announcement
is first made by About.
If the board of directors has determined that directors shall be elected at
a special meeting of stockholders, any stockholder of About who is a stockholder
of record at the time of giving of notice of the special meeting and who shall
be entitled to vote at the meeting may nominate persons for election to the
board of directors, provided that the stockholder complies with the notice
procedures described
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below. If About calls a special meeting of stockholders for the purpose of
electing one or more directors to the board of directors, any stockholder may
nominate a person for election to the board if the stockholder's notice is
delivered to the secretary at the principal executive offices of About not
earlier than the 90th day prior to the special meeting and not later than the
later of the close of business of the 60th day before the special meeting or the
close of business of the tenth day following the day on which the public
announcement is first made of the date of the special meeting and of the
nominees proposed by the board of directors to be elected at the special
meeting.
A stockholder's notice to About must set forth all of the following:
- for each person whom the stockholder wishes to nominate for election or
re-election as a director, all information required to be disclosed in
solicitations of proxies for election of directors, or otherwise required
by applicable law, including that person's written consent to being named
in the proxy statement as a nominee and to serving as a director if
elected;
- for other business, a brief description of the business the stockholder
proposes to bring before the meeting, the reasons for conducting that
business at that meeting and any material interest of the stockholder in
the business proposed; and
- the name and address of the stockholder and the beneficial owner, if any,
on whose behalf the nomination or proposal is made, as they appear on
About's books, and the class and number of shares of About which are
beneficially owned by the stockholder and the beneficial owner, if any.
LIMITATION OF PERSONAL LIABILITY OF DIRECTORS AND OFFICERS
Delaware law provides that a corporation may include in its certificate of
incorporation a provision limiting or eliminating the liability of its directors
to the corporation and its stockholders for monetary damages arising from a
breach of fiduciary duty, except for:
- a breach of the duty of loyalty to the corporation or its stockholders;
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- payment of a dividend or the repurchase or redemption of stock in
violation of Delaware law; or
- any transaction from which the director derived an improper personal
benefit.
The certificate of incorporation, as amended, of PRIMEDIA and the second
amended and restated certificate of incorporation of About provide that, to the
fullest extent Delaware law permits the limitation or elimination of the
liability of directors, no director will be liable to PRIMEDIA or About, as the
case may be, or their respective stockholders for monetary damages for breach of
fiduciary duty as a director.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Delaware law, a corporation generally may indemnify directors and
officers:
- for actions taken in good faith and in a manner they reasonably believed
to be in, or not opposed to, the best interests of the corporation; and
- with respect to any criminal proceeding, if they had no reasonable cause
to believe that their conduct was unlawful.
In addition, Delaware law provides that a corporation may advance to a
director or officer expenses incurred in defending any action upon receipt of an
undertaking by the director or officer to repay the amount advanced if it is
ultimately determined that he or she is not entitled to indemnification.
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PRIMEDIA. The amended and restated by-laws of PRIMEDIA provide that
PRIMEDIA will indemnify to the fullest extent permitted by Delaware law any
current or former director or officer of the corporation, and may, at the
discretion of the board of directors, indemnify any current or former employee
or agent of PRIMEDIA against all expenses, judgments, fines and amounts paid in
settlement in connection with any threatened, pending or completed action, suit
or proceeding in which the person was involved because of that person's service,
at the request of PRIMEDIA, as a director, officer, partner, trustee, employee
or agent of another corporation, partnership, joint venture, trust, or other
enterprise.
In addition, the amended and restated by-laws provide that the expenses
incurred by a person who is or was a director or officer in connection with any
action, suit or proceeding will be advanced to the director or officer by
PRIMEDIA upon receipt of an undertaking by or on behalf of the director or
officer to repay the amounts advanced if ultimately it is determined that the
director or officer was not entitled to be indemnified against the expenses.
ABOUT. The amended and restated by-laws of About provide that About will
indemnify to the fullest extent permitted by Delaware law any director or
officer made, or threatened to be made, a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of being a
director or officer of About or a predecessor corporation, or, at About's
request, a director or officer of another corporation. The indemnification
provided by About is not exclusive of any other rights to which indemnified
person may be entitled under any bylaw, agreement or vote of stockholders or
disinterested directors or otherwise, continues as to an indemnified person who
has ceased to be a director, and inures to the benefit of the heirs, executors
and administrators of an indemnified person. About's obligation to provide
indemnification is to be offset to the extent of any other source of
indemnification or any otherwise applicable insurance coverage under a policy
maintained by About or by any other person.
In addition, the amended and restated by-laws provide that the expenses
incurred by a director or officer of About in defending a civil or criminal
action, suit or proceeding by reason of the fact that the person is or was a
director of About will be advanced to the person by About upon receipt of an
undertaking by or on behalf of the director to repay the amounts advanced if
ultimately it is determined that the director or officer was not entitled to be
indemnified against the expenses. The indemnification provisions of the amended
and restated by-laws also apply to all directors and officers who are or have
been fiduciaries of any employee benefit plan of About.
STATE ANTI-TAKEOVER STATUTES
Under the business combination statute of Delaware law, a corporation is
prohibited from engaging in any business combination with an interested
stockholder who, together with its affiliates or associates, owns, or who is an
affiliate or associate of the corporation and within a three-year period did
own, 15% or more of the corporation's voting stock for a three-year period
following the time the stockholder became an interested stockholder, unless:
- prior to the time the stockholder became an interested stockholder, the
board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming
an interested stockholder;
- the interested stockholder owned at least 85% of the voting stock of the
corporation, excluding specified shares, upon consummation of the
transaction which resulted in the stockholder becoming an interested
stockholder; or
- at or subsequent to the time the stockholder became an interested
stockholder, the business combination is approved by the board of
directors of the corporation and authorized by the affirmative vote, at an
annual or special meeting and not by written consent, of at least 66 2/3%
of
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the outstanding voting shares of the corporation, excluding shares held by
that interested stockholder.
A business combination generally includes:
- mergers, consolidations and sales or other dispositions of 10% or more of
the assets of a corporation to or with an interested stockholder;
- specified transactions resulting in the issuance or transfer to an
interested stockholder of any capital stock of the corporation or its
subsidiaries; and
- other transactions resulting in a disproportionate financial benefit to an
interested stockholder.
The provisions of the Delaware business combination statute do not apply to
a corporation if, subject to certain requirements, the certificate of
incorporation or by-laws of the corporation contain a provision expressly
electing not to be governed by the provisions of the statute or the corporation
does not have voting stock listed on a national securities exchange, authorized
for quotation on an inter-dealer quotation system of a registered national
securities association or held of record by more than 2,000 stockholders.
Neither PRIMEDIA in its certificate of incorporation, as amended, or its
amended and restated by-laws, nor About in its second amended and restated
certificate of incorporation or its amended and restated by-laws, has adopted
any provision to "opt-out" of the Delaware business combination statute and the
statute is applicable to business combinations involving PRIMEDIA and About.
EXECUTIVES; EXECUTIVE COMPENSATION; STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE
OFFICERS AND PRINCIPAL STOCKHOLDERS
Information concerning current directors and officers of PRIMEDIA, executive
compensation and ownership of PRIMEDIA stock by management and principal
stockholders is contained in PRIMEDIA's annual report on Form 10-K for the year
ended December 31, 1999 and PRIMEDIA's proxy statement for its 2000 annual
meeting of stockholders dated April 19, 2000, and is incorporated herein by
reference.
Information concerning current directors and officers of About, executive
compensation and ownership of About stock by management and principal
stockholders is contained in About's annual report on Form 10-K for the year
ended December 31, 1999 and About's proxy statement for its 2000 annual meeting
of stockholders dated April 10, 2000, and is incorporated herein by reference.
See "Where You Can Find More Information."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
THE FOLLOWING SUMMARIES ARE QUALIFIED BY REFERENCE TO THE COMPLETE TEXT OF
EACH AGREEMENT, WHICH IS INCORPORATED BY REFERENCE. WE ENCOURAGE YOU TO READ THE
AGREEMENTS IN THEIR ENTIRETY.
ADS FOR EQUITY AGREEMENTS
On October 29, 2000, About and PRIMEDIA entered into two agreements,
pursuant to which About agreed to purchase advertising and promotional services
from PRIMEDIA with a total value of $72 million based on a $35.70 pro forma
equivalent per share value of About stock in exchange for a total of 2,016,806
shares of About stock. About has agreed to purchase $14,400,000 of these
services by December 31, 2001 and issued 403,361 shares of About stock to
PRIMEDIA on November 8, 2000. About has agreed to purchase the remainder of
these services between January 1, 2002 and December 31, 2005 and issued the
remaining 1,613,445 shares of About stock to PRIMEDIA on December 5, 2000.
94
Effective as of December 6, 2000, About and PRIMEDIA entered into an
agreement pursuant to which About agreed to purchase additional advertising and
promotional services from PRIMEDIA with a total value of $14,900,000 based on a
$20.25 fair market value per share of About stock in exchange for a total of
735,802 shares of About stock. About has agreed to purchase $14,900,000 of these
services by December 31, 2001 and issued 735,802 shares of About stock to
PRIMEDIA on December 6, 2000.
These agreements will survive termination of the merger agreement.
SALE REPRESENTATION AGREEMENT
On October 29, 2000, About and PRIMEDIA entered into a sales representation
agreement, pursuant to which PRIMEDIA has agreed to serve as the worldwide
advertising sales representative of About for the purpose of selling certain
forms of advertising for specified web sites owned and operated by About. From
November 1, 2000 through April 30, 2001, PRIMEDIA will serve as About's
exclusive third-party sales representative for these sites, with certain
preferences over About's employees or other agents beginning February 1, 2001.
Beginning in the second quarter of 2001 through December 31, 2005, PRIMEDIA will
be the exclusive sales representative with respect to these specified sites.
About has agreed to pay PRIMEDIA commission-based fees equal to 20% of the net
advertising revenues derived only from such forms of advertising sold on these
specific sites. From November 1, 2000 to March 31, 2001, the fees shall be
payable only with respect to those sales actually generated by PRIMEDIA. From
April 1, 2001 to December 31, 2005, the fees shall be payable regardless of
whether the sales were generated by PRIMEDIA. About and PRIMEDIA also agreed
that the number of About web sites to be covered by this agreement may grow to
20% of the total number of About web sites. This agreement is renewable for
additional one-year terms until either party notifies the other party of its
intent not to renew.
RIGHT OF FIRST OFFER AGREEMENT
On October 29, 2000, About and PRIMEDIA entered into a right of first offer
agreement concerning the possible provision of content from publications that
compete with PRIMEDIA publications. Under the terms of the agreement, if About
proposes to enter into a license agreement under which it will pay for content
from publications that compete with PRIMEDIA publications, PRIMEDIA has the
right to provide such content on terms no less favorable to About if, in About's
sole judgment, such content is identical in quality to that provided by the
competitive publication. This agreement terminates on December 31, 2005.
LIST RENTAL AGREEMENT
Effective as of December 6, 2000, About and PRIMEDIA Magazines Inc. entered
into an agreement pursuant to which PRIMEDIA Magazines Inc. granted About the
right to use a mailing list owned by PRIMEDIA Magazines Inc. in exchange for
120,987 shares of About stock. About issued 120,987 shares of About stock to
PRIMEDIA Magazines Inc. on December 6, 2000.
OTHER AGREEMENTS
About and PRIMEDIA have entered into certain agreements pursuant to which
PRIMEDIA has agreed to purchase advertising and promotional services on the
About network. The terms of these agreements expire in November of 2001 and
December of 2002. One of these agreements, a sponsorship and advertising
agreement, provides for payments to About in the aggregate of $5,900,000.
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COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act requires PRIMEDIA's and About's
directors and executive officers, and persons who own more than 10% of either
PRIMEDIA's or About's stock, to file with the Securities and Exchange Commission
initial reports of ownership on a Form 3 and reports of changes in ownership of
common stock and other equity securities of PRIMEDIA or About, as applicable on
a Form 4 or Form 5. Officers, directors and 10% stockholders are required by SEC
regulations to furnish PRIMEDIA or About, as applicable with, copies of all
Section 16(a) forms they file.
To PRIMEDIA's and About's knowledge, based solely on review of the copies of
the reports furnished to PRIMEDIA and About and written representations from the
executive officers and directors, PRIMEDIA and About believe that all
Section 16(a) filing requirements applicable to its officers, directors, and 10%
stockholders were met during 2000, except with respect to initial statements of
beneficial ownership for two directors of About, Daphne Kis and Stanley Fung,
which statements were not filed on a timely basis but have subsequently been
filed.
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LEGAL MATTERS
Simpson Thacher & Bartlett, New York, New York, will provide an opinion for
PRIMEDIA regarding the validity of the shares of PRIMEDIA offered by this joint
proxy statement-consent solicitation-prospectus.
Simpson Thacher & Bartlett, New York, New York, counsel for PRIMEDIA, and
Brobeck, Phleger & Harrison LLP, New York, New York, counsel for About, will
provide opinions regarding certain United States federal income tax consequences
of the merger for PRIMEDIA and About, respectively.
CHANGE IN INDEPENDENT PUBLIC ACCOUNTANTS
In June 2000, About decided to replace KPMG LLP as its independent
accountants, and retained Ernst & Young LLP as its new independent accountants.
The decision to change About's accountants was recommended by the audit
committee of About's board of directors and approved by About's board of
directors. KPMG LLP's reports on About's financial statements for the two most
recent fiscal years (i.e., the fiscal years ended December 31, 1998 and
December 31, 1999) contained no adverse opinion or a disclaimer of opinion, and
were not qualified or modified as to uncertainty, audit scope or accounting
principles.
During About's last two fiscal years and the subsequent interim period to
the date hereof, there were no disagreements between About and KPMG LLP on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of KPMG LLP, would have caused it to make reference to the subject
matter of the disagreements in connection with its reports. Prior to retaining
Ernst & Young LLP, About had not consulted with Ernst & Young LLP regarding
accounting principles.
EXPERTS
PRIMEDIA. The consolidated financial statements as of December 31, 1998 and
1999 and for each of the three years in the period ended December 31, 1999 and
the related financial statement schedule incorporated in this joint proxy
statement-consent solicitation-prospectus by reference from the PRIMEDIA Annual
Report on Form 10-K for the year ended December 31, 1999 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports (which
report on the consolidated financial statements expresses an unqualified opinion
and includes an explanatory paragraph referring to PRIMEDIA's change in 1998 in
the method of accounting for internal use 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), which are incorporated herein by reference, and have been
so incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
ABOUT. The consolidated financial statements and the related financial
statement schedule of About, as of December 31, 1998 and 1999 and for each of
the three years in the period ended December 31, 1999, incorporated in this
joint proxy statement-consent solicitation-prospectus by reference from About's
Annual Report on Form 10-K for the year ended December 31, 1999, have been
audited by KPMG LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and has been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
STOCKHOLDER PROPOSALS
PRIMEDIA. For a stockolder to bring matters before PRIMEDIA's 2001 Annual
Meeting, notice must be received by PRIMEDIA within the time limits described
below. The notice must include a description of the proposed business, the
reasons therefore and other specified matters. For a matter to be included in
PRIMEDIA's proxy statement and proxy for the 2001 Annual Meeting, notice must
have been received by PRIMEDIA on or before January 15, 2001. In each case, the
notice must be given to the Secretary of PRIMEDIA, whose address is 745 Fifth
Avenue, New York, New York, 10151. Any
97
stockholder desiring a copy of PRIMEDIA's by-laws will be furnished one without
charge upon written request to the Secretary.
ABOUT. Proposals submitted by stockholders of About for presentation at its
2001 annual meeting of stockholders, to be held if the merger has not been
consummated before then, must have been received by the Secretary of About no
later than the close of business on January 9, 2001 and no earlier than the
close of business on December 10, 2000 for inclusion in the proxy statement and
form of proxy relating to the 2001 annual meeting of stockholders. In addition,
the proxies solicited by the About board of directors for the 2001 annual
meeting of its stockholders will confer discretionary authority to vote on any
stockholder proposal raised at the meeting which is not described in the 2001
proxy statement unless About has received notice of the proposal, as described
above. However, if the date of its 2001 annual meeting of stockholders is more
than 30 days before May 9, 2001 or more than 60 days after May 9, 2001, notice
by the stockholder must be delivered after the close of business on the 90th day
prior to the 2001 annual meeting and by the close of business on the 60th day
prior to the 2001 annual meeting or the close of business on the 10th day
following the date on which a public announcement of the 2001 annual meeting is
first announced. If About determines to change the date of its 2001 annual
meeting of stockholders more than 30 days from May 9, 2001, About will provide
its stockholders with a reasonable time before it begins to print and mail its
proxy materials for the 2001 annual meeting in order to allow its stockholders
an opportunity to make proposals in accordance with the rules and regulations of
the SEC.
WHERE YOU CAN FIND MORE INFORMATION
PRIMEDIA and About file annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy any
document we file at the SEC's public reference rooms in Washington, D.C., New
York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public at the SEC's website at HTTP://WWW.SEC.GOV. Copies of
documents filed by PRIMEDIA with the SEC are also available at the offices of
The New York Stock Exchange, 20 Broad Street, New York, New York 10005. Copies
of documents filed by About with the SEC are also available at the Nasdaq Stock
Market, 1735 K Street, NW, Washington, D.C. 20006.
PRIMEDIA has filed a registration statement on Form S-4 under the Securities
Act with the SEC with respect to PRIMEDIA's common stock to be issued in the
merger. This joint proxy statement-consent solicitation-prospectus constitutes
the prospectus of PRIMEDIA filed as part of the registration statement in
addition to being a proxy statement of About for its special meeting of
stockholders and a consent solicitation of PRIMEDIA. This joint proxy
statement-consent solicitation-prospectus does not contain all of the
information set forth in the registration statement because certain parts of the
registration statement are omitted in accordance with the rules and regulations
of the SEC. The registration statement and its exhibits are available for
inspection and copying as set forth above.
The SEC allows us to "incorporate by reference," into this joint proxy
statement-consent solicitation-prospectus documents filed with the SEC by
PRIMEDIA and About. This means that we can disclose important information to you
by referring you to those documents. The information incorporated by reference
is considered to be a part of this joint proxy statement-consent solicitation-
prospectus, and later information that we file with the SEC will update and
supersede that information. We incorporate by reference the documents listed
below and any documents filed by PRIMEDIA or About pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this joint proxy
statement-consent solicitation-prospectus and before the date of About's special
meeting:
PRIMEDIA FILINGS (SEC FILE NUMBER 1-5805): PERIODS
------------------------------------------ -------
Annual Report on Form 10-K Year ended December 31, 1999
Quarterly Reports on Form 10-Q Quarters ended March 31, 2000, June 30, 2000
and September 30, 2000
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PRIMEDIA FILINGS (SEC FILE NUMBER 1-5805): PERIODS
------------------------------------------ -------
Current Reports on Form 8-K Filed April 14, 2000, May 15, 2000,
October 30, 2000 and November 13, 2000
The description of PRIMEDIA's common stock
and preferred stock contained in PRIMEDIA's
registration statements filed under Section
12 of the Securities Exchange Act
PRIMEDIA's proxy statement for its 2000 April 19, 2000
annual meeting of stockholders
ABOUT FILINGS (SEC FILE NUMBER 000-25525): PERIODS
------------------------------------------ -------
Annual Report on Form 10-K Year ended December 31, 1999
Quarterly Reports on Form 10-Q Quarters ended March 31, 2000, June 30, 2000
and September 30, 2000
Current Reports on Form 8-K February 14, 2000, April 10, 2000, June 21,
2000, and October 31, 2000
About's proxy statement for its 2000 annual April 10, 2000
meeting of stockholders
You may request a copy of the documents incorporated by reference into this
joint proxy statement-consent solicitation-prospectus by writing to or
telephoning PRIMEDIA or About.
Requests for documents should be directed to:
- FOR PRIMEDIA DOCUMENTS:
Warren Bimblick Georgeson Shareholder Communications, Inc.
PRIMEDIA Inc. or 17 State Street
745 Fifth Avenue New York, New York 10004
New York, New York 10151 Banks and Brokers (212) 440-9800
(212) 745-0100 All Others (800) 223-2064
- FOR ABOUT DOCUMENTS:
Investor Relations or Beacon Hill Partners, Inc.
About.com, Inc. 90 Broad Street
1440 Broadway, 19th Floor New York, New York 10004
New York, New York 10018 (800) 357-8212
(212) 204-4000
This joint proxy statement-consent solicitation-prospectus does not
constitute an offer to sell, or a solicitation of an offer to purchase, the
securities offered by this joint proxy statement-consent
solicitation-prospectus, or the solicitation of a proxy or consent, in any
jurisdiction to or from any person to whom or from whom it is unlawful to make
such offer, solicitation of an offer or proxy or consent solicitation in such
jurisdiction. Neither the delivery of this joint proxy statement-consent
solicitation-prospectus nor any distribution of securities pursuant to this
joint proxy statement-consent solicitation-prospectus shall, under any
circumstances, create any implication that there has been no change in the
information set forth or incorporated into this joint proxy statement-consent
solicitation-prospectus by reference or in our affairs since the date of this
joint proxy statement-consent solicitation-prospectus. The information contained
in this joint proxy statement-consent solicitation-prospectus with respect to
PRIMEDIA was provided by PRIMEDIA and the information contained in this joint
proxy statement-consent solicitation-prospectus with respect to About was
provided by About.
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ANNEX A
October 29, 2000
The Board of Directors
PRIMEDIA Inc. 745 Fifth Avenue
New York, New York 10151
Dear Members of the Board:
We understand that PRIMEDIA Inc., a Delaware corporation (the "COMPANY"), is
considering a transaction whereby the Company will acquire About.com, Inc., a
Delaware corporation ("ABOUT.COM"). Pursuant to the terms of an Agreement and
Plan of Merger (the "PURCHASE AGREEMENT"), the Company will undertake a series
of transactions whereby About.com will become a wholly owned subsidiary of the
Company (the "TRANSACTION"). Pursuant to the terms of the Purchase Agreement all
of the issued and outstanding shares of the capital stock of About.com, par
value of $.001 per share ("ABOUT.COM COMMON STOCK") will be converted into
2.3409 shares of Common Stock, par value of $.01 per share, of the Company (the
"EXCHANGE RATIO"). No Company Common Stock will be issued to holders of
fractional shares of About.com Common Stock. The terms and conditions of the
Transaction are more fully set forth in the Purchase Agreement.
You have requested our opinion as to whether the Exchange Ratio is fair,
from a financial point of view, to the Company and to the holders of Company
Common Stock.
Wit SoundView Corporation ("WIT") has acted as financial advisor to the
Board of Directors of the Company in connection with the Transaction and will
receive a fee upon the consummation thereof. In the past, Wit and its
predecessors have provided investment banking services to the Company and
received customary compensation for the rendering of such services. In the
ordinary course of business, Wit, its successors and affiliates may trade
securities of the Company for their own accounts and, accordingly, may at any
time hold a long or short position in such securities.
Our opinion does not address the Company's underlying business decision to
effect the Transaction or constitute a recommendation to any shareholder of the
Company as to how such shareholder should vote with respect to the Transaction.
At your direction, we have not been asked to, nor do we, offer any opinion as to
the material terms of the Purchase Agreement or the form of the Transaction. In
rendering this opinion, we have assumed, with your consent, that the Company and
About.com will comply with all the material terms of the Purchase Agreement.
In arriving at our opinion, we have, among other things: (i) reviewed
certain publicly available business and historical financial information
relating to the Company and About.com, (ii) reviewed certain internal financial
information and other data relating to the business and financial prospects of
the Company, including estimates and financial forecasts prepared by management
of the Company, that were provided to us by the Company and not publicly
available, (iii) reviewed certain internal financial information and other data
relating to the business and financial prospects of About.com, including
estimates and financial forecasts prepared by the managements of the Company and
About.com and not publicly available, (iv) conducted discussions with members of
the senior managements of the Company and About.com, (v) reviewed publicly
available financial and stock market data with respect to certain other
companies in lines of business we believe to be generally comparable to those of
the Company, (vi) compared the financial terms of the Transaction with the
publicly available financial terms of certain other transactions which we
believe to be generally relevant, (vii) considered certain pro forma effects of
the Transaction on the Company's financial statements and reviewed certain
estimates of synergies prepared by Company management, (viii) reviewed drafts of
the
Purchase Agreement, and (ix) conducted such other financial studies, analyses,
and investigations, and considered such other information as we deemed necessary
or appropriate.
In connection with our review, at your direction, we have not assumed any
responsibility for independent verification for any of the information reviewed
by us for the purpose of this opinion and have, at your direction, relied on its
being complete and accurate in all material respects. In addition, at your
direction, we have not made any independent evaluation or appraisal of any of
the assets or liabilities (contingent or otherwise) of the Company or About.com,
nor have we been furnished with any such evaluation or appraisal. With respect
to the financial forecasts, estimates, pro forma effects and calculations of
synergies referred to above, we have assumed, at your direction, that they have
been reasonably prepared on a basis reflecting the best currently available
estimates and judgments of the management of each company as to the future
performance of their respective companies. Our opinion is necessarily based on
economic, monetary, market and other conditions as in effect on, and the
information made available to us as of, the date hereof.
Based upon and subject to the foregoing, it is our opinion that, as the date
hereof, the Exchange Ratio is fair, from a financial point of view, to the
Company and to the holders of Company Common Stock.
Very truly yours,
WIT SOUNDVIEW CORPORATION
By: /s/ MACK S. ROSSOFF_______________
Name: Mack S. Rossoff_________________
Title: Managing Director______________
A-2
ANNEX B
October 29, 2000
Board of Directors
PRIMEDIA Inc.
745 Fifth Avenue
New York, New York 10151
Members of the Board of Directors:
PRIMEDIA Inc. (the "ACQUIROR"), Abracadabra Acquisition Corporation, a
wholly owned subsidiary of the Acquiror (the "ACQUISITION SUB"), and
About.com, Inc. (the "COMPANY") propose to enter into an Agreement and Plan of
Merger dated as of October 29, 2000 (the "AGREEMENT") pursuant to which the
Acquisition Sub will be merged with and into the Company in a transaction (the
"MERGER") in which each outstanding share of the Company's common stock, par
value $0.001 per share (the "SHARES"), will be converted into the right to
receive 2.3409 shares (the "EXCHANGE RATIO") of the common stock, par value
$0.01 per share, of the Acquiror (the "ACQUIROR SHARES").
You have asked us whether, in our opinion, as of the date hereof, the
Exchange Ratio is fair from a financial point of view to the Acquiror.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial information
relating to the Company and the Acquiror that we deemed to be relevant;
(2) Reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets and prospects of the Company
and the Acquiror, as well as the amount and timing of any cost savings
and synergies expected to result from the Merger (the "EXPECTED
SYNERGIES"), furnished to us by the Company and the Acquiror;
(3) Conducted discussions with members of senior management of the Company
and the Acquiror concerning their respective businesses and prospects
before and after giving effect to the Merger and the Expected Synergies;
(4) Reviewed the historical market prices and trading activity for the
Shares and the Acquiror Shares and compared them with that of certain
publicly traded companies which we deemed to be reasonably similar to the
Company and the Acquiror, respectively;
(5) Compared the results of operations of the Company and the Acquiror with
that of certain companies, which we deemed to be reasonably similar to
the Company and the Acquiror, respectively;
(6) Compared the proposed financial terms of the transactions contemplated
by the Agreement with the financial terms of certain other mergers and
acquisitions which we deemed to be relevant;
(7) Considered the pro forma effect of the Merger on the Acquiror;
(8) Reviewed the Agreement; and
(9) Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed necessary, including our assessment of general economic, market
and monetary conditions.
In preparing our opinion, we have relied on the accuracy and completeness of
all information supplied or otherwise made available to us, discussed with or
reviewed by or for us, or publicly available, and we have not assumed any
responsibility for independently verifying such information or undertaken an
independent evaluation or appraisal of the assets or liabilities of the Company
or the Acquiror or been furnished with any such evaluation or appraisal. With
respect to the financial forecasts and Expected Synergies furnished by the
Company and the Acquiror, we have assumed that they have been reasonably
prepared and reflect the best currently available estimates and judgment of the
Company's or the Acquiror's management as to the expected future financial
performance of the Company or the Acquiror, as the case may be, and the Expected
Synergies. We have further assumed that the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof. We have assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Merger, no restrictions, including any divestiture requirements or
amendments or modifications, will be imposed that will have a material adverse
effect on the contemplated benefits of the Merger. We have also assumed that the
Merger will be consummated in accordance with the terms of the Agreement without
waiver of any material condition.
We are acting as financial advisor to the Acquiror in connection with the
Merger and will receive a fee from the Acquiror for our services, a significant
portion of which is contingent upon the consummation of the Merger. In addition,
the Acquiror has agreed to indemnify us for certain liabilities arising out of
our engagement. We have, in the past, provided certain financial advisory and
financing services to the Acquiror and to affiliates of its principal
shareholder, KKR Associates L.P., and may continue to do so and have received,
and may receive, fees for the rendering of such services. In the ordinary course
of our business, we may actively trade the Company Shares, as well as the
Acquiror Shares, for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of the
Acquiror. Our opinion does not address the merits of the underlying decision by
the Acquiror to engage in the Merger and does not constitute a recommendation to
any shareholder of the Acquiror as to how such shareholder should vote on the
proposed issuance of the Acquiror Shares in the Merger or any matter related
thereto.
We are not expressing any opinion herein as to the prices at which the
Acquiror Shares will trade following the announcement or consummation of the
Merger.
On the basis of, and subject to the foregoing, we are of the opinion that,
as of the date hereof, the Exchange Ratio is fair from a financial point of view
to the Acquiror.
Very truly yours,
/s/ MERRILL LYNCH, PIERCE, FENNER &
___SMITH INCORPORATED_________________
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
B-2
ANNEX C
October 29, 2000
Board of Directors
About.com Inc.
1440 Broadway
New York NY 10018
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to the stockholders of About.com Inc. (the "COMPANY") of the consideration
to be received by such stockholders pursuant to the terms of the Agreement and
Plan of Merger, dated as of October 29, 2000 (the "AGREEMENT"), among Primedia
Inc. ("PRIMEDIA"), Abracadabra Acquisition Corporation ("ACQUISITION SUB"), a
wholly owned subsidiary of Primedia, and the Company, pursuant to which
Acquisition Sub will be merged (the "MERGER") with and into the Company.
Pursuant to the Agreement, each share of common stock, par value $0.001 per
share, of the Company ("COMPANY COMMON STOCK") will be converted subject to
certain exceptions into the right to receive 2.341 shares of common stock, par
value $0.01 per share, of Primedia ("PRIMEDIA COMMON STOCK").
In arriving at our opinion, we have reviewed the draft dated October 29,
2000 of the Agreement. We also have reviewed financial and other information
that was publicly available or furnished to us by the Company and Primedia,
including information provided to us during discussions with their respective
managements of the Company and Primedia. Included in the information provided
during discussions with the respective managements were certain financial
projections of the Company for the period beginning October 1, 2000 and ending
December 31, 2001 prepared by the management of the Company and certain
financial projections of Primedia for the period beginning October 1, 2000 and
ending December 31, 2005 prepared by the management of Primedia. In addition, we
have reviewed the reported price and trading activity for the Company Common
Stock and Primedia Common Stock, compared certain financial and securities data
for the Company and Primedia with similar information for certain other
companies the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations in the Internet content industry
specifically and in other industries generally and performed such other
financial studies, analyses and investigations as we considered appropriate for
the purposes of this opinion.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by the Company and Primedia or
their respective representatives, or that was otherwise reviewed by us. With
respect to the financial projections supplied to us, we have relied on
representations of the Company or Primedia, as the case may be, that they have
been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the management of the Company and Primedia, as the
case may be, as to the future operating and financial performance of the Company
and Primedia, respectively. We have not assumed any responsibility for making an
independent evaluation of any assets or liabilities or for making any
independent verification of any of the information reviewed by us. We have
relied as to certain legal matters on advice of counsel to the Company.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect the conclusion reached in this opinion, we do not have
any obligation to update, revise or reaffirm this opinion. We are expressing no
opinion herein as
to what the value of Primedia Common Stock will be when issued to the Company's
stockholders or as to the prices at which Primedia Common Stock will actually
trade at any time. Our opinion does not address the relative merits of the
Merger and any other business strategies being considered by the Board of
Directors of the Company. In addition, it is understood that this letter is
solely for the information of the Board of Directors of the Company in
connection with its consideration of the Merger and that our opinion does not
constitute a recommendation to any stockholder as to how such stockholder should
vote on the Merger. Donaldson, Lufkin, & Jenrette Securities Corporation ("DLJ")
is acting as financial advisor to the Company in connection with the Merger and
will receive a fee for its services, a significant portion of which is
contingent upon the consummation of the Merger. DLJ, as part of its investment
banking services, is regularly engaged in the valuation of businesses and
securities in connection with mergers, acquisitions, underwritings, sales and
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. DLJ has performed investment
banking and other services for the Company in the past, including lead managing
a follow-on offering in October 1999 and has been compensated for such services.
DLJ has also performed investment banking and other services for affiliates of
Kohlberg Kravis Roberts & Co., an affiliate of Primedia, including but not
limited to M&A advisory, equity and debt financings and has been compensated for
such services. In the ordinary course of business, DLJ and its affiliates may
actively trade the debt and equity securities of the Company and Primedia for
its own and such affiliates' accounts and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the consideration to be received by holders of Company
Common Stock pursuant to the Agreement is fair to such holders from a financial
point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ ROBERT G. MANN
Robert G. Mann
Senior Vice President
C-2
ANNEX D
AGREEMENT AND PLAN OF MERGER
AMONG
PRIMEDIA INC.,
ABRACADABRA ACQUISITION CORPORATION
AND
ABOUT.COM, INC.
DATED AS OF OCTOBER 29, 2000
TABLE OF CONTENTS
ARTICLE I THE MERGER........................................ D-1
Section 1.1. The Merger................................... D-1
Section 1.2. Effective Time............................... D-1
Section 1.3. Effects of the Merger........................ D-2
Section 1.4. Certificate of Incorporation; By-Laws........ D-2
Section 1.5. Directors and Officers....................... D-2
Section 1.6. Conversion of Securities..................... D-2
Section 1.7. Treatment of Employee Options and Stock
Purchase Plan........................................... D-2
Section 1.8. Fractional Interests......................... D-4
Section 1.9. Surrender of Shares of Company Common Stock;
Stock Transfer Books.................................... D-4
Section 1.10. Lost Certificates........................... D-5
Section 1.11. Withholding Rights.......................... D-5
Section 1.12. Closing and Closing Date.................... D-6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY.... D-6
Section 2.1. Organization and Qualification............... D-6
Section 2.2. Certificate of Incorporation and By-Laws..... D-6
Section 2.3. Capitalization; Subsidiaries................. D-7
Section 2.4. Authority Relative to This Agreement......... D-8
Section 2.5. No Conflict; Required Filings and Consents... D-8
Section 2.6. Compliance................................... D-9
Section 2.7. SEC Filings; Financial Statements............ D-9
Section 2.8. Absence of Certain Changes or Events......... D-10
Section 2.9. Absence of Litigation........................ D-10
Section 2.10. Employee Benefit Plans...................... D-10
Section 2.11. Tax Matters................................. D-11
Section 2.12. Environmental Matters....................... D-12
Section 2.13. Form S-4; Proxy Statement................... D-13
Section 2.14. Opinion of Financial Advisor................ D-13
Section 2.15. Brokers..................................... D-13
Section 2.16. Affiliate Transactions...................... D-14
Section 2.17. Vote Required............................... D-14
Section 2.18. DGCL Section 203; State Takeover Statutes... D-14
Section 2.19. Material Contracts.......................... D-14
Section 2.20. Absence of Breaches or Defaults............. D-15
Section 2.21. Intellectual Property....................... D-15
Section 2.22. Insurance................................... D-17
Section 2.23. Labor Matters............................... D-17
Section 2.24. Reorganization Qualification................ D-17
Section 2.25. Guides...................................... D-17
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND
SUB....................................................... D-18
i
Section 3.1. Corporate Organization....................... D-18
Section 3.2. Capitalization............................... D-18
Section 3.3. Authority Relative to This Agreement......... D-19
Section 3.4. No Conflict; Required Filings and Consents... D-19
Section 3.5. Compliance................................... D-20
Section 3.6. SEC Filings; Financial Statements............ D-20
Section 3.7. Absence of Certain Changes or Events......... D-21
Section 3.8. Form S-4; Proxy Statement.................... D-21
Section 3.9. Absence of Litigation........................ D-21
Section 3.10. Opinion of Financial Advisor................ D-22
Section 3.11. Brokers..................................... D-22
Section 3.12. Affiliate Transactions...................... D-22
Section 3.13. Reorganization Qualification................ D-22
Section 3.14. Stockholders' Consent and Approval
Obtained................................................ D-22
Section 3.15. Employee Benefit Plans...................... D-22
Section 3.16. Tax Matters................................. D-22
ARTICLE IV CONDUCT OF BUSINESS PENDING THE MERGER........... D-22
Section 4.1. Conduct of Business of The Company Pending
The Merger.............................................. D-22
Section 4.2. Conduct of Business of Parent Pending The
Merger.................................................. D-25
ARTICLE V ADDITIONAL AGREEMENTS............................. D-26
Section 5.1. Preparation of Form S-4 and the Proxy
Statement; Stockholder Meeting.......................... D-26
Section 5.2. Accountants' Letters......................... D-27
Section 5.3. Access to Information; Confidentiality....... D-27
Section 5.4. No Solicitation of Transactions.............. D-28
Section 5.5. Employee Benefits Matters.................... D-29
Section 5.6. Directors' and Officers' Indemnification;
Insurance............................................... D-29
Section 5.7. Notification of Certain Matters.............. D-30
Section 5.8. Further Action; Reasonable Best Efforts...... D-30
Section 5.9. Public Announcements......................... D-30
Section 5.10. Stock Exchange Listing...................... D-30
Section 5.11. Affiliates.................................. D-31
Section 5.12. Board of Directors and Officers of Parent... D-31
Section 5.13. Section 16b Approvals....................... D-31
Section 5.14. SEC Documents............................... D-31
Section 5.15. Continued Employment........................ D-31
Section 5.16. Outstanding Company Securities.............. D-31
ARTICLE VI CONDITIONS OF MERGER............................. D-31
Section 6.1. Conditions to Obligation of Each Party to
Effect The Merger....................................... D-31
Section 6.2. Conditions to Obligations of The Company to
Effect The Merger....................................... D-32
Section 6.3. Conditions to Obligations of Parent and Sub
to Effect The Merger.................................... D-33
ii
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER............... D-34
Section 7.1. Termination.................................. D-34
Section 7.2. Effect of Termination........................ D-35
Section 7.3. Fees and Expenses............................ D-35
Section 7.4. Amendment.................................... D-36
Section 7.5. Waiver....................................... D-36
ARTICLE VIII GENERAL PROVISIONS............................. D-36
Section 8.1. Non-Survival of Representations, Warranties
and Agreements.......................................... D-36
Section 8.2. Notices...................................... D-36
Section 8.3. Certain Definitions.......................... D-37
Section 8.4. Severability................................. D-38
Section 8.5. Entire Agreement; Assignment................. D-38
Section 8.6. Parties in Interest.......................... D-38
Section 8.7. Governing Law................................ D-38
Section 8.8. Headings..................................... D-38
Section 8.9. Counterparts................................. D-39
Section 8.10. Interpretation.............................. D-39
iii
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 29, 2000 (the
"AGREEMENT"), among PRIMEDIA Inc., a Delaware corporation ("PARENT"),
Abracadabra Acquisition Corporation, a Delaware corporation and a direct wholly
owned subsidiary of Parent ("SUB"), and About.com, Inc., a Delaware corporation
(the "COMPANY").
WHEREAS, the Boards of Directors of Parent and Sub and the Company have
declared this Agreement to be advisable, and the Boards of Directors of Parent,
Sub and the Company have each approved the merger of Sub with and into the
Company and the Company becoming a wholly owned direct subsidiary of Parent (the
"MERGER") in accordance with the General Corporation Law of the State of
Delaware ("DGCL") upon the terms and subject to the conditions set forth herein;
WHEREAS, certain stockholders of Parent holding not less than 70% of the
outstanding voting securities of Parent have entered into a voting agreement,
dated as of the date hereof (the "PARENT VOTING AGREEMENT"), pursuant to which
they have agreed, among other things, to consent to the issuance of Parent
Common Stock (as defined below) in the Merger;
WHEREAS, concurrently with the execution and delivery of this Agreement and
as an inducement to the willingness of Parent and Sub to enter into this
Agreement, certain holders of shares of common stock, par value $.001 per share
(the "COMPANY COMMON STOCK"), of the Company have each entered into a voting
agreement, dated as of the date hereof (the "SHAREHOLDER VOTING AGREEMENT"),
pursuant to which such holders have agreed to vote their shares of Company
Common Stock in the manner set forth therein; and
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "CODE");
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Sub and the Company hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1. THE MERGER. Upon the terms and subject to the conditions of
this Agreement and in accordance with the DGCL, at the Effective Time (as
defined in Section 1.2), Sub shall be merged with and into the Company. As a
result of the Merger, the separate corporate existence of Sub shall cease and
the Company shall continue as the surviving corporation of the Merger (the
"SURVIVING CORPORATION"). At Parent's election, the Merger may alternatively be
structured so that any direct wholly owned subsidiary of Parent may be
substituted for Sub as a constituent corporation in the Merger. In the event of
such an election, the parties agree to execute an appropriate amendment to this
Agreement in order to reflect such election.
Section 1.2. EFFECTIVE TIME. As soon as practicable after the satisfaction
or waiver of the conditions set forth in Article VI, the parties hereto shall
cause the Merger to be consummated by filing a certificate of merger (the
"CERTIFICATE OF MERGER") with the Secretary of State of the State of Delaware,
in such form as required by and executed in accordance with the relevant
provisions of the DGCL (the date and time of the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware (or such later time
as is specified in the Certificate of Merger and agreed upon by the parties
hereto) being the "EFFECTIVE TIME").
D-1
Section 1.3. EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in the applicable provisions of the DGCL. Without limiting the generality
of the foregoing and subject thereto, at the Effective Time all the property,
rights, privileges, immunities, powers and franchises of the Company and Sub
shall vest in the Surviving Corporation, and all debts, liabilities and duties
of the Company and Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
Section 1.4. CERTIFICATE OF INCORPORATION; BY-LAWS. (a) At the Effective
Time and without any further action on the part of the Company and Sub, the
Restated Certificate of Incorporation of the Company (the "CERTIFICATE OF
INCORPORATION") as in effect immediately prior to the Effective Time shall be
the Restated Certificate of Incorporation of the Surviving Corporation until
thereafter and further amended as provided therein and under the DGCL.
(b) At the Effective Time and without any further action on the part of
the Company and Sub, the Amended and Restated By-Laws of the Company (the
"BY-LAWS") shall be the Amended and Restated By-Laws of the Surviving
Corporation and thereafter may be amended or repealed in accordance with
their terms or the Certificate of Incorporation of the Surviving Corporation
and as provided by law.
Section 1.5. DIRECTORS AND OFFICERS. The directors of Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed (as the case may be) and qualified.
Section 1.6. CONVERSION OF SECURITIES. At the Effective Time, by virtue of
the Merger and without any action on the part of Sub, the Company or the holders
of any of the following securities:
(a) Subject to Section 1.8, each share of Company Common Stock issued
and outstanding immediately prior to the Effective Time (other than shares
of Company Common Stock to be canceled in accordance with Section 1.6(b)
hereof) shall be converted into 2.3409 (the "EXCHANGE RATIO") fully paid and
nonassessable shares of Common Stock, par value $0.01 per share (the "PARENT
COMMON STOCK"), of Parent (the "MERGER CONSIDERATION"). As of the Effective
Time, all such shares of Company Common Stock shall no longer be outstanding
and shall automatically be canceled and shall cease to exist, and each
holder of a certificate representing any such shares of Company Common Stock
shall cease to have any rights with respect thereto, except the right to
receive the Merger Consideration and any cash in lieu of fractional shares
of Parent Common Stock to be issued or paid in consideration therefor upon
surrender of such certificate in accordance with Section 1.9, without
interest.
(b) Each share of Company Common Stock that is (i) held in the treasury
of the Company or (ii) owned by Parent immediately prior to the Effective
Time shall be cancelled and retired without any conversion thereof and no
payment or distribution shall be made with respect thereto.
(c) Each share of common stock of Sub issued and outstanding immediately
prior to the Effective Time shall be converted into one validly issued,
fully paid and non-assessable share of common stock of the Surviving
Corporation and shall thereafter constitute all of the issued and
outstanding capital stock of the Surviving Corporation.
Section 1.7. TREATMENT OF EMPLOYEE OPTIONS AND STOCK PURCHASE PLAN.
(a) Prior to the Effective Time, the Board of Directors of the Company
(or, if appropriate, any Committee thereof) and the Board of Directors of
Parent (or, if appropriate, any Committee thereof) shall adopt appropriate
resolutions and take all other actions necessary to provide that as of the
Effective Time all outstanding stock options of the Company (the "COMPANY
STOCK RIGHTS")
D-2
heretofore granted under any stock option plan of the Company or its
acquired subsidiaries (the "STOCK PLANS") and which are outstanding
immediately prior to the Effective Time shall be assumed by Parent and be
deemed to constitute an option to purchase shares of Parent Common Stock or,
in the case of Company Stock Rights which are in the form of restricted
stock, shares of restricted Parent Common Stock (collectively, "NEW STOCK
RIGHTS") in an amount and, if applicable, at an exercise price determined as
provided below:
(i) The number of shares of Parent Common Stock to be subject to the
New Stock Rights shall be equal to the product of the number of shares of
Company Common Stock remaining subject (as of immediately prior to the
Effective Time) to the original Company Stock Right and the Exchange
Ratio, PROVIDED that any fractional shares of Parent Common Stock
resulting from such multiplication shall be rounded down to the nearest
share; and
(ii) The exercise price per share of Parent Common Stock under the
New Stock Right shall be equal to the exercise price per share of the
Company Common Stock under the original Company Stock Right divided by
the Exchange Ratio, PROVIDED that such exercise price shall be rounded
down to the nearest cent.
The adjustment provided herein with respect to any options which are
"incentive stock options" (as defined in Section 422 of the Code) shall be
and is intended to be effected in a manner which is consistent with
Section 424(a) of the Code. Except as may be required by the terms of the
Automatic Option Grant Program under the 1998 Stock Option/Stock Issuance
Plan or any grants thereunder as of the date hereof to directors, the
Company shall not accelerate the vesting, or otherwise amend the terms, of
any unvested Company Stock Rights under any of the Stock Plans. After the
Effective Time, each New Stock Right shall be exercisable and shall vest
upon the same terms and conditions as were applicable to the related Company
Stock Right immediately prior to the Effective Time except that all
references to the Company shall be deemed to be references to the Parent.
(b) Immediately prior to the Effective Time, pursuant to the terms of
the Company's 1999 Employee Stock Purchase Plan (the "ESPP"), each
outstanding purchase right under the ESPP shall be exercised for the
purchase of Company Common Stock at the price per share set forth in the
ESPP. The Company Common Stock purchased under the ESPP shall be considered
issued and outstanding immediately prior to the Effective Time and shall be
converted pursuant to Section 1.6 hereof. In addition, prior to the
Effective Time, the Company shall amend the ESPP to provide for (i) its
continuation from and after the Effective Time and (ii) a new offering
period to commence from and after the Effective Time and to terminate
immediately prior to the start of the next succeeding offering period under
the PRIMEDIA Employee Stock Purchase Plan for which participants in the ESPP
are eligible to particpate.
(c) The Company shall ensure that following the Effective Time no holder
of a Company Stock Right or any participant in any Stock Plans shall have
any right thereunder to acquire capital stock of the Company, Sub, or the
Surviving Corporation. The Company will take all reasonable steps to ensure
that, immediately following the Effective Time, none of Sub, the Company,
the Surviving Corporation or any of their respective subsidiaries is or will
be bound by any Company Stock Rights, other options, warrants, rights or
agreements which would entitle any person, other than Sub or its affiliates,
to own any capital stock of the Company, Sub, the Surviving Corporation or
any of their respective subsidiaries or to receive any payment in respect
thereof.
(d) In connection with the issuance of New Stock Rights and the
assumption of the ESPP, Parent shall (i) reserve for issuance the aggregate
number of shares of Parent Common Stock that will become subject to New
Stock Rights and the ESPP pursuant to this Section 1.7 from and after the
Effective Time, upon exercise of New Stock Rights and the purchase rights
under the ESPP, (ii) make available for issuance all shares of Parent Common
Stock covered thereby, subject to the
D-3
terms and conditions applicable thereto, and (iii) if necessary, as soon as
reasonably practicable following the Effective Time, file a registration
statement on Form S-8 covering the shares to be issued upon exercise of the
New Stock Rights and the purchase rights under the ESPP.
Section 1.8. FRACTIONAL INTERESTS. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued in connection with the
Merger, and such fractional interests will not entitle the owner thereof to any
rights of a stockholder of Parent. In lieu of any such fractional interests,
each holder of shares of Company Common Stock exchanged pursuant to Section
1.6(a) who would otherwise have been entitled to receive a fraction of a share
of Parent Common Stock (after taking into account all shares of Company Common
Stock then held of record by such holder) shall receive cash (without interest)
in an amount equal to the product of such fractional part of a share of Parent
Common Stock multiplied by the closing price of a share of Parent Common Stock
on the NYSE as reported by The Wall Street Journal (or if not reported thereby,
any other authoritative source) on the Closing Date (as defined in Section
1.12), rounded down to the nearest cent.
Section 1.9. SURRENDER OF SHARES OF COMPANY COMMON STOCK; STOCK TRANSFER
BOOKS. (a) Prior to the Closing Date, Sub shall designate a bank or trust
company to act as agent for the holders of shares of Company Common Stock in
connection with the Merger (the "EXCHANGE AGENT") to receive the shares of
Parent Common Stock (and any cash payable in lieu of any fractional shares of
Parent Common Stock) to which holders of shares of Company Common Stock shall
become entitled pursuant to Sections 1.6(a) and 1.8. When and as needed, Parent
or Sub will make available to the Exchange Agent sufficient shares of Parent
Common Stock and cash to make all exchanges pursuant to Section 1.9(b).
(b) Promptly after the Effective Time, the Surviving Corporation shall
cause to be mailed to each record holder, as of the Effective Time, of an
outstanding certificate or certificates which immediately prior to the
Effective Time represented shares of Company Common Stock (the
"CERTIFICATES"), a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the Exchange
Agent) and instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of Parent
Common Stock therefor and for cash payable in lieu of any fractional shares
of Parent Common Stock. Upon surrender to the Exchange Agent of a
Certificate, together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto, and such other
documents as may be required pursuant to such instructions, the holder of
such Certificate shall be entitled to receive in exchange therefor, (i) a
certificate representing that number of whole shares of Parent Common Stock
which such holder has the right to receive pursuant to the provisions of
Section 1.6(a) and (ii) cash in lieu of any fractional shares of Parent
Common Stock to which such holder is entitled pursuant to Section 1.8, after
giving effect to any required tax withholdings, and the Certificate so
surrendered shall forthwith be cancelled. If the exchange of certificates
representing shares of Parent Common Stock is to be made to a person other
than the person in whose name the surrendered Certificate is registered, it
shall be a condition of exchange that the Certificate so surrendered shall
be properly endorsed or shall be otherwise in proper form for transfer and
that the person requesting such exchange shall have paid any transfer and
other taxes required by reason of the exchange of certificates representing
shares of Parent Common Stock to a person other than the registered holder
of the Certificate surrendered or shall have established to the satisfaction
of the Surviving Corporation that such tax either has been paid or is not
applicable.
(c) At any time following six months after the Effective Time, the
Surviving Corporation shall be entitled to require the Exchange Agent to
deliver to it any shares of Parent Common Stock (and any cash payable in
lieu of any fractional shares of Parent Common Stock) which had been made
available to the Exchange Agent and which have not been disbursed to holders
of Certificates, and thereafter such holders shall be entitled to look to
the Surviving Corporation
D-4
(subject to abandoned property, escheat or other similar laws) only as
general creditors thereof with respect to the shares of Parent Common Stock
(and any cash payable in lieu of any fractional shares of Parent Common
Stock) payable upon due surrender of their Certificates. Notwithstanding the
foregoing, none of the Surviving Corporation, Parent or the Exchange Agent
shall be liable to any holder of a Certificate for shares of Parent Common
Stock (and any cash payable in lieu of any fractional shares of Parent
Common Stock) delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(d) At the Effective Time, the stock transfer books of the Company shall
be closed and thereafter there shall be no further registration of transfers
of shares of Company Common Stock on the records of the Company. From and
after the Effective Time, the holders of Certificates evidencing ownership
of shares of Company Common Stock outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such shares of
Company Common Stock except as otherwise provided for herein or by
applicable law.
(e) No dividends or other distributions declared or made after the
Effective Time with respect to shares of Parent Common Stock shall be paid
to the holder of any unsurrendered Certificate with respect to the whole
shares of Parent Common Stock it is entitled to receive and no cash payment
in lieu of fractional interests shall be paid pursuant to Section 1.8 until
the holder of such Certificate shall surrender such Certificate in
accordance with the provisions of this Agreement. Upon such surrender, there
shall be paid to the person in whose name the certificates representing such
whole shares of Parent Common Stock shall be issued, any dividends or
distributions with respect to such shares of Parent Common Stock which have
a record date after the Effective Time and shall have become payable between
the Effective Time and the time of such surrender. In no event shall the
person entitled to receive such dividends or distributions be entitled to
receive interest thereon.
(f) If, at any time after the Effective Time, the Surviving Corporation
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to
vest, perfect or confirm of record or otherwise in the Surviving Corporation
its right, title or interest in, to or under any of the rights, properties
or assets of either Sub or the Company acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger or
otherwise to carry out this Agreement, the officers of the Surviving
Corporation shall be authorized to execute and deliver, in the name and on
behalf of each of Sub and the Company or otherwise, all such deeds, bills of
sale, assignments and assurances and to take and do, in such names and on
such behalves or otherwise, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out the purposes of this
Agreement.
Section 1.10. LOST CERTIFICATES. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the holder
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such holder of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will deliver in exchange for such lost, stolen or destroyed
Certificate the applicable Merger Consideration with respect to the shares of
Company Common Stock formerly represented thereby, any cash in lieu of
fractional shares of Parent Common Stock and unpaid dividends and distributions
on shares of Parent Common Stock deliverable in respect thereof pursuant to this
Agreement.
Section 1.11. WITHHOLDING RIGHTS. Each of the Surviving Corporation and
Parent shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock such amounts as it is required to deduct and withhold
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with respect to the making of such payment under the Code and the rules and
regulations promulgated thereunder, or any provision of state, local or foreign
tax law. To the extent that amounts are so withheld by the Surviving Corporation
or Parent, as the case may be, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares of
Company Common Stock in respect of which such deduction and withholding was made
by the Surviving Corporation or Parent, as the case may be.
Section 1.12. CLOSING AND CLOSING DATE. Unless this Agreement shall have
been terminated and the transactions herein contemplated shall have been
abandoned pursuant to the provisions of Section 7.1, the closing (the "CLOSING")
of this Agreement shall take place (a) at 10:00 a.m. (New York time) on the
second business day after all of the conditions to the respective obligations of
the parties set forth in Article VI hereof shall have been satisfied or waived
or (b) at such other time and date as Parent and the Company shall agree (such
date and time on and at which the Closing occurs being referred to herein as the
"CLOSING DATE"). The Closing shall take place at such location as Parent and the
Company shall agree.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Sub that, except as
set forth in the corresponding sections or subsections of the Disclosure
Schedule delivered by the Company to Parent and Sub prior to the execution of
this Agreement (the "COMPANY DISCLOSURE SCHEDULE") or in any other section or
subsection of the Company Disclosure Schedule if it is reasonably apparent that
such disclosure applies:
Section 2.1. ORGANIZATION AND QUALIFICATION. Each of the Company and each
of its subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
the requisite corporate power and authority and any necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as it is now being conducted, except where the failure to have such power,
authority and governmental approvals could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect (as defined
below). Each of the Company and each of its subsidiaries is duly qualified or
licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary, except for such failures to be so duly qualified or
licensed or in good standing which could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. When used in this
Article II or otherwise in connection with the Company or any of its
subsidiaries, the term "MATERIAL ADVERSE EFFECT" means any change or effect that
would be materially adverse to the business, properties, assets, condition
(financial or otherwise) or results of operations of the Company and its
subsidiaries taken as a whole or that would materially impair the ability of the
Company to perform its obligations hereunder; PROVIDED that none of the
following shall be taken into account in determining whether there has been or
could be a Material Adverse Effect: (w) any employee attrition after the date
hereof; (x) any change arising from the public announcement of the Merger and
the other transactions contemplated by this Agreement; (y) any change in the
market price or trading volume of the Company Common Stock after the date
hereof; or (z) any adverse effect on the Company attributable solely to
conditions affecting the business to consumer Internet industry, the United
States economy as a whole or foreign economies in any locations where the
Company or any of its subsidiaries has material operations or sales (and not
having a materially disproportionate effect on the Company).
Section 2.2. CERTIFICATE OF INCORPORATION AND BY-LAWS. The Company has
heretofore furnished or made available to Parent a complete and correct copy of
the Certificate of Incorporation and the By-
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Laws as currently in effect. Such Certificate of Incorporation and By-Laws are
in full force and effect and no other organizational documents are applicable to
or binding upon the Company.
Section 2.3. CAPITALIZATION; SUBSIDIARIES. (a) The authorized capital
stock of the Company consists of 105,000,000 shares, consisting of (i) 5,000,000
shares of preferred stock, par value $0.001 per share ("PREFERRED STOCK"), and
(ii) 100,000,000 shares of Company Common Stock. As of September 30, 2000,
(i) 18,462,290 shares of Company Common Stock were issued and outstanding, all
of which shares were duly authorized, validly issued, fully paid and
nonassessable and were issued free of preemptive (or similar) rights, (ii) no
shares of Company Common Stock were held in the treasury of the Company,
(iii) no shares of Company Common Stock which are restricted stock issued
pursuant to the ESPP were issued and outstanding, (iv) an aggregate of 8,024,872
shares, of Company Common Stock were reserved and available for issuance in
connection with the exercise of stock options issuable pursuant to the Stock
Plans (other than the ESPP); (v) an aggregate of 125,000 shares of Company
Common Stock were reserved for issuance and issuable upon or otherwise
deliverable in connection with the exercise of purchase rights under the ESPP;
and (vi) an aggregate of 5,369,591 shares of Company Common Stock are issuable
upon or otherwise deliverable in connection with the exercise of all outstanding
Company Stock Rights issued pursuant to the Stock Plans or otherwise identified
on Section 2.3(a) of the Company Disclosure Schedule. All of the shares of
Company Common Stock that may be issued pursuant to the Stock Plans will be,
when issued, duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive (or similar) rights. No shares of preferred stock of
the Company are outstanding or held in the treasury of the Company. Except as
set forth above or in Section 2.3(a) of the Company Disclosure Schedule, there
are outstanding (A) no shares of capital stock or other voting securities
(including indebtedness having the right to vote) of the Company, (B) no
securities of the Company convertible into or exchangeable for shares of capital
stock or voting securities (including indebtedness having the right to vote) of
the Company, (C) no options, warrants or other rights to acquire from the
Company, and no obligation of the Company to issue, any capital stock, voting
securities (including indebtedness having the right to vote) or securities
convertible into or exchangeable for capital stock or voting securities
(including indebtedness having the right to vote) of the Company and (D) no
equity equivalents, interests in the ownership or earnings of the Company or
other similar rights (collectively, "COMPANY SECURITIES"). Except pursuant to
the Stock Plans and the Company Securities issued thereunder, there are no
outstanding obligations of the Company or any of its subsidiaries to repurchase,
redeem or otherwise acquire any Company Securities and there is no voting trust
or other agreement or understanding to which the Company or any of its
subsidiaries is a party or is bound with respect to the voting of the capital
stock of the Company of any of its subsidiaries. There are no other options,
calls, warrants or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of the Company or any
of its subsidiaries to which the Company or any of its subsidiaries is a party.
(b) Each of the outstanding shares of capital stock of each of the
Company's subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and all such shares are owned by the Company or another wholly
owned subsidiary of the Company and are owned free and clear of all security
interests, liens, claims, pledges, agreements, limitations in voting rights,
licenses, charges or other encumbrances of any nature whatsoever ("LIENS").
There are no outstanding contractual obligations of the Company or any of
its subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of any subsidiary or, except as set forth in Section 2.3(b) of
the Company Disclosure Schedule, to provide funds to or make any investment
(in the form of a loan, capital contribution or otherwise) in any such
subsidiary or any other entity. Section 2.3(b) of the Company Disclosure
Schedule sets forth a complete and correct list of all of the subsidiaries
of the Company and all other entities in which the Company owns, directly or
indirectly, any equity interest. Such list sets forth the amount of capital
stock or other equity interests owned by the Company, directly or
indirectly, in such subsidiaries or other entities.
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(c) The signatories to the Shareholder Voting Agreement hold at least
10% of the outstanding shares of Company Common Stock (on a fully diluted
basis).
Section 2.4. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby has been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement, or to consummate the transactions so
contemplated (other than, with respect to the Merger, the adoption of this
Agreement by the holders of a majority of the outstanding shares of Company
Common Stock, and the filing of appropriate merger documents as required by the
DGCL). This Agreement has been duly and validly executed and delivered by the
Company and, assuming the due authorization, execution and delivery hereof by
Parent and Sub (as applicable), constitutes a legal, valid and binding
obligations of the Company enforceable against the Company in accordance with
its terms (except insofar as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by principles governing the availability of
equitable remedies).
Section 2.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution, delivery and performance of this Agreement by the Company do not and
will not: (i) conflict with or violate the Certificate of Incorporation or
By-Laws of the Company or the equivalent organizational documents of any of its
subsidiaries; (ii) conflict with or violate any law, statute, rule, regulation,
order, writ, award, judgment, directive, decree, injunction, determination,
settlement or stipulation ("ORDER") applicable to the Company or any of its
subsidiaries or by which its or any of their respective properties are bound or
affected (assuming that all consents, approvals and authorizations contemplated
by clauses (i), (ii) and (iii) of subsection (b) below have been obtained and
all filings described in such clauses have been made); or (iii) result in any
breach or violation of or constitute a default (or an event which with notice or
lapse of time or both could become a default) or result in the loss of a benefit
or creation of additional liabilities or fees under, or give rise to any right
of termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any of the properties or assets of the Company or any of
its subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or any of their respective properties are
bound or affected, except, in the case of clauses (ii) and (iii), for any such
conflicts, violations, breaches, defaults or other occurrences which could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(b) The execution, delivery and performance of this Agreement by the
Company and the consummation of the Merger by the Company do not and will
not require any consent, approval, authorization or permit of, action by,
filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except for (i) applicable requirements of the
Securities Act of 1933, as amended (the "SECURITIES ACT"), and the
rules and regulations promulgated thereunder, the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), and the rules and regulations
promulgated thereunder, the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR ACT"), the rules and regulations of the NYSE,
Nasdaq National Market ("NASDAQ") and state securities, takeover and Blue
Sky laws, (ii) the filing and recordation of appropriate merger or other
documents as required by the DGCL and (iii) such consents, approvals,
authorizations, permits, actions, filings or notifications the failure of
which to make or obtain could not, individually or in the aggregate,
reasonably be expected to (x) prevent or delay consummation of the Merger or
(y) have a Material Adverse Effect.
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Section 2.6. COMPLIANCE. The Company and each of its subsidiaries are in
compliance with, and are not in default or violation of, (i) the Certificate of
Incorporation and By-Laws of the Company or the equivalent organizational
documents of such subsidiary, (ii) all laws (including, without limitation,
Environmental Laws) and Orders applicable to them or by which any of their
respective properties or businesses are bound or affected and (iii) all notes,
bonds, mortgages, indentures, contracts, agreements, leases, licenses, permits,
franchises and other instruments or obligations to which any of them are a party
or by which any of them or any of their respective properties are bound or
affected (including all of the foregoing respecting the privacy information of
users or visitors to their web sites, including minors), except, in the case of
clauses (ii) and (iii), for any such failures of compliance, defaults and
violations which could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Except as disclosed with reasonable
specificity prior to the date hereof in the Company SEC Reports (as defined in
Section 2.7), neither the Company nor any of its subsidiaries has received
notice of any revocation or modification of any federal, state, local or foreign
governmental license, certification, tariff, permit, authorization or approval
material to the Company and its subsidiaries taken as a whole. The Company and
its subsidiaries have all permits, licenses, authorizations, consents, approvals
and franchises from governmental agencies required to conduct their businesses
as now being conducted, except for such permits, licenses, authorizations,
consents, approvals, and franchises the absence of which could not, individually
or in the aggregate, reasonably be expected have a Material Adverse Effect.
Section 2.7. SEC FILINGS; FINANCIAL STATEMENTS. (a) The Company and, to
the extent applicable, each of its then or current subsidiaries, has filed all
forms, reports, statements and documents required to be filed with the
Securities and Exchange Commission (the "SEC") since January 1, 1999
(collectively, the "COMPANY SEC REPORTS"), each of which has complied in all
material respects with the applicable requirements of the Securities Act and the
rules and regulations promulgated thereunder, or the Exchange Act and the rules
and regulations promulgated thereunder, each as in effect on the date so filed.
None of such Company SEC Reports (including but not limited to any financial
statements or schedules included or incorporated by reference therein)
contained, when filed, any untrue statement of a material fact or omitted to
state a material fact required to be stated or incorporated by reference therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Except to the extent
revised or superseded by a subsequent filing with the SEC made prior to the date
hereof (a copy of which has been provided or made available to Parent), none of
the Company SEC Reports filed by the Company since January 1, 1999, contains any
untrue statement of a material fact or omits to state a material fact required
to be stated or incorporated by reference therein or necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading.
(b) Each of the unaudited consolidated financial statements of the
Company and its subsidiaries (including any audited and related notes
thereto) included in the Company SEC Reports, complies or, if not yet filed,
will comply as to form in all material respects with all applicable
accounting requirements and with the published rules and regulations of the
SEC with respect thereto, has been or, if not yet filed, will have been
prepared in accordance with generally accepted accounting principles
(except, in the case of unaudited consolidated quarterly statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto) and
fairly presents in all material respects or, if not yet filed, will fairly
present in all material respects the consolidated financial position of the
Company and its subsidiaries at the respective date thereof and the
consolidated results of its and their operations and changes in cash flows
for the periods indicated (subject, in the case of unaudited quarterly
statements, to normal year-end audit adjustments).
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(c) Except as and to the extent set forth on the consolidated balance
sheet of the Company and its subsidiaries at June 30, 2000, including the
notes thereto, included in the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 2000 (the "JUNE 30 10Q"), neither the
Company nor any of its subsidiaries has any liabilities or obligations of
any nature (whether accrued, absolute, contingent or otherwise), except for
liabilities or obligations incurred in the ordinary course of business since
June 30, 2000 which could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
(d) The Company has heretofore furnished to Parent a complete and
correct copy of any amendments or modifications which have not yet been
filed with the SEC to agreements, documents or other instruments which
previously had been filed by the Company with the SEC pursuant to the
Securities Act and the rules and regulations promulgated thereunder or the
Exchange Act and the rules and regulations promulgated thereunder.
Section 2.8. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
1999, except as specifically disclosed in the Company SEC Reports filed and
publicly available prior to the date of this Agreement or set forth in
Section 2.8 of the Company Disclosure Schedule, the Company and its subsidiaries
have conducted their businesses only in the ordinary course and in a manner
consistent with past practice and since such date there has not been (i) any
change in the financial condition, results of operations, assets, business or
operations of the Company or any of its subsidiaries, individually or in the
aggregate, having or which could be reasonably likely to have a Material Adverse
Effect, (ii) any condition, event or occurrence which, individually or in the
aggregate, having or which could reasonably be expected to have a Material
Adverse Effect, (iii) any damage, destruction or loss (whether or not covered by
insurance) with respect to any assets of the Company or any of its subsidiaries,
individually or in the aggregate, having or which could reasonably be expected
to have a Material Adverse Effect or (iv) any other action which, if it had been
taken after June 30, 2000, would have required the consent of Parent under
Section 4.1 hereof.
Section 2.9. ABSENCE OF LITIGATION. Except as specifically disclosed in
the Company SEC Reports filed and publicly available prior to the date of this
Agreement or Section 2.9 of the Company Disclosure Schedule, there are no suits,
claims, actions, arbitrations, proceedings or investigations ("ACTIONS") pending
or, to the best knowledge of the Company, threatened against the Company or any
of its subsidiaries, or any properties or rights of the Company or any of its
subsidiaries, before any court, arbitrator or administrative, governmental or
regulatory authority or body, domestic or foreign. To the Company's knowledge,
neither the Company nor any of its subsidiaries nor any of their respective
properties is or are subject to any Order having, or which could, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
Section 2.10. EMPLOYEE BENEFIT PLANS. (a) Section 2.10(a) of the Company
Disclosure Schedule contains a true and complete list of each "employee benefit
plan" (within the meaning of section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), (including without limitation
multiemployer plans within the meaning of ERISA section 3(37)), stock purchase,
stock option, severance, employment, change-of-control, fringe benefit,
collective bargaining, bonus, incentive, deferred compensation and all other
employee benefit plans, agreements, programs, policies or other arrangements,
whether or not subject to ERISA, whether formal or informal, oral or written,
legally binding or not under which any employee or former employee of the
Company or any of its subsidiaries has any present or future right to benefits
(with respect to his or her relationship to the Company or any of its
subsidiaries) or under which the Company or any of its subsidiaries has any
present or future liability. All such plans, agreements, programs, policies and
arrangements shall be collectively referred to as the "PLANS".
(b) With respect to each Plan, the Company has delivered or made
available to Parent a current, accurate and complete copy (or, to the extent
no such copy exists, an accurate description)
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thereof and, to the extent applicable, (i) any related trust agreement,
annuity contract or other funding instrument; (ii) the most recent
determination letter; (iii) any summary plan description and other material
written communications (or a description of any oral communications) by the
Company or any of its subsidiaries to its employees concerning the extent of
the benefits provided under a Plan; and (iv) for the three most recent
years: (I) the Form 5500 and attached schedules; (II) audited financial
statements; and (III) actuarial valuation reports.
(c) Except as could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, (i) each Plan has been
established and administered in accordance with its terms, and in compliance
with the applicable provisions of ERISA, the Code and other applicable laws,
rules and regulations and if intended to be qualified within the meaning of
section 401(a) of the Code has received a favorable determination letter (or
opinion or notification letter, if applicable) from the Internal Revenue
Service or there is a period of time remaining under applicable Internal
Revenue Service regulations or pronouncements in which to apply for such a
letter and make any retroactive amendments necessary to obtain a favorable
determination as to the qualified status of each such Plan, and the Company
is not aware of any circumstances which could result in the revocation or
denial of any such favorable determination letter; (ii) with respect to any
Plan, no Actions (other than routine claims for benefits in the ordinary
course) are pending or, to the knowledge of the Company, threatened;
(iii) neither the Company nor any other party has engaged in a prohibited
transaction, as such term is defined under section 4975 of the Code or
section 406 of ERISA, which would subject the Company, the Surviving
Corporation, any of their subsidiaries, Sub or Parent to any taxes,
penalties or other liabilities under section 4975 of the Code or sections
409 or 502(i) of ERISA; (iv) no Plan provides for an increase in benefits on
or after the Closing Date; and (v) each Plan may be amended or terminated
without obligation or liability (other than those obligations and
liabilities for which specific assets have been set aside in a trust or
other funding vehicle or reserved for on the Company's June 30, 2000 balance
sheet included in the June 30 10Q).
(d) No Plan is, or at any time was, subject to Title IV of ERISA, and
neither the Company, nor any member of its "CONTROLLED GROUP" (defined as
any organization which is a member of a controlled group of organizations
within the meaning of sections 414(b), (c), (m) or (o) of the Code), has any
liability or will have any liability under Title IV of ERISA. Neither the
Company, nor any member of its Controlled Group, has any liability or will
have any liability in connection with any multiemployer plan (within the
meaning of section 4001(a)(3) of ERISA).
(e) Except as set forth on Section 2.10(e) of the Company Disclosure
Schedule, no Plan exists which could result in the payment to any employee
of the Company or any of its subsidiaries of any money or other property or
rights or accelerate or provide any other rights or benefits to any such
employee as a result of the transactions contemplated by this Agreement.
Neither the Company nor any of its subsidiaries has made any payments, is
obligated to make any payments, or is a party to any agreement that under
certain circumstances could obligate it to make any payments that will not
be deductible under Sections 162(m) or 280G of the Code.
Section 2.11. TAX MATTERS. (a) The Company and each of its subsidiaries
have (i) filed all material Tax Returns (as hereinafter defined) required to be
filed by them (taking into account extensions) and all such Tax Returns were
true, correct and complete in all material respects, (ii) paid or provided
adequate reserves for all material Taxes whether or not shown to be due on such
Returns or which are otherwise due and payable and (iii) paid or provided
adequate reserves for all material Taxes for which a notice of assessment or
collection has been received. Neither the Internal Revenue Service nor any other
taxing authority has asserted in writing any claim for Taxes, or to the
Company's knowledge, is threatening to assert any claims for Taxes, against the
Company or any of its subsidiaries. The Company and each of its subsidiaries
have withheld or collected and paid over to the appropriate governmental,
administrative or regulatory bodies or authorities (or are properly holding for
such
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payment) all material Taxes required by law to be withheld or collected. There
are no outstanding contracts, undertakings or agreements extending or waiving
the statutory period of limitation applicable to any material Tax Return of the
Company or any of its subsidiaries. Neither the Company nor any of its
subsidiaries has made an election under Section 341(f) of the Code. There are no
Liens for Taxes upon the assets of the Company or any of its subsidiaries, other
than Liens for Taxes that are not yet due, Liens that are being contested in
good faith in accordance with applicable law and disclosed in Section
3.14(a) of the Company Disclosure Schedule (and for which adequate reserves have
been provided) and Liens which would not, individually or in the aggregate, have
a Material Adverse Effect. Neither the Company nor any of its subsidiaries
(i) has been a member of an affiliated group filing a consolidated federal
income Tax Return (other than a group the common parent of which was the
Company), (ii) has any liability for the Taxes of any Person, including under
Treasury Regulation Section 1.1502-6 or analogous state, local or foreign law
for any Taxes, other than for Taxes of the Company or its subsidiaries or
(iii) is a party to, is bound by or has any obligation under a Tax sharing or
Tax indemnity contract, undertaking, or agreement or any other contract of a
similar nature with any entity other than the Company or any of its subsidiaries
that remains in effect. No claim has been made in writing by a taxing authority
in a jurisdiction where the Company or any of its subsidiaries does not file Tax
Returns that the Company or any of its subsidiaries is or may be subject to
taxation by that jurisdiction where such claim, if determined adversely to the
Company or such subsidiary, would, individually or in the aggregate, have a
Material Adverse Effect. Neither the Company nor any of its subsidiaries is the
subject of any currently ongoing audit or examination with respect to Taxes,
nor, to the Company's knowledge, has any such audit been threatened or proposed
by any taxing authority.
(b) The Company does not know of any fact relating to the Company or its
stockholders that could reasonably be expected to prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the
Code.
(c) For purposes of this Agreement: (i) "TAXES" shall mean any and all
federal, state, local, foreign or other taxes of any kind (together with any
and all interest, penalties, additions to tax and additional amounts imposed
with respect thereto) imposed by any taxing authority, including but not
limited to taxes or other charges on or with respect to income, franchises,
windfall or other profits, gross receipts, property, sales, use, capital
stock, payroll, employment, license, disability, severance, stamp,
occupation, social security, workers' compensation, unemployment
compensation, or net worth, and taxes or other charges in the nature of
excise, withholding, ad valorem or value added, and includes any liability
for Taxes of another person, as a transferee or successor, under Treasury
Regulation Section 1.1502-6 or analogous provision of law or otherwise; and
(ii) "TAX RETURN" shall mean any return, report or similar statement
(including the attached schedules) required to be filed with any
governmental authority with respect to any Tax, including any information
return, claim for refund, amended return or declaration of estimated Tax.
Section 2.12. ENVIRONMENTAL MATTERS. (a) Except as could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect,
(i) the operations of the Company and its subsidiaries has been and is in
compliance with all applicable Environmental Laws and with all Environmental
Permits and (ii) there are no pending or, to the knowledge of the Company,
threatened actions, suits, claims, investigations or other proceedings
(collectively, "ACTIONS") under or pursuant to Environmental Laws against the
Company or any of its subsidiaries or involving any real property currently or
formerly owned, operated or leased by the Company.
(b) For the purpose of this Agreement:
"ENVIRONMENTAL LAWS" means any and all Orders, ordinances, guidelines,
codes, decrees, or other legally enforceable requirements (including,
without limitation, common law) of any international authority, foreign
government, the United States, or any state, local, municipal or
D-12
other governmental authority, regulating, relating to or imposing liability
or standards of conduct concerning protection of the environment or of human
health, or employee health and safety, including without limitation the
Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. Sections 9601 ET SEQ., the Hazardous Materials Transportation Act,
49 U.S.C. Sections 1801 ET SEQ., the Resource Conservation and Recovery Act,
42 U.S.C. Sections 6901 ET SEQ., the Clean Water Act, 33 U.S.C. Sections
1251 ET SEQ., the Clean Air Act, 42 U.S.C. Sections 7401 ET SEQ., the Toxic
Substances Control Act, 15 U.S.C. Sections 2601 ET SEQ., the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C., Sections 136 ET SEQ.,
Occupational Safety and Health Act 29 U.S.C. Sections 651 ET SEQ. and the
Oil Pollution Act of 1990, 33 U.S.C. Sections 2701 ET SEQ., as such laws
have been amended or supplemented, and the regulations promulgated pursuant
thereto, and all analogous state or local statutes.
"ENVIRONMENTAL PERMITS" means any and all permits, consents, licenses,
approvals, registrations, notifications, exemptions and any other
authorization required under any applicable Environmental Law.
Section 2.13. FORM S-4; PROXY STATEMENT. None of the information supplied
by the Company for inclusion or incorporation by reference in (i) the
registration statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of shares of Parent Common Stock in connection with
the Merger, or any of the amendments or supplements thereto (collectively, the
"FORM S-4"), will, at the time the Form S-4 is filed with the SEC, at any time
it is amended or supplemented and at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) the proxy statement for use relating
to the adoption by the stockholders of the Company of this Agreement and the
proxy or information statement to be sent to the stockholders of Parent in
connection with the Merger, or any of the amendments or supplements thereto
(collectively, the "PROXY STATEMENT"), will, at the date it is first mailed to
the Company's stockholders and Parent's stockholders and at the time of the
meeting of the Company's stockholders held to vote on the adoption of this
Agreement, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations
thereunder. No representation is made by the Company in this Section 2.13 with
respect to statements made or incorporated by reference therein or in the
Form S-4 based on information supplied by Parent or Sub specifically for
inclusion or incorporation by reference in the Proxy Statement or in the
Form S-4.
Section 2.14. OPINION OF FINANCIAL ADVISOR. The Company has received the
written opinion of Donaldson, Lufkin & Jenrette Securities Corporation (the
"COMPANY FINANCIAL ADVISOR"), dated the date hereof, to the effect that the
consideration to be received in the Merger by the Company's stockholders is fair
to such stockholders from a financial point of view. An executed copy of such
opinion has been delivered to Parent. The Company has been authorized by the
Company Financial Advisor to permit, subject to prior review and consent by such
Company Financial Advisor (such consent not to be unreasonably withheld), the
inclusion of such fairness opinion in the Form S-4 and the Proxy Statement.
Section 2.15. BROKERS. No broker, finder or investment banker (other than
the Company Financial Advisor) is entitled to any brokerage, finder's or other
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company. The
Company has heretofore furnished to Parent a complete and correct copy of all
agreements between the Company and the Company Financial Advisor pursuant to
which such firm would be entitled to any payment relating to the transactions
contemplated hereby.
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Section 2.16. AFFILIATE TRANSACTIONS. Except as set forth in Section 2.16
of the Company Disclosure Schedule or as disclosed in the Company SEC Reports
filed and publicly available prior to the date of this Agreement, there are no
material contracts, commitments, agreements, arrangements or other transactions
between the Company or any of its subsidiaries, on the one hand, and any
(i) officer or director of the Company or any of its subsidiaries, (ii) record
or beneficial owner of five percent or more of the voting securities of the
Company or (iii) affiliate (as such term is defined in Regulation 12b-2
promulgated under the Exchange Act) of any such officer, director or beneficial
owner, on the other hand.
Section 2.17. VOTE REQUIRED. The affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock entitled to vote
thereon is the only vote of the holders of any class or series of the Company's
capital stock necessary to adopt this Agreement. The Board of Directors of the
Company (the "COMPANY BOARD") (at a meeting duly called and held) has
(i) approved and declared advisable this Agreement, (ii) determined that the
transactions contemplated hereby are advisable, fair to and in the best
interests of the holders of Company Common Stock, (iii) resolved to recommend
adoption of this Agreement, the Merger and the other transactions contemplated
hereby to such holders and (iv) directed that adoption of this Agreement be
submitted to the Company's stockholders. Subject to the provisions of
Section 5.4, the Company hereby agrees to the inclusion in the Form S-4 and the
Proxy Statement of the recommendations of the Company Board described in this
Section 2.17.
Section 2.18. DGCL SECTION 203; STATE TAKEOVER STATUTES. Prior to the date
hereof, the Board of Directors of the Company has approved this Agreement and
the Merger and the other transactions contemplated hereby and such approval is
sufficient to render the restrictions on "business combinations" set forth in
Section 203 of the DGCL inapplicable to this Agreement, the Merger and any of
such other transactions contemplated hereby. No other state takeover statute or
similar statute or regulation applies or purports to apply to the Merger, this
Agreement or any of the transactions contemplated by this Agreement, and no
provision of the Certificate of Incorporation or By-Laws of the Company or
similar governing instruments of any of the Company's subsidiaries would,
directly or indirectly, restrict or impair the ability of Parent to vote, or
otherwise to exercise the rights of a stockholder with respect to, shares of the
Company and its subsidiaries that may be acquired or controlled by Parent.
Section 2.19. MATERIAL CONTRACTS. (a) Section 2.19 of the Company
Disclosure Schedule contains a complete list of all material contracts (written
or oral), plans, undertakings, commitments or agreements to which the Company or
any of its subsidiaries is a party or by which any of them is bound as of the
date of this Agreement.
(b) Section 2.19 of the Company Disclosure Schedule contains a complete
and accurate list of the following:
(i) promissory notes, loans, agreements, indentures, evidences of
indebtedness or other instruments providing for the lending of money,
whether as borrower, lender or guarantor (excluding trade payables or
receivables arising in the ordinary course of business);
(ii) contracts or agreements containing covenants limiting the
freedom of the Company or any of its subsidiaries or affiliates to engage
in any line of business or compete with any person or operate at any
location;
(iii) change in control or similar arrangements with any officers,
employees or agents of the Company that will result in any obligation
(absolute or contingent) of the Company or any of its subsidiaries to
make any payment to any officers, employees or agents of the Company
following either the consummation of the transactions contemplated
hereby, termination of
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employment, or both (other than as set forth in Section 2.10(e) of the
Company Disclosure Schedule);
(iv) labor contracts;
(v) license, consent, royalty and other agreements concerning
Intellectual Property (as defined below) (other than agreements with
guides and other providers of content entered into in the ordinary course
of business);
(vi) distribution and syndication partnerships or arrangements;
(vii) joint venture or partnership agreements or joint development or
similar agreements pursuant to which any third party is entitled to
develop any products on behalf of the Company or its subsidiaries (other
than agreements with guides and other providers of content entered into
in the ordinary course of business);
(viii) any contract or agreement for the acquisition, directly or
indirectly (by merger or otherwise), of material assets (other than
inventory) or capital stock of another person; and
(ix) contracts or agreements involving the issuance or repurchase of
any capital stock of the Company or any of its subsidiaries (other than
the Stock Plans and the ESPP and the Company's repurchase rights with
respect to Company Common Stock issued in connection with any of the
foregoing).
(c) For the purpose of this Agreement, the term "CONTRACTS" shall mean
all of the contracts (written or oral), plans, undertakings, commitments and
agreements are, or are required to be, contained in Section 2.19 of the
Company Disclosure Schedule. True and complete copies of the written
Contracts identified on Section 2.19 of the Company Disclosure Schedule have
been delivered or made available to Parent.
Section 2.20. ABSENCE OF BREACHES OR DEFAULTS. Except as set forth in
Section 2.20 of the Company Disclosure Schedule, neither the Company nor any of
its subsidiaries is and, to the knowledge of the Company, no other party is in
default under, or in breach or violation of, any Contract, Guide Agreement (as
defined below) or other content agreement and, to the knowledge of the Company,
no event has occurred which, with the giving of notice or passage of time or
both would constitute a default under any Contract or Guide Agreement except for
defaults, breaches, violations or events which could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Other than
Contracts and Guide Agreements which have terminated or expired in accordance
with their terms, and except as set forth in Section 2.20 of the Company
Disclosure Schedule, each of the Contracts and Guide Agreements is in full force
and effect, and assuming all consents required by the terms thereof or
applicable law have been obtained, such Contracts and Guide Agreements will
continue to be in full force and effect immediately following the consummation
of the transactions contemplated hereby, in each case except where the failure
to be in full force and effect could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. No event has occurred
which either entitles, or would, on notice or lapse of time or both, entitle the
holder of any indebtedness for borrowed money affecting the Company or any of
its subsidiaries (except for the execution of this Agreement) to accelerate, or
which does accelerate, the maturity of any indebtedness affecting the Company or
any of its subsidiaries, except as set forth in Section 2.20 of the Company
Disclosure Schedule.
Section 2.21. INTELLECTUAL PROPERTY. Each patent, patent application,
registered trademark, material unregistered trademark, trademark application,
registered service mark, material unregistered service mark, service mark
application, registered trade name, material unregistered trade name, material
domain name, copyright registration and copyright application owned by the
Company is set
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forth on Section 2.21 of the Company Disclosure Schedule. Except as set forth on
Section 2.21 of the Company Disclosure Schedule:
(a) The Company (i) owns all right, title and interest in and to, free
and clear of any Lien, or (ii) has a valid license to use, all the
Intellectual Property necessary to carry out the Company's current
activities. The Company is not in breach of any such licenses except for
breaches which could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. To the Company's knowledge, all
registered patents, trademarks, service marks and copyrights listed on
Section 2.21 of the Company Disclosure Schedule are valid and subsisting and
in full force and effect, and all applications are currently pending;
(b) The Company Intellectual Property is all the Intellectual Property
that is necessary for the ownership, maintenance and operation of the
Company's business as currently conducted, and the consummation of the
transactions contemplated hereby will not alter or impair any such rights;
(c) The Company has not, and the continued operation of the Company's
business as presently conducted and as presently proposed to be conducted
will not, to the Company's knowledge, interfere with, infringe upon or
misappropriate ("INFRINGE") any Intellectual Property rights of third
parties. To the best knowledge of the Company, there are no material pending
charges, complaints, claims, demands or notices alleging that the Company's
use of its material Intellectual property Infringes upon the Intellectual
Property rights of any third party;
(d) To the Company's knowledge, no third party has Infringed upon any
material Company Intellectual Property;
(e) No Action or Order has been made, is pending, or, to the knowledge
of the Company, is threatened which challenges the legality, validity,
enforceability, use or ownership of any Company Intellectual Property that,
individually or in the aggregate, could be expected to have a Material
Adverse Effect; and
(f) The Company takes reasonable steps necessary to maintain and protect
its Intellectual Property and has executed non-disclosure agreements and
Intellectual Property assignments with all employees and independent
contractors who contribute to or create Intellectual Property, alone or with
others, that is owned or used by the Company.
(g) As used in this Agreement, "INTELLECTUAL PROPERTY" means (i) all
inventions (whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereon, and all patents, patent applications
and patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof,
(ii) all trademarks, service marks, trade dress, logos, trade names, domain
names, and corporate names, together with all translations, adaptations,
derivations and combinations thereof and including all goodwill associated
therewith, and all applications, registrations and renewals in connection
therewith, (iii) all copyrightable works, all copyrights and all
applications, registrations and renewals in connection therewith, (iv) all
trade secrets and confidential business information (including ideas,
know-how, customer and supplier lists, pricing and cost information and
business and marketing plans and proposals), (v) all computer software
(including data and related documentation), (vi) all other proprietary
rights, (vii) all copies and tangible embodiments of the foregoing
categories of intellectual property listed in subsections (i) through
(vi) herein (in whatever form or medium), and (viii) all rights under
licenses, sublicenses, agreements, or permissions related to the foregoing
categories of intellectual property listed in subsections (i) through
(vii) herein. As used in this Agreement, "COMPANY INTELLECTUAL PROPERTY"
means all Intellectual Property currently owned or used by Company.
D-16
(h) The Company utilizes industry standard measures and practices to
protect (i) the security and integrity of its networks, software, Web sites
and related systems from unauthorized use or access and (ii) the privacy of
all information stored thereon.
Section 2.22. INSURANCE. The Company has provided or made available to the
Parent true, correct and complete copies of all policies of insurance to which
the Company or any of its subsidiaries is a party or is a beneficiary or named
insured. The Company and its subsidiaries maintain insurance coverage with
reputable insurers in such amounts and covering such risks as are in accordance
with normal industry practice for companies engaged in businesses similar to
that of the Company (taking into account the cost and availability of such
insurance).
Section 2.23. LABOR MATTERS. The Company and each of its subsidiaries is
in compliance with all applicable laws (domestic and foreign), agreements,
contracts, and policies relating to employment, employment practices, wages,
hours, and terms and conditions of employment except for failures so to comply,
if any, that could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect. The Company has complied in all material
respects with its payment obligations to all employees of the Company and its
subsidiaries in respect of all wages, salaries, commissions, bonuses, benefits
and other compensation due and payable to such employees under any Company
policy, practice, agreement, plan, program or any statute or other law. Except
as set forth in Section 2.23 of the Company Disclosure Schedule, the Company is
not liable for any severance pay or other payments to any employee or former
employee arising from the termination of employment under any benefit or
severance policy, practice, agreement, plan, or program of the Company, nor will
the Company have any liability that exists or arises, or may be deemed to exist
or arise, under any applicable law or otherwise, as a result of or in connection
with the transactions contemplated hereunder or as a result of the termination
by the Company of any persons employed by the Company or any of its subsidiaries
on or prior to the Effective Time of the Merger except as required by Code
Section 4980B. The Company is in compliance with its obligations pursuant to the
Worker Adjustment and Retraining Notification Act of 1988 and part 6 and 7 of
Title I of ERISA, to the extent applicable, and all other employee notification
and bargaining obligations arising under any collective bargaining agreement or
statute. To the knowledge of the Company, the employment of any employee or
independent contractor by the Company does not violate any legal or contractual
rights of any third party, including any rights with respect to Intellectual
Property.
Section 2.24. REORGANIZATION QUALIFICATION. Neither the Company nor, to
its knowledge, any of its affiliates has taken or agreed to take any action, or
knows of any circumstances, that (without regard to any action taken or agreed
to be taken by Parent or any of its affiliates) would prevent the Merger from
qualifying as a reorganization within the meaning of Sections 368(a)(1)(A)
and 368(a)(2)(E) of the Code.
Section 2.25. GUIDES. The Company has made available to Parent forms of
its guide agreements (the "FORM GUIDE AGREEMENTS") and each guide has executed
and delivered to the Company a guide agreement in one of such forms without
material modification (each, a "GUIDE AGREEMENT").
D-17
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
PARENT AND SUB
Parent and Sub hereby, jointly and severally, represent and warrant to the
Company that, except as set forth in the corresponding sections or subsections
of the Disclosure Schedule delivered by Parent and Sub to the Company prior to
the execution of this Agreement (the "PARENT DISCLOSURE SCHEDULE"), or in any
other section or subsection of the Parent Disclosure Schedule if it is
reasonably apparent that such disclosure applies:
Section 3.1. CORPORATE ORGANIZATION. (a) Each of Parent and Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is incorporated and has the requisite corporate
power and authority and any necessary governmental authority to own, operate or
lease its properties and to carry on its business as it is now being conducted,
except where the failure to have such power, authority and governmental
approvals could not, individually or in the aggregate, reasonably be expected to
have a Parent Material Adverse Effect (as defined below). Each of Parent and Sub
is duly qualified or licensed as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of its properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed or in good standing which could not, individually or in
the aggregate, reasonably be expected to have a Parent Material Adverse Effect.
When used in this Article III or otherwise in connection with Parent or any of
its subsidiaries (including Sub), the term "PARENT MATERIAL ADVERSE EFFECT"
means any change or effect that would be materially adverse to the business,
properties, assets, condition (financial or otherwise) or results of operations
of Parent and its subsidiaries taken as a whole or that would materially impair
the ability of Parent to perform its obligations hereunder; PROVIDED that none
of the following shall be taken into account in determining whether there has
been or could be a Parent Material Adverse Effect: (w) any employee attrition
after the date hereof, (x) any change arising from the public announcement of
the Merger and the other transactions contemplated by this Agreement; (y) any
change in the market price or trading volume of the Parent Common Stock after
the date hereof; or (z) any adverse effect on Parent attributable solely to
conditions affecting the publishing business, the United States economy as a
whole or foreign economies in any locations where Parent or any of its
subsidiaries has material operations or sales (and not having a materially
disproportionate effect on Parent).
(b) Parent has heretofore furnished to or made available to the Company
a complete and correct copy of its certificate of incorporation and by-laws
as currently in effect. Such certificate of incorporation and by-laws are in
full force and effect and no other organizational documents are applicable
to or binding upon Parent.
(c) Sub has heretofore furnished to or made available to the Company a
complete and correct copy of the certificate of incorporation of Sub and the
by-laws of Sub as currently in effect. Such certificate of incorporation and
bylaws are in full force and effect and no other organizational documents
are applicable to or binding upon Sub.
Section 3.2. CAPITALIZATION. (a) The authorized capital stock of Parent
consists of 255,750,000 shares, consisting of 250,000,000 shares of Parent
Common Stock and 5,750,000 shares of preferred stock, par value $.01 per share.
As of September 30, 2000, (i) 166,765,849 shares of Parent Common Stock were
issued and outstanding, all of which were duly authorized, validly issued, fully
paid and nonassessable and were issued free of preemptive (or similar) rights,
(ii) 123,848 shares of Parent Common Stock were held in the treasury of Parent,
(iii) an aggregate of 13,620,464 shares of Parent Common Stock were reserved for
issuance and issuable upon or otherwise deliverable in connection with the
exercise of outstanding stock options to purchase shares of Parent Common Stock
("PARENT OPTIONS") identified on Section 3.2(a) of the Parent Disclosure
Schedule and issued pursuant to the
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employee benefit plans of Parent, (iv) 2,000,000 shares of $10.00 Series D
Exchangeable Preferred Stock of Parent were issued and outstanding,
(v) 1,250,000 shares of $9.20 Series F Exchangeable Preferred Stock of Parent
were issued and outstanding and (vi) 2,500,000 shares of $8.625 Series H
Exchangeable Preferred Stock of Parent were issued and outstanding. Except
(i) as set forth above or (ii) as a result of the exercise of the Parent Options
outstanding as of the date hereof and identified on Section 3.2(a) of the Parent
Disclosure Schedule, as of the date hereof there are outstanding (a) no shares
of capital stock or other voting securities (including indebtedness having the
right to vote) of Parent, (b) no securities of Parent convertible into or
exchangeable for shares of capital stock or voting securities (including
indebtedness having the right to vote) of Parent, (c) no options, warrants, or
other rights to acquire from Parent, and no obligation of Parent to issue, any
capital stock, voting securities (including indebtedness having the right to
vote) or securities convertible into or exchangeable for capital stock or voting
securities (including indebtedness having the right to vote) of Parent and
(d) no equity equivalents, interests in the ownership or earnings of Parent or
other similar rights (collectively, "PARENT SECURITIES"). Except as set forth in
Section 3.2(a) of the Parent Disclosure Schedule, as of the date hereof, there
are no outstanding obligations of Parent or any of its subsidiaries to
repurchase, redeem or otherwise acquire any Parent Securities except pursuant to
existing arrangements with employees. As of the date hereof, there are no other
options, calls, warrants or other rights, agreements, arrangements or
commitments of any character relating to the issued or unissued capital stock of
Parent or any of its subsidiaries to which Parent or any of its subsidiaries is
a party.
(b) The authorized capital stock of Sub consists of 100 shares of common
stock, par value $0.01 per share, 100 shares of which are duly authorized,
validly issued and outstanding, fully paid and nonassessable and owned by
Parent free and clear of all Liens. Sub was formed solely for the purpose of
engaging in a business combination transaction with the Company and has
engaged in no other business activities and has conducted its operations
only as contemplated hereby.
Section 3.3. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and Sub
has all necessary corporate power and authority to execute and deliver this
Agreement, to perform their respective obligations hereunder and to consummate
the transactions contemplated hereby. The execution, delivery and performance of
this Agreement by each of Parent and Sub and the consummation by each of Parent
and Sub of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of Parent and Sub and
no other corporate proceedings on the part of Parent or Sub are necessary to
authorize this Agreement or to consummate the transactions so contemplated
(other than (i) the effectiveness of a registration statement on Form S-4
relating to the Parent Common Stock to be issued in the Merger,
(ii) stockholder approval of the issuance of Parent Common Stock in the Merger,
and (iii) the filing of appropriate merger documents as required by the DGCL).
This Agreement has been duly and validly executed and delivered by Parent and
Sub and, assuming due authorization, execution and delivery hereof by the
Company, constitutes a legal, valid and binding obligation of each such
corporation enforceable against such corporation in accordance with its terms
(except insofar as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally or by principles governing the availability of equitable
remedies).
Section 3.4. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution, delivery and performance of this Agreement by Parent and Sub do not
and will not: (i) conflict with or violate the respective certificates of
incorporation or by-laws of Parent or Sub; (ii) assuming that all consents,
approvals and authorizations contemplated by clauses (i), (ii) and (iii) of
subsection (b) below have been obtained and all filings described in such
clauses have been made, conflict with or violate any Order applicable to Parent
or Sub or by which either of them or any of their respective properties are
bound or affected; or (iii) result in any breach or violation of or constitute a
default (or an event which with notice or lapse of time or both could become a
default) or result in the loss of a material benefit under, or give rise to any
right of termination, amendment, acceleration or cancellation of, or result in
D-19
the creation of a Lien on any of the property or assets of Parent or Sub
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Parent or
Sub is a party or by which Parent or Sub or any of their respective properties
are bound or affected, except, in the case of clauses (ii) and (iii), for any
such conflicts, violations, breaches, defaults or other occurrences which could
not, individually or in the aggregate, reasonably be expected to prevent the
consummation of the Merger or to have a Parent Material Adverse Effect. All of
the conflicts, violations, breaches, defaults and other occurrences referred to
in the immediately preceding sentence are identified in Section 3.4(a) of the
Parent Disclosure Schedule.
(b) The execution, delivery and performance of this Agreement by Parent
and Sub do not and will not require any consent, approval, authorization or
permit of, action by, filing with or notification to, any governmental or
regulatory authority, domestic or foreign, except (i) for applicable
requirements of the Securities Act and the rules and regulations promulgated
thereunder, the Exchange Act and the rules and regulations promulgated
thereunder, the HSR Act, the rules and regulations of Nasdaq, the NYSE and
state securities, takeover and Blue Sky laws, (ii) the filing and
recordation of appropriate merger or other documents as required by the
DGCL, and (iii) such consents, approvals, authorizations, permits, actions,
filings or notifications the failure of which to make or obtain could not,
individually or in the aggregate, be expected to (x) prevent the
consummation of the Merger or (y) have a Parent Material Adverse Effect.
Section 3.5. COMPLIANCE. Parent is in compliance with, and is not in
default or violation of, its certificate of incorporation and by-laws. Parent
and each of its subsidiaries are in compliance with, and are not in default or
violation of (i) all laws (including, without limitation, Environmental Laws)
and Orders applicable to them or by which any of their respective properties are
bound or affected and (ii) all notes, bonds, mortgages, indentures, contracts,
agreements, leases, licenses, permits, franchises and other instruments or
obligations to which any of them are a party or by which any of them or any of
their respective properties are bound or affected, except, in the case of
clauses (i) and (ii), for any such failures of compliance, defaults and
violations which could not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect. Except as disclosed prior to
the date hereof in the Parent SEC Reports (as defined in Section 3.6), neither
Parent nor any of its subsidiaries has received notice of any revocation or
modification of any federal, state, local or foreign governmental license,
certification, tariff, permit, authorization or approval material to Parent and
its subsidiaries taken as a whole. Parent and its subsidiaries have all permits,
licenses, authorizations, consents, approvals and franchises from governmental
agencies required to conduct their businesses as now being conducted, except for
such permits, licenses, authorizations, consents, approvals, and franchises the
absence of which could not, individually or in the aggregate, reasonably be
expected have a Parent Material Adverse Effect.
Section 3.6. SEC FILINGS; FINANCIAL STATEMENTS. (a) Parent and, to the
extent applicable, each of its then or current subsidiaries, has filed all
forms, reports, statements and documents required to be filed with the SEC since
January 1, 1999 (collectively, the "PARENT SEC REPORTS"), each of which has
complied in all material respects with the applicable requirements of the
Securities Act and the rules and regulations promulgated thereunder, or the
Exchange Act and the rules and regulations promulgated thereunder, each as in
effect on the date so filed. None of such Parent SEC Reports (including but not
limited to any financial statements or schedules included or incorporated by
reference therein) contained, when filed, any untrue statement of a material
fact or omitted to state a material fact required to be stated or incorporated
by reference therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
Except to the extent revised or superseded by a subsequent filing with the SEC
prior to the date hereof, none of the Parent SEC Reports filed by Parent since
January 1, 1999 and prior to the date hereof contains any untrue statement of a
material fact or omits to state a material fact required to be
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stated or incorporated by reference therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(b) Each of the audited and unaudited consolidated financial statements
of Parent and its subsidiaries (including any related notes thereto)
included in Parent SEC Reports complies or, if not yet filed, will comply as
to form in all material respects with all applicable accounting requirements
and with the published rules and regulations of the SEC with respect
thereto, has been or, if not yet filed, will have been prepared in
accordance with generally accepted accounting principles (except, in the
case of unaudited consolidated quarterly statements, as permitted by
Form 10-Q of the SEC) applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto) and fairly
presents in all material respects or, if not yet filed, will fairly present
in all material respects the consolidated financial position of Parent and
its subsidiaries at the respective date thereof and the consolidated results
of its operations and changes in cash flows for the periods indicated
(subject, in the case of unaudited quarterly statements, to normal year-end
audit adjustments).
Section 3.7. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
1999, except as specifically disclosed in the Parent SEC Reports filed and
publicly available prior to the date of this Agreement or disclosed in Section
3.7 of the Parent Disclosure Schedule, Parent and its subsidiaries have
conducted their businesses only in the ordinary course and in a manner
consistent with past practice and since such date there has not been (i) any
change in the financial condition, results of operations, assets, business or
operations of Parent or any of its subsidiaries having or which could be
reasonably likely to have a Parent Material Adverse Effect or (ii) any
condition, event or occurrence which, individually or in the aggregate, having
or which could reasonably be expected to have a Parent Material Adverse Effect.
Section 3.8. FORM S-4; PROXY STATEMENT. None of the information supplied
by Parent or Sub for inclusion or incorporation by reference in (i) the Form S-4
will, at the time the Form S-4 is filed with the SEC, at any time it is amended
or supplemented and at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and (ii) the Proxy Statement will, at the date it is first
mailed to the Company's stockholders and Parent's stockholders and at the time
of the meeting of the Company's stockholders held to vote on adoption of this
Agreement, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Form S-4 will comply as to form in all material respects with
the requirements of the Securities Act and the rules and regulations thereunder,
except that no representation is made by Parent or Sub with respect to
statements made or incorporated by reference therein based on information
supplied by the Company specifically for inclusion or incorporation by reference
in the Form S-4.
Section 3.9. ABSENCE OF LITIGATION. Except as specifically disclosed in
the Parent SEC Reports filed and publicly available prior to the date of this
Agreement or in Section 3.9 of the Parent Disclosure Schedule, there are no
Actions pending or, to the best knowledge of Parent, threatened against Parent
or any of its subsidiaries, or any properties or rights of Parent or any of its
subsidiaries, before any court, arbitrator or administrative, governmental or
regulatory authority or body, domestic or foreign, that could, individually or
in the aggregate, reasonably be expected to have a Parent Material Adverse
Effect. To Parent's knowledge, neither Parent nor any of its subsidiaries nor
any of their respective properties is or are subject to any Order having, or
which, insofar as can be reasonably foreseen, in the future could, individually
or in the aggregate, reasonably be expected to have a Parent Material Adverse
Effect or to prevent or delay the consummation of the transactions contemplated
hereby.
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Section 3.10. OPINION OF FINANCIAL ADVISOR. Parent has received the
opinion of Wit SoundView, dated the date of this Agreement, to the effect that
the consideration to be paid by Parent in connection with the Merger is fair to
Parent and the holders of the Parent Common Stock from a financial point of
view, a signed copy of which has been delivered to the Company.
Section 3.11. BROKERS. No broker, finder or investment banker (other than
Wit SoundView, Merrill Lynch & Co. and the others identified on Section 3.11 of
the Parent Disclosure Schedule, the fees and expenses of which shall be paid by
Parent) is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Sub.
Section 3.12. AFFILIATE TRANSACTIONS. Except as set forth in Section 3.12
of the Parent Disclosure Schedule or as disclosed in the Parent SEC Reports
filed and publicly available prior to the date of this Agreement, as of the date
hereof there are no material contracts, commitments, agreements, arrangements or
other transactions between Parent or any of its subsidiaries, on the one hand,
and any (i) officer or director of Parent or (ii) record or beneficial owner of
five percent or more of the voting securities of Parent, on the other hand.
Section 3.13. REORGANIZATION QUALIFICATION. Neither Parent nor Sub, nor to
Parent's knowledge, any affiliate of Parent, has taken or agreed to take any
action, or knows of any circumstances, that (without regard to any action taken
or agreed to be taken by the Company or any of its affiliates) would prevent the
Merger from qualifying as a reorganization within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code.
Section 3.14. STOCKHOLDERS' CONSENT AND APPROVAL OBTAINED. Stockholders of
Parent holding not less than 70% of the outstanding shares of Parent Common
Stock have executed voting agreements agreeing to consent to and approve the
issuance of Parent Common Stock in the Merger. Such consent and approval are the
only consent and approval of the holders of any class or series of Parent's
capital stock necessary to adopt and approve of the terms of this Agreement, the
Merger and the transactions contemplated herein.
Section 3.15. EMPLOYEE BENEFIT PLANS. Except as could not, individually or
in the aggregate, reasonably be expected to have a Parent Material Adverse
Effect, each "employee benefit plan" (within the meaning of section 3(3) of
ERISA) under which any employee or former employee of Parent has any present or
future right to benefits or under which Parent has any present or future
liability has been established and administered in accordance with its terms,
and in compliance with the applicable provisions of ERISA, the Code and other
applicable laws, rules and regulations.
Section 3.16. TAX MATTERS. Parent has (i) filed all material Tax Returns
required to be filed by it (taking into account extensions) and all such Tax
Returns were true, correct and complete in all material respects, (ii) paid or
provided adequate reserves for all material Taxes whether or not shown to be due
on such Returns or which are otherwise due and payable and (iii) paid or
provided adequate reserves for all material Taxes for which a notice of
assessment or collection has been received, except, in the case of clause (i),
(ii) or (iii), for any such filings, payments or accruals which would not,
individually or in the aggregate, have a Parent Material Adverse Effect.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
Section 4.1. CONDUCT OF BUSINESS OF THE COMPANY PENDING THE MERGER. The
Company covenants and agrees that, during the period from the date hereof to the
Effective Time, unless Parent shall otherwise consent in writing in advance, the
businesses of the Company and its subsidiaries shall be conducted only in, and
the Company and its subsidiaries shall not take any action except in, the
ordinary course of business and in a manner consistent with past practice and in
compliance with
D-22
applicable laws; and the Company and its subsidiaries shall each use its
commercially reasonable efforts to preserve substantially intact the business
organization of the Company and its subsidiaries, to keep available the services
of the present officers, employees and consultants of the Company and its
subsidiaries and to preserve the present relationships of the Company and its
subsidiaries with customers, suppliers, licensors, licensees, advertisers,
distributors and other persons with which the Company or any of its subsidiaries
has significant business relations. By way of amplification and not limitation,
neither the Company nor any of its subsidiaries shall, between the date of this
Agreement and the Effective Time, directly or indirectly do, or propose or
commit to do, any of the following without the prior written consent of Parent:
(a) Amend its Certificate of Incorporation or By-Laws or equivalent
organizational documents;
(b) Issue, deliver, sell, pledge, dispose of or encumber, or authorize
or commit to the issuance, sale, pledge, disposition or encumbrance of, any
shares of capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of capital
stock, or any other ownership interest (including but not limited to stock
appreciation rights or phantom stock), of the Company or any of its
subsidiaries (except for the issuance of shares of Company Common Stock in
accordance with the terms of (i) outstanding Company Stock Rights, (ii)
beginning in November 2000, up to 100,000 options per calendar month to be
issued to new hires and up to 25,000 options (net of options forfeited) per
calendar month to be issued to non-officer employees; PROVIDED that, for the
period from the date hereof until the Closing, no existing employee shall
receive more than 3,000 options pursuant to this clause (ii), (iii) the
ESPP, and (iv) the securities on Section 2.3(a) of the Company Disclosure
Schedule);
(c) Declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock;
(d) Reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock or any
capital stock of any of its subsidiaries (other than pursuant to the
Company's repurchase rights for departing employees with respect to Company
Common Stock issued in connection with the ESPP or the Company Stock
Rights);
(e) (i) Acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof or (except for the purchase of inventory, equipment,
content and other rights or properties in the ordinary course of business)
any material assets; (ii) sell, transfer, lease, mortgage, pledge, license,
encumber or otherwise dispose of or subject to any Lien any of its assets or
rights (including capital stock of subsidiaries), except the disposition of
obsolete assets or otherwise unused or immaterial assets and the licensing
of names in the ordinary course of business consistent with past practice;
(iii) except as set forth in Section 4.1(e) of the Company Disclosure
Schedule, incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, the obligations of any person, or make any loans,
advances or capital contributions to, or investments in, any other person
(other than trade payables and receivables incurred in the ordinary course
of business); (iv) except in the ordinary course of business consistent with
past practice, enter into, amend, terminate or renew any material contract
or agreement (including, without limitation, the Contracts) or enter into,
or amend or terminate any joint venture arrangements (including distribution
and syndication agreements); (v) enter into any transaction, contract,
commitment, arrangement or understanding with any affiliate of the Company
other than with its subsidiaries; (vi) enter into any commitments or
transactions or related commitments or transactions material, individually,
to the Company and its subsidiaries taken as a whole; (vii) enter into any
new material line of business; (viii) change the Form Guide Agreements used
by the Company and its subsidiaries, except for changes consistent with past
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practice; (ix) authorize any single capital expenditure which is in excess
of $500,000 or capital expenditures which are, in the aggregate, in excess
of $4,000,000 for the Company and its subsidiaries taken as a whole; or
(x) enter into or amend any contract, agreement, commitment or arrangement
with respect to any of the matters set forth in this Section 4.1(e);
(f) Except to the extent required under existing employee and director
benefit plans, agreements or arrangements as in effect on the date of this
Agreement, (i) increase or otherwise amend the compensation or fringe
benefits of any of its directors, officers or employees, except for merit
increases in salary or wages of employees of the Company or its subsidiaries
who are not officers of the Company in the ordinary course of business in
accordance with past practice, or (ii) grant any retention, severance or
termination pay not currently required to be paid under existing severance
plans or (iii) enter into, or amend, any employment, consulting or severance
agreement or arrangement with any present or former director, officer or
other employee of the Company or its subsidiaries except for severance
arrangements consistent with past practice offered in the ordinary course to
employees who have been terminated, or (iv) establish, adopt, enter into or
amend or terminate any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any directors,
officers or employees, or (v) amend the terms of any outstanding options to
purchase any equity of the Company or any subsidiary (including accelerating
the vesting or lapse of repurchase rights or obligations);
(g) Except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
practices or principles used by it;
(h) Take any action that (without regard to any action taken or agreed
to be taken by Parent or any of its affiliates) would prevent the Merger
from qualifying as a reorganization within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code;
(i) Make or change any material Tax election, file any amended Tax
Return with respect to any material Taxes, settle or compromise any material
federal, state, local or foreign Tax liability, change any annual Tax
accounting period, change any method of Tax accounting, enter into any
closing agreement relating to any material Tax, surrender any right to claim
a material Tax refund, or consent to any extension or waiver of the
limitations period applicable to any Tax claim or assessment; PROVIDED,
HOWEVER, that an action permitted as a result of the materiality qualifiers
in this clause (i) shall not be taken if such action could be taken after
the Effective Time without causing an adverse effect on the Company;
(j) Settle or compromise any pending or threatened Action which is
material or which relates to the transactions contemplated hereby;
(k) Adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its subsidiaries (other than the
Merger);
(l) Pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of liabilities reflected or
reserved against in the financial statements of the Company or incurred in
the ordinary course of business and consistent with past practice;
(m) Effectuate a "plant closing" or "mass layoff", as those terms are
defined in WARN, affecting in whole or in part any site of employment,
facility, operating unit or employee of the Company or any of its
subsidiaries;
D-24
(n) Fail to maintain in full force and effect the existing insurance
policies covering the Company and its subsidiaries and their respective
properties, assets and businesses; or
(o) Take, or offer or propose to take, or agree to take in writing or
otherwise, any of the actions described in Section 4.1 clauses (a) through
(n) which would make any of the representations or warranties of the Company
contained in this Agreement untrue and incorrect as of the date when made if
such action had then been taken or would result in any of the conditions set
forth in Article VI not being satisfied.
Section 4.2. CONDUCT OF BUSINESS OF PARENT PENDING THE MERGER. (a) During
the period from the date of this Agreement to the Effective Time (except as
otherwise contemplated by the terms of this Agreement), Parent shall use its
commercially reasonable efforts to preserve intact its and its subsidiaries'
current business organizations, keep available the services of their current
officers and employees and preserve their relationships with customers,
suppliers, licensors, licensees, advertisers, distributors and other persons
with which the Company or any of its subsidiaries has significant business
relations. By way of amplification and not limitation, without limiting the
generality of the foregoing, during the period from the date of this Agreement
to the Effective Time, Parent shall not, without the prior consent of the
Company:
(i) Amend Parent's certificate of incorporation (except to change the
number of authorized shares of capital stock or to permit the issuance of
a series preferred stock) or by-laws in a manner that would be materially
adverse to the holders of Parent Common Stock;
(ii) Reclassify, combine, split or subdivide any of its capital
stock;
(iii) Take, or offer or propose to take, or agree to take in writing
or otherwise, any of the actions described in Sections 4.2(b)(i) and
(ii) or any action which would make any of the representations or
warranties of Parent contained in this Agreement untrue and incorrect as
of the date when made if such action had then been taken or (except as
otherwise provided herein) would result in any of the conditions set
forth in Article VI not being satisfied;
(iv) Issue, deliver, sell, pledge, dispose of or encumber, or
authorize or commit to the issuance, sale, pledge, disposition or
encumbrance of, any shares of capital stock of any class, or any options,
warrants, convertible securities or other rights of any kind to acquire
any shares of capital stock, or any other ownership interest (including,
but not limited to stock appreciation rights or phantom stock) of Parent
or any of its subsidiaries to any record or beneficial owner of five
percent or more of the voting securities of Parent, except on an arms-
length basis; or
(v) Adopt a plan of complete or partial liquidation or dissolution of
Parent (other than the Merger).
(b) Parent shall not, and shall not permit any of its subsidiaries to,
intentionally take any action that (without regard to any action taken or
agreed to be taken by the Company or any of its affiliates) would prevent
the Merger from qualifying as a reorganization within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code.
D-25
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1. PREPARATION OF FORM S-4 AND THE PROXY STATEMENT; STOCKHOLDER
MEETING. (a) Promptly following the date of this Agreement, the Company and
Parent shall prepare and file with the SEC the Proxy Statement, and Parent shall
prepare and file with the SEC the Form S-4, in which the Proxy Statement will be
included as a prospectus. Each of the Company and Parent shall use its
reasonable best efforts to have the Form S-4 declared effective under the
Securities Act as promptly as practicable after such filing. Each of the Company
and Parent will use its reasonable best efforts to cause the Proxy Statement to
be mailed to its respective stockholders as promptly as practicable after the
Form S-4 is declared effective under the Securities Act. Parent shall also take
any action (other than qualifying to do business in any jurisdiction in which it
is not now so qualified) required to be taken under any applicable state
securities law in connection with the issuance of Parent Common Stock in
connection with the Merger, and the Company shall furnish all information
concerning the Company and the holders of the Company Common Stock and rights to
acquire Company Common Stock pursuant to the Stock Plans as may be reasonably
required in connection with any such action. Each of Parent and the Company
shall furnish all information concerning itself to the other as may be
reasonably requested in connection with any such action and the preparation,
filing and distribution of the Form S-4 and the preparation, filing and
distribution of the Proxy Statement. The Company, Parent and Sub each agree to
correct any information provided by it for use in the Form S-4 or the Proxy
Statement that shall have become false or misleading.
(b) The Company, acting through its Board of Directors, shall, subject
to and in accordance with its Certificate of Incorporation and By-Laws,
promptly and duly call, give notice of, convene and hold as soon as
practicable following the date upon which the Form S-4 becomes effective a
meeting of the holders of Company Common Stock for the purpose of voting to
approve and adopt this Agreement and the transactions contemplated hereby,
and (i) recommend approval and adoption of this Agreement and the
transactions contemplated hereby, by the stockholders of the Company and
include in the Proxy Statement such recommendation and (ii) take all
reasonable and lawful action to solicit and obtain such approval. The Board
of Directors of the Company shall not withdraw, amend or modify in a manner
adverse to Parent its recommendation referred to in clause (i) of the
preceding sentence (or announce publicly its intention to do so), except
that such Board of Directors shall be permitted to withdraw, amend or modify
its recommendation (or publicly announce its intention to do so) if:
(i) the Company has complied with Section 5.4; (ii) an unsolicited Superior
Proposal (as defined in Section 5.4) shall have been proposed by any person
other than Parent and such proposal is pending at the time of such
withdrawal, amendment or modification and (iii) the Company shall have
notified Parent of such Superior Proposal at least three business days in
advance of such withdrawal, amendment or modification; PROVIDED that, in the
event that, during the period prior to such withdrawal, amendment or
modification, Parent offers to enter into a transaction with the Company on
substantially the same or more favorable financial terms to the Company as
such Superior Proposal, as determined in good faith by a financial advisor
to the Company of nationally recognized standing, the Company shall not be
permitted to withdraw, amend or modify its recommendation (or publicly
announce its intention to do so) or accept such Superior Proposal. Without
limiting the generality of the foregoing, (i) the Company agrees that its
obligation to duly call, give notice of, convene and hold a meeting of the
holders of Company Common Stock, as required by this Section 5.1, shall not
be affected by the withdrawal, amendment or modification of the Board of
Directors' recommendation of approval and adoption of this Agreement and the
transactions contemplated hereby and (ii) subject to the Company's rights
pursuant to Section 5.4, the Company agrees that its obligations under this
Section 5.1(b) shall not be affected by the commencement, public proposal,
public disclosure or communication to the Company of any Acquisition
Proposal (as defined in Section 5.4).
D-26
(c) The Company will cause its transfer agent to make stock transfer
records relating to the Company available to the extent reasonably necessary
to effectuate the intent of this Agreement.
(d) Parent, acting through its Board of Directors, shall, subject to and
in accordance with its certificate of incorporation and by-laws, duly as
soon as possible, set a record date for the determination of stockholders of
Parent entitled to vote by written consent to approve the issuance of Parent
Common Stock in the Merger. Parents shall take all other actions necessary
or advisable to cause the execution of such consent as soon as possible
thereafter.
(e) Parent, acting through its Board of Directors, shall, in accordance
with its certificate of incorporation and by-laws, send the Proxy Statement
to its other stockholders pursuant to Rule 14C of the Exchange Act.
Section 5.2. ACCOUNTANTS' LETTERS. (a) The Company shall use its
reasonable best efforts to cause to be delivered to Parent a "comfort" letter of
each of Ernst & Young LLP, the Company's independent public accountants, and
KPMG LLP, the Company's previous independent public accountants, dated a date
within two business days before the date on which the Form S-4 shall become
effective and addressed to Parent, in form and substance reasonably satisfactory
to Parent and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Form S-4. In connection with the Company's efforts to obtain such
letter, if requested by Ernst & Young LLP and/or KPMG LLP, Parent shall provide
a representation letter to Ernst & Young LLP and/or KPMG LLP, complying with the
Statement on Auditing Standards No. 72 ("SAS 72"), if then required.
(b) Parent shall use its reasonable best efforts to cause to be
delivered to the Company a "comfort" letter of Deloitte & Touche LLP,
Parent's independent public accountants, dated a date within two business
days before the date on which the Form S-4 shall become effective and
addressed to the Company, in form and substance reasonably satisfactory to
the Company and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Form S-4. In connection with the Parent's efforts to obtain
such letter, if requested by Deloitte & Touche LLP, the Company shall
provide a representation letter to Deloitte & Touche LLP complying with
SAS 72, if then required.
Section 5.3. ACCESS TO INFORMATION; CONFIDENTIALITY. (a) From the date
hereof to the Effective Time, each of the Company and Parent shall, and shall
cause its subsidiaries, officers, directors, employees, auditors and other
agents to, afford the officers, employees, auditors and other agents of Parent
or the Company, respectively, who shall agree to be bound by the provisions of
this Section 5.3 as though a party hereto, complete access at all reasonable
times to its officers, employees, agents, properties, offices, plants and other
facilities and to all books and records, and shall furnish Parent or the
Company, respectively, with all financial, operating and other data and
information as Parent or the Company, respectively, through its officers,
employees or agents may from time to time request. In addition, subsequent to
the date of this Agreement, Parent and/or any of its subsidiaries may initiate
communications with any officer or key employee of the Company for the purpose
of addressing the prospective retention of such officer or employee following
the Closing, PROVIDED that Parent believes, in good faith, that there is a
compelling, legitimate business need to initiate such communication prior to the
Closing Date.
(b) Each of the Company and Parent will hold and will cause its
directors, officers, employees, agents, advisors (including, without
limitation, counsel and auditors) and controlling persons to hold any such
information which is nonpublic in confidence on the same terms and
conditions as the confidentiality provisions set forth in the
Confidentiality Agreement dated July 27, 2000, as amended from time to time,
between the Company and Parent (the "CONFIDENTIALITY AGREEMENT").
D-27
(c) No investigation pursuant to this Section 5.3 shall affect any
representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto.
Section 5.4. NO SOLICITATION OF TRANSACTIONS. The Company agrees that
neither it nor any of its subsidiaries nor any of the officers and directors of
it or its subsidiaries shall, and that it shall direct and cause its and its
subsidiaries' employees, agents and representatives (including any investment
banker, attorney or accountant retained by it or any of its subsidiaries) not
to, directly or indirectly, initiate, solicit, knowingly encourage or otherwise
facilitate (including by way of furnishing information) any inquiries or the
making of any proposal or offer with respect to (i) a merger, reorganization,
share exchange, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving it or any of its
subsidiaries, or (ii) any purchase or sale of all or any significant portion of
the assets or 15% or more of the equity securities of it or any of its
subsidiaries (any such proposal or offer being hereinafter referred to as an
"ACQUISITION PROPOSAL"), and agrees that neither it nor any of its subsidiaries
nor any of the officers and directors of it or its subsidiaries shall, and that
it shall direct and cause its and its subsidiaries' employees, agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its subsidiaries) not to, directly or indirectly, have
any discussion with or provide any confidential information or data to any
person relating to an Acquisition Proposal, or engage in any negotiations
concerning an Acquisition Proposal, or otherwise knowingly facilitate any effort
or attempt to make or implement an Acquisition Proposal or accept an Acquisition
Proposal. Notwithstanding the foregoing, the Company or its Board of Directors
shall be permitted to (A) to the extent applicable, comply with
Rule 14e-2(a) promulgated under the Exchange Act with regard to an Acquisition
Proposal, or (B) engage in any discussions or negotiations with, or provide any
information to, any person in response to an unsolicited bona fide written
Acquisition Proposal by any such person, if and only to the extent that, in the
case of the actions referred to in clause (B), (i) the Company's stockholders
meeting relating to the adoption of this Agreement by the stockholders of the
Company shall not have occurred, (ii) such Acquisition Proposal constitutes a
Superior Proposal and was not solicited by it and did not otherwise result from
a breach of this Section 5.4, (iii) the Board of Directors of the Company
determines in good faith, based on the advice of its outside legal advisors,
that in light of this Superior Proposal, if the Company fails to participate in
such discussions or negotiations with, or provide such information to, the
person making such Superior Proposal, it would be in violation of its fiduciary
duties under applicable law, (iv) prior to providing any information or data to
any person in connection with an Acquisition Proposal by any such person, the
Board of Directors of the Company receives from such person an executed
confidentiality agreement on terms no less favorable to the Company than those
contained in the Confidentiality Agreement and (v) prior to providing any
information or data to any person or entering into discussions or negotiations
with any person, the Board of Directors of the Company notifies Parent promptly
of such inquiries, proposals or offers received by, any such information
requested from, or any such discussions or negotiations sought to be initiated
or continued with, any of its representatives indicating, in connection with
such notice, the name of such person and the material terms and conditions of
any proposals or offers. The Company agrees that it will keep Parent informed
reasonably promptly of any material change in the terms of any such proposals or
offers and will notify Parent 24 hours in advance before an agreement is
reached. The Company agrees that it will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any Acquisition Proposal or similar
transaction or arrangement. The Company agrees that it will take the necessary
steps to promptly inform the individuals or entities referred to in the first
sentence of this Section 5.4 of the obligations undertaken in this Section 5.4.
Nothing in this Section 5.4 shall (x) permit the Company to terminate this
Agreement (except as specifically provided in Article VII hereof) or (y) affect
any other obligation of the Company under this Agreement. For purposes of this
Section 5.4, "SUPERIOR PROPOSAL" shall mean a bona fide written Acquisition
Proposal which the Board of Directors of the Company concludes in good faith,
upon the advice of a financial advisor of nationally recognized reputation,
taking into
D-28
account all legal, financial, regulatory and other aspects of the proposal and
the person making the proposal (including any break-up fees, expense
reimbursement provisions and conditions to consummation), (i) would, if
consummated, result in a transaction that is more favorable to all of the
Company's stockholders (in their capacities as stockholders), from a financial
point of view, than the transactions contemplated by this Agreement and (ii) is
reasonably capable of being completed (PROVIDED that for purposes of this
definition of "Superior Proposal," the term Acquisition Proposal shall have the
meaning assigned to such term in this Section 5.4, except that the reference to
"15%" in the definition of "Acquisition Proposal" shall be deemed to be a
reference to "51%" and "Acquisition Proposal" shall only be deemed to refer to a
transaction involving the Company, and the reference to "assets" (including the
shares of any subsidiary of the Company) shall refer to the assets of the
Company and its subsidiaries, taken as a whole, and not the assets of any of the
subsidiaries alone).
Section 5.5. EMPLOYEE BENEFITS MATTERS. (a) The Company shall or Parent
shall cause the Company and the Surviving Corporation to promptly pay or provide
when due all compensation and benefits earned through or prior to the Effective
Time as provided pursuant to the terms of any Plans in existence as of the date
hereof and set forth on Section 2.10 of the Company Disclosure Schedule. Parent
and the Company agree that the Company and the Surviving Corporation shall pay
promptly or provide when due all compensation and benefits required to be paid
pursuant to the terms of any individual agreement with any employee, former
employee, director or former director in effect and disclosed to Parent as of
the date hereof. Nothing herein shall require the continued employment of any
person or prevent the Company and/or the Surviving Corporation from taking any
action or refraining from taking any action that the Company could take or
refrain from taking prior to the Effective Time.
(b) Parent shall, for the period ending on December 31, 2001, maintain
(or cause the Surviving Corporation to maintain) employee benefit plans
(other than with respect to equity-based compensation, except as
contemplated by Section 1.7(b)) for the benefit of each employee of the
Company or its subsidiaries who continues employment with the Surviving
Corporation as of the Effective Time that are no less favorable in the
aggregate to the Plans in effect immediately prior to the Effective Time
with respect to each such employee; provided, that nothing herein shall
require Parent and/or the Surviving Corporation to continue to maintain any
Plan or grant any such employee any equity-based compensation in the
Surviving Corporation or Parent. For purposes of determining eligibility to
participate, eligibility for benefit forms and subsidies and the vesting of
benefits under such plans (without duplication of benefits as a result
thereof), the Surviving Corporation shall give effect to years of service
with the Company and its subsidiaries in respect of years of service for
which credit was given by the Company and its subsidiaries. No employee
electing coverage under the medical insurance plans of the Surviving
Corporation shall be excluded from coverage thereunder (for such employee
and any person covered by virtue of such employee's employment) on the basis
of a pre-existing condition that was not also excluded under the Company's
medical insurance plan.
Section 5.6. DIRECTORS' AND OFFICERS' INDEMNIFICATION; INSURANCE. (a) The
By-Laws of the Surviving Corporation shall contain provisions no less favorable
with respect to indemnification and exculpation from liability than are set
forth in the Certificate of Incorporation of the Company, which provisions shall
not be amended, repealed or otherwise modified for a period of six years from
the Effective Time in any manner that would adversely affect the rights
thereunder of individuals who at the Effective Time were directors, officers or
employees of the Company.
(b) For six years from the Effective Time, the Surviving Corporation
shall, unless Parent agrees in writing to guarantee the indemnification
obligations set forth in Section 5.6(a), maintain in effect the current
directors' and officers' liability insurance covering those persons who are
currently covered by the Company's directors' and officers' liability
insurance policy to the extent that it provides coverage for events
occurring prior to the Effective Time (a copy of which has
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been heretofore delivered to Parent), so long as the annual premium therefor
would not be in excess of 150% of the last annual premium paid prior to the
date of this Agreement (the "COMPANY'S CURRENT PREMIUM"). If such premiums
for such insurance would at any time exceed 150% of the Company's Current
Premium, then the Surviving Corporation shall cause to be maintained
policies of insurance that in the Surviving Corporation's good faith
determination, provide the maximum coverage available at an annual premium
equal to 150% of the Company's Current Premium.
Section 5.7. NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which could be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
and (ii) any failure of the Company, Parent or Sub, as the case may be, to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it hereunder; PROVIDED, HOWEVER,
that the delivery of any notice pursuant to this Section 5.7 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
Section 5.8. FURTHER ACTION; REASONABLE BEST EFFORTS. Upon the terms and
subject to the conditions hereof, each of the parties hereto shall use its
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as soon as practicable after the
date hereof, including but not limited to (i) cooperation in the preparation and
filing of the Form S-4, the Proxy Statement, and required filings under the HSR
Act and any amendments to any thereof and (ii) using its reasonable best efforts
to make all required regulatory filings and applications and to obtain all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities and parties to contracts with the Company and
its subsidiaries as are necessary for the consummation of the transactions
contemplated by this Agreement and to fulfill the conditions to the Merger. In
furtherance and not in limitation of the foregoing, each party hereto agrees to
make, to the extent it has not already done so, an appropriate filing of a
Notification and Report Form pursuant to the HSR Act with respect to the
transactions contemplated hereby as promptly as practicable and in any event
within five business days of the date hereof and to supply as promptly as
practicable any additional information and documentary material that may be
requested pursuant to the HSR Act. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to this Agreement
shall use their reasonable best efforts to take all such necessary action. In
the event that a suit or objection is instituted by any person or governmental
authority challenging this Agreement and the transactions contemplated hereby as
violative of applicable competition and antitrust laws, each of Parent and the
Company shall use their reasonable best efforts to resist or resolve such suit
or objection. Notwithstanding the foregoing, in connection with any such
objection or suit instituted by such person or governmental authority
(including, but not limited to, the Federal Trade Commission or the Antitrust
Division of the Department of Justice), neither Parent nor Sub shall be required
to provide any undertakings or agree to any condition that could reasonably be
expected to result in a substantial detriment to Parent's or the Company's
business or results of operations (a "SUBSTANTIAL DETRIMENT").
Section 5.9. PUBLIC ANNOUNCEMENTS. Parent and the Company shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to the Merger and shall not issue any such press release
or make any such public statement prior to such consultation, except as may be
required by law or any listing agreement with its securities exchange.
Section 5.10. STOCK EXCHANGE LISTING. Parent shall use its reasonable best
efforts to have approved for listing on the NYSE prior to the Effective Time,
subject to official notice of issuance, the Parent Common Stock to be issued
pursuant to the Merger.
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Section 5.11. AFFILIATES. Prior to the Closing Date, the Company shall
deliver to Parent a letter identifying all persons who are, at the time this
Agreement is submitted for adoption by the stockholders of the Company,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act.
The Company shall use its reasonable best efforts to cause each such person to
deliver to Parent on or prior to the Closing Date a written agreement
substantially in the form attached as Exhibit A hereto.
Section 5.12. BOARD OF DIRECTORS AND OFFICERS OF PARENT. Parent shall use
its reasonable efforts to appoint the Company's Chief Executive Officer to the
Board of Directors of Parent, effective immediately following the Effective
Time. The Board of Directors of Parent also shall appoint the Company's Chief
Executive Officer as Chief Internet Officer of Parent, effective immediately
following the Effective Time.
Section 5.13. SECTION 16B APPROVALS. The Board of Directors or
Compensation Committee of Parent shall grant all approvals and take all other
actions required pursuant to Rules 16b-3(d) and 16b-3(e) under the Exchange Act
to cause the Parent Common Stock and New Stock Rights to be exempt from the
provisions of Section 16(b) of the Exchange Act.
Section 5.14. SEC DOCUMENTS. From the date hereof to the Effective Time,
each of Parent and the Company shall furnish to the Company and Parent,
respectively, a complete and correct copy of any agreements, documents or other
instruments, or amendment or modifications thereto, which are filed by Parent or
the Company, respectively, with the SEC pursuant to the Securities Act and the
rules and regulations promulgated thereunder or the Exchange Act and the
rules and regulations promulgated thereunder.
Section 5.15. CONTINUED EMPLOYMENT. The Company shall take no action to
terminate the employment of Messrs. Kurnit and Day in their current jobs and
shall not diminish their respective responsibilities or compensation, except
that the Company may, after consultation with Parent, terminate either
individual "for cause."
Section 5.16. OUTSTANDING COMPANY SECURITIES. The Company shall use
commercially reasonable efforts to cause the Company Securities listed in
Section 5.16 of the Company Disclosure Schedule to be exercised or cancelled,
and the Company's obligations thereunder to be discharged, prior to the Closing.
ARTICLE VI
CONDITIONS OF MERGER
Section 6.1. CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Closing Date of the following
conditions:
(a) This Agreement shall have been adopted by the affirmative vote of
the holders of a majority of the outstanding shares of Company Common Stock.
(b) No Order (whether temporary, preliminary or permanent) shall have
been enacted, entered, promulgated or enforced by any court or governmental
authority of competent jurisdiction which prohibits, restrains, enjoins or
restricts the consummation of the Merger; PROVIDED, HOWEVER, that the
parties shall use their reasonable best efforts to cause any such Order to
be vacated or lifted.
(c) Any waiting period applicable to the Merger under the HSR Act shall
have terminated or expired.
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(d) The Form S-4 and any required post-effective amendment thereto shall
have become effective under the Securities Act and shall not be the subject
of any stop order or proceedings seeking a stop order, and any material
"blue sky" and other state securities laws applicable to the registration of
the Parent Common Stock to be exchanged for Company Common Stock shall have
been complied with.
(e) The shares of Parent Common Stock issuable to the holders of Company
Common Stock pursuant to this Agreement shall have been approved for listing
on the NYSE, subject to official notice of issuance.
(f) Any waiting period under the proxy rules applicable to Parent shall
have expired.
Section 6.2. CONDITIONS TO OBLIGATIONS OF THE COMPANY TO EFFECT THE
MERGER. The obligation of the Company to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of the following additional
conditions:
(a) (i) Parent and Sub shall have performed or complied with in all
material respects their agreements and covenants contained in this Agreement
required to be performed or complied with at or prior to the Closing Date;
(ii) the representations and warranties of Parent and Sub contained in this
Agreement shall be true in all respects (without regard to materiality or
Material Adverse Effect qualifiers), in each case when made and, unless a
representation speaks of a specific date, on and as of the Closing Date with
the same force and effect as if made on and as of such date, except where
failures to be so true could not, individually or in the aggregate,
reasonably be expected to have a Parent Material Adverse Effect; PROVIDED
HOWEVER, such Parent Material Adverse Effect qualification shall be
inapplicable with respect to the representations and warranties contained in
Sections 3.2 and 3.10 (which representations shall be true and correct at
the applicable times in all material respects) and (iii) the Company shall
have received a certificate signed on behalf of Parent by the chief
executive officer and chief financial officer of Parent to such effect.
(b) The opinion, based on appropriate representations of the Company and
Parent, of Brobeck, Phleger & Harrison LLP, counsel to the Company, to the
effect that (i) the Merger will be treated for Federal income Tax purposes
as a reorganization within the meaning of Section 368(a) of the Code and
(ii) Parent, Sub and the Company will each be a party to the reorganization
under the meaning of Section 368(b) of the Code, dated on or about the date
of and referred to in the Proxy Statement as first mailed to stockholders of
the Company, which shall not have been withdrawn or modified in any material
respect as of the Closing Date.
(c) At any time on or after the date of this Agreement there shall not
have occurred any condition, event or occurrence which could, individually
or in the aggregate, reasonably be likely to cause a Parent Material Adverse
Effect.
(d) There shall not be pending or threatened by any governmental
authority any Action before any United States court or other governmental
body of competent jurisdiction, which challenges or seeks to restrain or
prohibit the consummation of the Merger.
(e) All approvals or consents of any governmental authority (whether
domestic, foreign or supranational) in connection with the Merger and the
consummation of the other transactions contemplated hereby (including all
relevant statutory, regulatory or other governmental waiting period
expirations) referred to in Section 2.5(a) of the Company Disclosure
Schedule shall have been obtained, have been declared or filed or be deemed
to have occurred, as the case may be, and all such approvals or consents
shall be in full force and effect.
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Section 6.3. CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE
MERGER. The obligations of Parent and Sub to effect the Merger shall be subject
to the fulfillment at or prior to the Closing Date of the following additional
conditions:
(a) (i) The Company shall have performed or complied with in all
material respects its agreements and covenants contained in this Agreement
required to be performed or complied with at or prior to the Closing Date;
(ii) the representations and warranties of the Company contained in this
Agreement shall be true in all respects (without regard to materiality or
Material Adverse Effect qualifiers), in each case when made and unless a
representation speaks of a specific date, on and as of the Closing Date with
the same force and effect as if made on and as of such date, except where
failures to be so true could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect; PROVIDED HOWEVER,
such Material Adverse Effect qualification shall be inapplicable with
respect to the representations and warranties contained in Sections 2.3,
2.14, 2.17 and 2.18 (which representations shall be true and correct at the
applicable times in all material respects); and (iii) Parent shall have
received a certificate signed on behalf of the Company by the chief
executive officer and chief financial officer of the Company to such effect.
(b) At any time on or after the date of this Agreement there shall not
have occurred any condition, event or occurrence which could, individually
or in the aggregate, reasonably be likely to cause a Material Adverse
Effect.
(c) The opinion, based on appropriate representations of the Company and
Parent, of Simpson Thacher & Bartlett, counsel to Parent, to the effect that
(i) the Merger will be treated for Federal income Tax purposes as a
reorganization within the meaning of Section 368(a) of the Code and
(ii) Parent, Sub and the Company will each be a party to the reorganization
within the meaning of Section 368(b) of the Code, dated on or about the date
of and referred to in the Proxy Statement as first mailed to the
stockholders of the Company, which shall not have been withdrawn or modified
in any material respect as of the Closing Date.
(d) There shall not be pending or threatened by any governmental
authority any Action before any United States court or other governmental
body of competent jurisdiction (i) challenging or seeking to restrain or
prohibit the consummation of the Merger or seeking to obtain from Parent or
any of its subsidiaries or the Company any material damages, (ii) seeking to
prohibit or limit the ownership or operation by the Company, Parent or any
of their respective subsidiaries of any material portion of the business or
assets of the Company, Parent or any of their respective subsidiaries, to
dispose of or hold separate any significant portion of the business or
assets of the Company, Parent or any of their respective subsidiaries, as a
result of the Merger or any of the other transactions contemplated by this
Agreement, or (iii) seeking to prohibit Parent or any of its subsidiaries
from effectively controlling in any material respect the business or
operations of the Company or its subsidiaries.
(e) All approvals or consents of any governmental authority (whether
domestic, foreign or supranational) in connection with the Merger and the
consummation of the other transactions contemplated hereby (including all
relevant statutory, regulatory or other governmental waiting period
expirations), which if not obtained in connection with the consummation of
the transactions contemplated hereby, could reasonably be expected to result
in a Substantial Detriment (each a "REQUIRED REGULATORY APPROVAL"), shall
have been obtained, have been declared or filed or be deemed to have
occurred, as the case may be, and all such Required Regulatory Approvals
shall be in full force and effect; provided, however, that a Required
Regulatory Approval shall not be deemed to have been obtained if in
connection with the grant thereof there shall have been an imposition by any
governmental authority of any condition, requirement, restriction or change
of regulation, or any other action directly or indirectly related to such
grant taken by such
D-33
governmental authority (including with respect to divestitures of assets or
subsidiaries), which could reasonably be expected to result in a Substantial
Detriment.
(f) All third party consents set forth on Schedule 6.3(f) attached
hereto shall have been obtained.
(g) Parent shall have received the agreements referred to in
Section 5.11.
(h) Parent shall have received the letters referred to in
Section 5.2(a).
(i) Each of the members of the Board of Directors of the Company shall
have duly delivered to the Company their written resignations, effective as
of the Effective Time, as directors of the Company, and Parent shall have
received copies of each such resignation and prior to such resignation, the
Board of Directors of the Company shall have fixed the authorized number of
directors of the Company, effective as of the Effective Time, at three (3)
and shall have appointed, effective as of the Effective Time, Thomas Rogers,
Charles McCurdy and Beverly Chell as the members of the Board of Directors
of the Surviving Corporation, and Parent shall have received evidence of
such actions.
(j) For all times prior to the Closing, each of Messrs. Kurnit and Day
(absent death or disability) shall have been employed by the Company in
accordance with the terms of Section 5.15 and, as of the Closing, each of
Messrs. Kurnit and Day shall be ready, willing and able (absent death or
permanent disability) to commence employment with Parent in accordance with
the terms of their respective employment agreements with Parent.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1. TERMINATION. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Closing Date,
whether before or after approval of matters presented in connection with the
Merger by the stockholders of the Company (except as otherwise stated herein):
(a) By mutual written consent of Parent and the Company;
(b) By either Parent or the Company, if the Merger shall not have been
consummated on or before June 30, 2001 (other than due to the failure of the
party seeking to terminate this Agreement to perform its obligations under
this Agreement required to be performed at or prior to the Effective Time);
(c) By either Parent or the Company, if any required approval of the
stockholders of the Company for this Agreement or the Merger shall not have
been obtained by reason of the failure to obtain the required vote upon a
vote held at a duly held meeting of stockholders or at any adjournment
thereof;
(d) By either Parent or the Company, if any court or other governmental
body of competent jurisdiction shall have issued a final Order or ruling or
taken any other final action restraining, enjoining or otherwise prohibiting
the Merger and such Order, ruling or other action is or shall have become
final and nonappealable;
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(e) By the Company, if prior to the Closing Date (i) there shall have
been a breach of any representation or warranty on the part of Parent
contained in this Agreement which could reasonably be expected to have a
Parent Material Adverse Effect or which could reasonably be expected to
materially adversely affect (or materially delay) the consummation of the
Merger, or (ii) there shall have been a breach of any covenant or agreement
on the part of Parent contained in this Agreement which could reasonably be
expected to have a Parent Material Adverse Effect or which could reasonably
be expected to materially adversely affect (or materially delay) the
consummation of the Merger, which breach shall not have been cured prior to
10 days following notice thereof; or
(f) By Parent, if prior to the Closing Date (i) there shall have been a
breach of any representation or warranty on the part of the Company
contained in this Agreement which could reasonably be expected to have a
Material Adverse Effect or which could reasonably be expected to materially
adversely affect (or materially delay) the consummation of the Merger, or
(ii) there shall have been a breach of any covenant or agreement on the part
of the Company contained in this Agreement which could reasonably be
expected to have a Material Adverse Effect or which could reasonably be
expected to materially adversely affect (or materially delay) the
consummation of the Merger, which breach shall not have been cured prior to
10 days following notice thereof; or
(g) By Parent, (i) if the Board of Directors of the Company shall have
(A) failed to recommend or withdrawn, modified or amended in any respect
adverse to Parent or Sub its approval or recommendation of this Agreement,
the Merger or any of the other transactions contemplated herein or resolved
to do so, or (B) approved or recommended a Superior Proposal from a person
(other than Parent) or resolved to do so, or (ii) the Company breaches any
of its agreements set forth in Section 5.4; or
(h) By Parent, if any person or group (as defined in
Section 13(d)(3) of the Exchange Act) (other than Parent, Sub or any of
their affiliates) shall have become (x) the beneficial owner (as defined in
Rule 13d-3 promulgated under the Exchange Act) of at least 25% of the
outstanding shares of Company Common Stock or (y) shall have acquired 25% or
more of the assets of the Company and its subsidiaries, taken as a whole.
Section 7.2. EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to Section 7.1, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto except as
set forth in Sections 5.3(b), 7.3 and 8.1; provided, however, that nothing
herein shall relieve any party from liability for any willful breach hereof.
Section 7.3. FEES AND EXPENSES. (a) If:
(i) This Agreement is terminated pursuant to Section 7.1(g) or (h);
or
(ii) (x) (A) Parent or the Company terminate this Agreement pursuant
to Section 7.1(c), or (B) Parent terminates this Agreement pursuant to
Section 7.1(f) and (y) in the case of (A) or (B), within 18 months
thereafter, the Company enters into an agreement with respect to an
Alternative Transaction or an Alternative Transaction is consummated;
then the Company shall pay to Parent and Sub, (A) within two business days
following any termination by Parent contemplated by Section 7.3(a)(i) and
(B) within two business days following the occurrence of one of the events
described in clause (y) of Section 7.3(a)(ii), a fee, in cash, of
$23.5 million (the "FEE"), PROVIDED, HOWEVER, that the Company shall in no
event be obligated to pay more than one such fee with respect to all such
occurrences and such termination.
(b) Within two business days after the termination of this Agreement
pursuant to Section 7.1(c), (f), (g) or (h), the Company shall pay all of
Parent's and Sub's Expenses (as defined
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below) up to a maximum payment pursuant to this Section 7.3(b) of
$1.0 million. The term "Expenses" shall include all out-of-pocket expenses
and fees (including without limitation fees and expenses payable to all
banks, investment banking firms and other financial institutions and their
respective agents and counsel for arranging or providing financial advice
with respect to the Merger and all reasonable fees and expenses of counsel,
accountants, experts and consultants to Parent and Sub) actually incurred by
Parent or Sub or on their behalf in connection with the consummation of all
transactions contemplated by this Agreement, including the Merger.
For purposes of this Section 7.3, "ALTERNATIVE TRANSACTION" means any of
the following events: (i) the acquisition of the Company by merger,
reorganization, share exchange, consolidation, business combination,
recapitalization, dissolution or otherwise by any person other than Parent,
Sub or any affiliate thereof (a "THIRD PARTY"); (ii) the acquisition by a
Third Party of 25% or more of the assets of the Company and its
subsidiaries, taken as a whole; (iii) the acquisition by a Third Party of
25% or more of the outstanding shares of Company Common Stock; (iv) the
adoption by the Company of a plan of liquidation or the declaration or
payment of an extraordinary dividend; or (v) the repurchase by the Company
or any of its subsidiaries of 25% or more of the outstanding shares of
Company Common Stock.
(c) Except as otherwise specifically provided herein, each party shall
bear its own expenses in connection with this Agreement and the transactions
contemplated hereby, except that each of Parent and the Company shall bear
and pay one-half of the costs and expenses incurred in connection with the
printing and mailing of the Form S-4 and the Proxy Statement.
Section 7.4. AMENDMENT. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time before or after any required approval of matters presented in
connection with the Merger by the stockholders of the Company; provided,
however, that after any such approval, there shall be made no amendment that by
law requires further approval by such stockholders without the further approval
of such stockholders. This Agreement may not be amended except by an instrument
in writing signed by the parties hereto.
Section 7.5. WAIVER. At any time prior to the Closing Date, any party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein, subject to the requirements of applicable law. Any
such extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby. The failure of any party to
this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of such rights.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 7.1, as the case may be, except that the agreements set
forth in Article I and Sections 5.5 and 5.6 shall survive the Effective Time and
those set forth in Section 5.3(b) and Section 7.3 shall survive termination of
this Agreement.
Section 8.2. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by telecopy
or by registered or certified mail (postage prepaid, return receipt
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requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
if to Parent or Sub:
PRIMEDIA Inc.
745 Fifth Avenue
New York, New York 10151
Attention: Charles McCurdy
Fax: (212) 745-0199
with an additional copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Gary I. Horowitz, Esq.
Fax: (212) 455-2502
if to the Company:
About.com, Inc.
1440 Broadway, 19th Floor
New York, New York 10018
Attention: Alan Blaustein
President-Corporate Development
Fax: (212) 204-1521
with an additional copy to:
Brobeck, Phleger & Harrison LLP
1633 Broadway, 47th Floor
New York, New York 10019
Attention: Eric Simonson, Esq.
Fax: (212) 586-7878
Section 8.3. CERTAIN DEFINITIONS. For purposes of this Agreement, the
term:
(a) "AFFILIATE" of a person means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person;
(b) "BENEFICIAL OWNER" with respect to any shares of Company Common
Stock means a person who shall be deemed to be the beneficial owner of such
shares of Company Common Stock (i) which such person or any of its
affiliates or associates beneficially owns, directly or indirectly,
(ii) which such person or any of its affiliates or associates (as such term
is defined in Rule 12b-2 of the Exchange Act) has, directly or indirectly,
(A) the right to acquire (whether such right is exercisable immediately or
subject only to the passage of time), pursuant to any agreement, arrangement
or understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (B) the right to vote pursuant to any
agreement, arrangement or understanding, or (iii) which are beneficially
owned, directly or indirectly, by any other persons with whom such person or
any of its affiliates or person with whom such person or any of its
affiliates or associates has any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of any shares;
(c) "CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or
D-37
cause the direction of the management policies of a person, whether through
the ownership of stock, as trustee or executor, by contract or credit
arrangement or otherwise;
(d) "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means the generally
accepted accounting principles set forth in the opinions and pronouncements
of the Accounting Principles Board of the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity
as may be approved by a significant segment of the accounting profession in
the United States, in each case applied on a basis consistent with the
manner in which the audited financial statements for the fiscal year of the
Company or the Parent ended December 31, 1999 were prepared;
(e) "PERSON" means an individual, corporation, limited liability
company, partnership, association, trust, unincorporated organization, other
entity or group (as defined in Section 13(d)(3) of the Exchange Act); and
(f) "SUBSIDIARY" or "SUBSIDIARIES" of the Company, the Surviving
Corporation, Parent or any other person means any corporation, partnership,
joint venture or other legal entity of which the Company, the Surviving
Corporation, Parent or such other person, as the case may be (either alone
or through or together with any other subsidiary), owns, directly or
indirectly, 50% or more of the stock or other voting or economic equity
interests.
Section 8.4. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the fullest extent
possible.
Section 8.5. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, together with
the Confidentiality Agreement, the Parent Voting Agreement and the Shareholder
Voting Agreement, constitutes the entire agreement among the parties with
respect to the subject matter hereof and supersedes all prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. This Agreement shall not be assigned by
operation of law or otherwise, except that Parent and Sub may assign all or any
of their respective rights and obligations hereunder to any direct or indirect
wholly owned subsidiary or subsidiaries of Parent, PROVIDED that no such
assignment shall relieve the assigning party of its obligations hereunder if
such assignee does not perform such obligations. Any attempted assignment that
does not comply with the provisions of this Section 8.5 shall be null and void
AB INITIO.
Section 8.6. PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and, except as provided in the
following sentence, nothing in this Agreement, express or implied, is intended
to or shall confer upon any other person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement. The parties hereto
expressly intend the provisions of Section 5.6 to confer a benefit upon and be
enforceable by, as third party beneficiaries of this Agreement, the third
persons referred to in, or intended to be benefited by, such provisions.
Section 8.7. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to principles of conflicts of laws.
Section 8.8. HEADINGS. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
D-38
Section 8.9. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
Section 8.10. INTERPRETATION. The parties hereto agree that in
interpreting this Agreement there shall be no inferences against the drafting
party.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
PRIMEDIA INC.
By: /s/ BEVERLY C. CHELL
-----------------------------------
Name: Beverly C. Chell
Title: Vice Chairman
ABRACADABRA ACQUISITION CORPORATION
By: /s/ BEVERLY C. CHELL
-----------------------------------
Name: Beverly C. Chell
Title: Vice Chairman
ABOUT.COM, INC.
By: /s/ SCOTT KURNIT
-----------------------------------
Name: Scott Kurnit
Title: Chairman and Chief Executive
Officer
[Signature page to Agreement and Plan of Merger]
D-39
AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER
AMENDMENT No. 1, dated as of January 2, 2001 ("AMENDMENT NO. 1"), by and
among PRIMEDIA Inc., a Delaware corporation ("PARENT"), Abracadabra Acquisition
Corporation, a Delaware corporation and a direct wholly owned subsidiary of
Parent ("SUB"), and About.com, Inc., a Delaware corporation (the "COMPANY").
W I T N E S S E T H:
WHEREAS, an Agreement and Plan of Merger, dated as of October 29, 2000 (the
"AGREEMENT"), has been entered into by and among Parent, Sub and the Company
providing for, among other matters, the merger of Sub with and into the Company;
WHEREAS, the Agreement provides that the parties thereto may amend such
agreement by written agreement of each party thereto;
NOW, THEREFORE, the parties hereto agree to amend the Agreement as follows:
Section 1. AMENDMENT OF THE AGREEMENT. Section 3.2(a) of the Agreement is
hereby
amended by (a) replacing the number 255,750,000 in the first sentence thereof
with the number 300,000,000, (b) replacing the number 5,750,000 in the first
sentence thereof with the number 50,000,000 and (c) replacing the number
166,765,849 in the second sentence thereof with the number 166,889,697.
Section 2. GOVERNING LAW. This Amendment No. 1 shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to principles of conflicts of laws.
Section 3. MISCELLANEOUS. Except as otherwise provided herein, all
provisions of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have cause this Amendment No. 1 to be
executed by their duly authorized representatives as of the date first written
above.
PRIMEDIA INC.
By: /s/ BEVERLY C. CHELL
-----------------------------------------
Name: Beverly C. Chell
Title: Vice Chairman
ABRACADABRA ACQUISITION CORPORATION
By: /s/ BEVERLY C. CHELL
-----------------------------------------
Name: Beverly C. Chell
Title: Vice Chairman
ABOUT.COM, INC.
By: /s/ SCOTT KURNIT
-----------------------------------------
Name: Scott Kurnit
Title: Chairman and Chief Executive
Officer
D-40
ANNEX E
VOTING AGREEMENT
Voting Agreement (this "AGREEMENT"), dated as of October 29, 2000, among
those shareholders of About.com, Inc., a Delaware corporation (the "COMPANY"),
listed on the signature page hereof (each, a "SHAREHOLDER," and collectively,
the "SHAREHOLDERS"), PRIMEDIA Inc., a Delaware corporation ("PARENT"), and
Abracadabra Acquisition Corporation, a Delaware corporation and a wholly owned
subsidiary of Parent ("MERGER SUB").
WHEREAS, each Shareholder beneficially owns the number of shares of common
stock, par value $0.001 per share, of the Company set forth below such
Shareholder's name on the signature page hereof (all such shares, together with
any other shares of capital stock of the Company such Shareholder acquires after
the date hereof, including, without limitation, as a result of a stock dividend,
stock split, recapitalization, combination, reclassification, exchange, or
change of such shares, or upon exercise or conversion of any securities, the
"SHARES");
WHEREAS, simultaneously with the execution and delivery hereof, Parent,
Merger Sub and the Company have entered into an Agreement and Plan of Merger
(the "MERGER AGREEMENT"; capitalized terms used herein and not defined shall
have the meanings set forth in the Merger Agreement), dated as of the date
hereof, which Merger Agreement has been approved by the Board of Directors of
the Company, and has been approved by the Boards of Directors of Parent and
Merger Sub. The directors of the Company unanimously voted in favor of the
adoption of the Merger Agreement and the recommendation that shareholders of the
Company approve the merger of Merger Sub with and into the Company (the
"MERGER") as contemplated by the Merger Agreement; and
WHEREAS, as a condition to entering into the Merger Agreement, Parent and
Merger Sub have required that the Shareholders agree, and in order to induce
Parent and Merger Sub to enter into the Merger Agreement, the Shareholders have
agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the parties hereby agree as follows
Section 1. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. Each
Shareholder severally represents and warrants to Parent and Merger Sub as
follows:
(a) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by such Shareholder, and no other proceedings on the part
of such Shareholder are necessary to authorize this Agreement or to
consummate the transactions so contemplated.
(b) This Agreement has been duly and validly executed and delivered by
such Shareholder and, assuming this Agreement constitutes a valid and
binding obligation of Parent and Merger Sub, constitutes a legal, valid and
binding obligation of such Shareholder enforceable against such Shareholder
in accordance with its terms (except insofar as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally or by principles
governing the availability of equitable remedies).
(c) The execution, delivery and performance by such Shareholder of this
Agreement and the consummation of the transactions contemplated hereby do
not and will not (i) contravene or conflict with its organizational
documents; (ii) contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree
binding upon or applicable to such Shareholder or any of its properties; or
(iii) conflict with, or result in the breach or termination of or constitute
a default (with or without the giving of notice or the lapse of time or
both) under, or give rise to any right of termination, cancellation, or loss
of any benefit to which such Shareholder is entitled under any provision of
any agreement, contract, license or other instrument binding upon such
Shareholder or any of its properties, or allow the acceleration of the
performance of any obligation of such Shareholder under any indenture,
mortgage deed of trust,
lease, license, contract, instrument or other agreement to which such
Shareholder is a party or by which such Shareholder, its assets or
properties is subject or bound, other than such contraventions, conflicts,
violations, breaches, defaults or other occurrences that would not
reasonably be expected to prevent, delay or impair such Shareholder's
ability to consummate the transactions contemplated by this Agreement.
(d) Other than any filings required by the Exchange Act or the rules and
regulations promulgated thereunder, the execution, delivery and performance
by such Shareholder of this Agreement and the consummation of the
transactions contemplated hereby by such Shareholder require no filings,
notices, declarations, consents or other actions to be made by such
Shareholder with, nor are any approvals or other confirmations or consents
required to be obtained by such Shareholder from, any governmental
authority.
(e) As of the date hereof, there is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of such
Shareholder, threatened against such Shareholder or its properties before
any court or arbitrator or any governmental authority which challenges or
seeks to prevent, enjoin, alter or delay the Merger or any of the other
transactions contemplated hereby or by the Merger Agreement. As of the date
hereof, such Shareholder is not, and none of its properties is, subject to
any order, writ, judgment, injunction, decree, determination or award which
would prevent, delay or impair the consummation of the transactions
contemplated hereby.
(f) Such Shareholder is, and at the Effective Time will be, the sole
record and beneficial owner of and has, and at the Effective Time such
Shareholder will have, good and valid title to the Shares held by such
Shareholder, free and clear of any Liens, except for any Liens arising
hereunder. Such Shareholder has, and at the Effective Time will have, the
power to vote, dispose of and otherwise transfer such Shares without the
approval, consent or other action of any person.
(g) There are no options or rights to acquire, or understandings or
arrangements to which such Shareholder is a party relating to the Shares
held by such Shareholder, other than this Agreement.
(h) The Shares indicated below such Shareholder's name on the signature
page hereof represent all of the shares of Company Common Stock beneficially
owned (within the meaning of Rule 13d-3 under the Exchange Act) by such
Shareholder.
(i) Such Shareholder understands and acknowledges that Parent and Merger
Sub are entering into the Merger Agreement in reliance on such Shareholder's
execution and delivery of this Agreement.
Section 2. AGREEMENT TO VOTE; PROXY.
(a) Each Shareholder agrees with, and covenants to, Parent and Merger
Sub as follows:
(i) At any meeting of shareholders of the Company called to vote upon
the Merger, the Merger Agreement or the other transactions contemplated
by the Merger Agreement or at which a vote, consent or other approval
with respect to the Merger, the Merger Agreement or the other
transactions contemplated by the Merger Agreement is sought, such
Shareholder shall vote (or cause to be voted) or shall consent, execute a
consent or cause to be executed a consent in respect of the Shares held
by such Shareholder in favor of the Merger, the execution and delivery by
the Company of the Merger Agreement and the approval of the terms thereof
and each of the other transactions contemplated by the Merger Agreement.
(ii) At any meeting of shareholders of the Company or at any
adjournment thereof or in any other circumstances upon which their vote,
consent or other approval is sought, such Shareholder shall vote (or
cause to be voted) the Shares held by such Shareholder against (A) any
Acquisition Proposal or (B) any amendment of the Company's Certificate of
E-2
Incorporation or By-laws which amendment would in any manner prevent or
materially impede, interfere with or delay the Merger, the Merger
Agreement or any of the other transactions contemplated by the Merger
Agreement.
(b) Each Shareholder hereby grants to, and appoints, Beverly Chell and
Charles McCurdy and any other individual who is designated by Parent, until
the termination of this Agreement pursuant to Section 12, an irrevocable
proxy, coupled with an interest, and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of such Shareholder,
with respect to the Shares held by such Shareholder, to vote the Shares held
by such Shareholder, or grant or execute a consent or approval, in complete
discretion of Parent or Merger Sub, a the case may be, at any meeting of
shareholders of the Company or at any adjournment thereof or in any other
circumstances upon which their vote, consent or other approval is sought in
accordance with paragraph (a) of this Section 2. Each Shareholder will take
such further action and execute such other instruments as may be necessary
to effect the intent of this proxy, and hereby revokes any proxy previously
granted by it with respect to the Shares held by it. Each Shareholder agrees
that this Agreement, including the provisions of this Section 2 will be
recorded in the books and records of the Company. Notwithstanding the
foregoing, nothing in this Agreement shall limit or affect any Shareholder's
ability to vote in his, her or its sole discretion on, and no Shareholder
shall grant or be deemed to grant any proxy or power-of-attorney with
respect to, any matter other than those matters specifically referred to in
Section 2(a) above.
Section 3. DISPOSITION OF SHARES. No Shareholder shall, without the prior
written consent of Parent, directly or indirectly, during the term of this
Agreement (i) grant or enter into any Lien, power of attorney or other agreement
or arrangement with respect to the voting of the Shares held by it, (ii) except
by operation of the laws of inheritance, sell, assign, transfer, encumber or
otherwise dispose of, or enter into any contract, option or other arrangement or
understanding with respect to the direct or indirect sale, assignment, transfer,
encumbrance or other disposition of any of the Shares held by it or (iii) take
any other action that would in any way restrict, limit or interfere with
performance of its obligations hereunder or the transactions contemplated
hereby. Each Shareholder hereby irrevocably waives any rights of appraisal or
rights to dissent from the Merger that such Shareholder may have. Each
Shareholder agrees, and shall use reasonable efforts to cause its affiliates to
agree, to exercise any rights that such Shareholder or any of such affiliates
may have to cause any shareholders of the Company, to vote any shares held by
such shareholder in favor of the Merger and to waive any rights of appraisal or
rights of dissent from the Merger that such shareholder may have. Any purported
transfer in violation of the foregoing shall be null and void.
Section 4. NO SOLICITATIONS. Subject to Section 16 below, each Shareholder
and its affiliates (other than the Company and its subsidiaries) will
immediately cease any existing discussions or negotiations with any third
parties conducted on or prior to the date hereof with respect to any Acquisition
Proposal. Each Shareholder agrees that it will not, and will use its best
efforts to cause such affiliates not to, directly or indirectly, solicit,
initiate, encourage or take any other action to facilitate any inquiries or
proposals with respect to, or that could reasonably be expected to lead to, an
Acquisition Proposal or engage in negotiations or discussions concerning, or
provide any confidential information relating to, any Acquisition Proposal. Each
Shareholder agrees that it and any of such affiliates will promptly advise
Parent of, and communicate to Parent the terms of, any such inquiry or proposal
it or any of such affiliates may receive, and will promptly advise Parent if it
or any of such affiliates provides any such information to any such person.
Section 5. GOVERNING LAW. This Agreement shall be governed by the laws of
the State of New York.
Section 6. NOTICES. Notices and other communications under this Agreement
shall be in writing and shall be deemed given as set forth in Section 8.2 of the
Merger Agreement, except that each
E-3
Shareholder shall receive such notices at the address set forth below such
Shareholder's name on the signature page hereof.
Section 7. ENTIRE AGREEMENT; AMENDMENTS. This Agreement constitutes the
entire understanding of the parties with respect to the subject matter hereof.
There are no restrictions, agreements, promises, warranties, covenants or
undertakings with respect to the subject matter hereof other than those
expressly set forth herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to its subject matter and is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder. This Agreement may be amended only by a written instrument
duly executed by Parent, Merger Sub and the Shareholders.
Section 8. ASSIGNMENT. Notwithstanding any other provision of this
Agreement, this Agreement shall not be assignable by any party hereto except by
Parent or Merger Sub to any direct or indirect wholly owned subsidiary of
Parent. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable against, (i) as to each Shareholder,
such Shareholder and such Shareholder's beneficiaries and representatives, and
(ii) Parent and Merger Sub and their successors and permitted assigns. Each
Shareholder agrees that this Agreement and the obligations of such Shareholder
hereunder shall attach to such Shareholder's Shares and shall be binding upon
any person or entity to which legal or beneficial ownership of such Shares shall
pass, by the laws of inheritance.
Section 9. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity and enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or entity
or any circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and unenforceable, the intent and purpose of such invalid and
unenforceable provision and (b) the remainder of this Agreement and the
application of such provision to other persons, entities or circumstances shall
not be affected by such invalidity or unenforceability, nor shall such
invalidity and unenforceability affect the validity or enforceability of such
provision, or the application thereof, in any other jurisdiction.
Section 10. STOP TRANSFER ORDER. In furtherance of this Agreement,
concurrently herewith each Shareholder shall and hereby does authorize Parent
and Merger Sub to notify the Company's transfer agent that there is a stop
transfer order with respect to all of the Shares subject to the terms of this
Agreement (and that this Agreement places limits on the voting and transfer of
the Shares). Each Shareholder further agrees to cause the Company not to
register the transfer of any certificate representing any of such Shareholder's
Shares unless such transfer is made in accordance with the terms of this
Agreement.
Section 11. FURTHER ACTION. From time to time, at the request of Parent or
Merger Sub and without further consideration, each Shareholder shall execute and
deliver to Parent and Merger Sub such documents and take such action as Parent
or Merger Sub may reasonably request in order to consummate the transactions
contemplated hereby.
Section 12. TERMINATION. This Agreement shall terminate and be of no
further force and effect upon the earlier to occur of (a) the Effective Time and
(b) upon the termination of the Merger Agreement pursuant to its terms.
Section 13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more of the counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
Section 14. SPECIFIC PERFORMANCE. The Shareholders, Parent and Merger Sub
acknowledge that this Agreement and the Shares are unique and that no party will
have an adequate remedy at law if
E-4
any other party breaches any covenant herein or fails to perform its obligations
hereunder. Accordingly, the Shareholders, Parent and Merger Sub agree that the
others shall have the right, in addition to any other rights which it may have,
to specific performance and equitable injunctive relief if any party shall fail
or threaten to fail to perform any of its obligations under this Agreement.
Section 15. EXPENSES. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such cost or expense.
Section 16. SHAREHOLDER CAPACITY. Each Shareholder signs solely in its
capacity as the record holder and beneficial owner of the Shares and nothing
herein shall limit or affect any actions taken or to be taken by any officer,
director or financial advisor of the Company or its subsidiaries in his, her or
its capacity as an officer, director or financial advisor of the Company,
including, without limitation, any actions permitted by the Merger Agreement.
Section 17. NO WAIVER. No failure or delay by Parent or Merger Sub to
assert any of its rights under this Agreement or otherwise shall constitute a
waiver of such rights. No single or partial exercise of any right, remedy, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. Any waiver shall be
effective only in the specific instance and for the specific purpose for which
given and shall not constitute a waiver to any subsequent or other exercise of
any right, remedy, power or privilege hereunder.
Section 18. SUBMISSION TO JURISDICTION. Each of the parties hereto
irrevocably agrees that any legal action or proceeding with respect to this
Agreement or for recognition and enforcement of any judgment in respect hereof
brought by any other party hereto or its successors or assigns may be brought
and determined in the courts of the State of New York, and each party hereto
hereby irrevocably submits with regard to any such action or proceeding for
itself and with respect to its property, generally and unconditionally, to the
nonexclusive jurisdiction of the aforesaid courts. Each of the parties hereto
hereby irrevocably waives, and agrees not to assert, by way of motion, as a
defense, counterclaim or otherwise, in any action or proceeding with respect to
this Agreement, (a) any claim that it is not personally subject to the
jurisdiction of the above-named courts for any reason other than the failure to
lawfully serve process, (b) that it or its property is exempt or immune from
jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise),
and (c) to the fullest extent permitted by applicable law, that (i) the suit,
action or proceeding in any such court is brought in an inconvenient forum, (ii)
the venue of such suit, action or proceeding is improper and (iii) this
Agreement, or the subject matter hereof, may not be enforced in or by such
courts.
Section 19. WAIVER OF JURY TRIAL. Each party hereto hereby irrevocably and
unconditionally waives any rights to a trial by jury in any legal action or
proceeding in relation to this Agreement and for any counterclaim therein.
Section 20. INTERPRETATION. The parties hereto agree that in interpreting
this Agreement there shall be no inferences against the drafting party.
E-5
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed on its behalf by its representatives thereunto duly authorized, all
as of the day and year first above written.
PRIMEDIA INC.
By: /s/ BEVERLY C. CHELL
-----------------------------------
Name: Beverly C. Chell
Title: Vice Chairman
ABRACADABRA ACQUISITION CORPORATION
By: /s/ BEVERLY C. CHELL
-----------------------------------
Name: Beverly C. Chell
Title: Vice Chairman
By: /s/ SCOTT KURNIT
-----------------------------------
Name: Scott Kurnit
Title: Chairman and Chief Executive
Officer
Address:
Shares Beneficially Held: 1,302,097
Options Held: 128,643
By: /s/ WILLIAM C. DAY
-----------------------------------
Name: William C. Day
Address:
Shares Beneficially Held: 72,780
Options Held: 208,531
By: /s/ KRISTOPHER A. WOOD
-----------------------------------
Name: Kristopher A. Wood
Address:
Shares Beneficially Held: 7,197
Options Held: 0
By: /s/ RONALD UNTERMAN
-----------------------------------
Name: Ronald Unterman
Address:
Shares Beneficially Held: 14,800
Options Held: 0
E-6
By: /s/ STANLEY L. FUNG
--------------------------------------
Name: Stanley L. Fung
Address:
Shares Beneficially Held: 25,214
Options Held: 20,000
By: /s/ FRANK J. BIONDI, JR.
-----------------------------------
Name: Frank J. Biondi, Jr.
Address:
Shares Beneficially Held: 1,000
Options Held: 17,800
By: /s/ DAPHNE KIS
-----------------------------------
Name: Daphne Kis
Address:
Shares Beneficially Held: 0
Options Held: 20,000
E-7
ANNEX F
PARENT VOTING AGREEMENT
Parent Voting Agreement (this "AGREEMENT"), dated as of October 29, 2000,
among those shareholders of PRIMEDIA Inc., a Delaware corporation ("PARENT"),
listed on the signature page hereof (each, a "SHAREHOLDER," and collectively,
the "SHAREHOLDERS"), and About.com, Inc., a Delaware corporation (the
"COMPANY").
WHEREAS, each Shareholder beneficially owns the number of shares of common
stock, par value $0.01 per share, of Parent set forth below such Shareholder's
name on the signature page hereof (all such shares, together with any other
shares of capital stock of the Parent such Shareholder acquires after the date
hereof, including, without limitation, as a result of a stock dividend, stock
split, recapitalization, combination, reclassification, exchange, or change of
such shares, or upon exercise or conversion of any securities, the "SHARES");
WHEREAS, simultaneously with the execution and delivery hereof, Parent, a
direct wholly-owned subsidiary of the Company ("MERGER SUB") and the Company
have entered into an Agreement and Plan of Merger (the "MERGER AGREEMENT";
capitalized terms used herein and not defined shall have the meanings set forth
in the Merger Agreement), dated as of the date hereof, which Merger Agreement
has been approved by the Board of Directors of the Company, and has been
approved by the Boards of Directors of Parent and Merger Sub and pursuant to
which Merger Sub will be merged with and into the Company (the "MERGER"); and
WHEREAS, as a condition to entering into the Merger Agreement, the Company
has required that the Shareholders agree, and in order to induce the Company to
enter into the Merger Agreement the Shareholders have agreed, to enter into this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the parties hereby agree as follows
Section 1. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. Each
Shareholder severally represents and warrants to the Company as follows:
(a) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by such Shareholder, and no other proceedings on the part
of such Shareholder are necessary to authorize this Agreement or to
consummate the transactions so contemplated.
(b) This Agreement has been duly and validly executed and delivered by
such Shareholder and, assuming this Agreement constitutes a valid and
binding obligation of the Company, constitutes a legal, valid and binding
obligation of such Shareholder enforceable against such Shareholder in
accordance with its terms (except insofar as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally or by principles governing the
availability of equitable remedies).
(c) The execution, delivery and performance by such Shareholder of this
Agreement and the consummation of the transactions contemplated hereby do
not and will not contravene or conflict with its organizational documents;
contravene or conflict with or constitute a violation of any provision of
any law, regulation, judgment, injunction, order or decree binding upon or
applicable to such Shareholder or any of its properties; or conflict with,
or result in the breach or termination of or constitute a default (with or
without the giving of notice or the lapse of time or both) under, or give
rise to any right of termination, cancellation, or loss of any benefit to
which such Shareholder is entitled under any provision of any agreement,
contract, license or other instrument binding upon such Shareholder or any
of its properties, or allow the acceleration of the performance of any
obligation of such Shareholder under any indenture, mortgage deed of trust,
lease, license, contract, instrument or other agreement to which such
Shareholder is a party or by which such Shareholder, its assets or
properties is subject or bound, other than such contraventions, conflicts,
violations, breaches, defaults or other occurrences that would not
reasonably be expected to prevent, delay or impair such Shareholder's
ability to consummate the transactions contemplated by this Agreement.
(d) Other than any filings required by the Exchange Act or the
rules and regulations promulgated thereunder, the execution, delivery and
performance by such Shareholder of this Agreement and the consummation of
the transactions contemplated hereby by such Shareholder require no filings,
notices, declarations, consents or other actions to be made by such
Shareholder with, nor are any approvals or other confirmations or consents
required to be obtained by such Shareholder from, any governmental
authority.
(e) As of the date hereof, there is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of such
Shareholder, threatened against such Shareholder or its properties before
any court or arbitrator or any governmental authority which challenges or
seeks to prevent, enjoin, alter or delay the Merger or any of the other
transactions contemplated hereby or by the Merger Agreement. As of the date
hereof, such Shareholder is not, and none of its properties is, subject to
any order, writ, judgment, injunction, decree, determination or award which
would prevent, delay or impair the consummation of the transactions
contemplated hereby.
(f) Such Shareholder is, and at the time the Shareholder Consent (as
defined in Section 2(a) below) is delivered to Parent (the "CONSENT TIME")
will be, the sole record and beneficial owner of and has, and at the Consent
Time such Shareholder will have, good and valid title to the Shares held by
such Shareholder, free and clear of any Liens, except for any Liens arising
hereunder. Such Shareholder has, and at the Consent Time will have, the
power to vote, dispose of and otherwise transfer such Shares without the
approval, consent or other action of any person.
(g) There are no options or rights to acquire, or understandings or
arrangements to which such Shareholder is a party relating to the Shares
held by such Shareholder, other than this Agreement and those described in
Section 3.12 of the Parent Disclosure Schedules to the Merger Agreement.
(h) The Shares indicated below such Shareholder's name on the signature
page hereof represent all of the shares of Parent Common Stock beneficially
owned (within the meaning of Rule 13d-3 under the Exchange Act) by such
Shareholder.
(i) Such Shareholder understands and acknowledges that the Company is
entering into the Merger Agreement in reliance on such Shareholder's
execution and delivery of this Agreement.
Section 2. AGREEMENT TO VOTE: PROXY. Each Shareholder agrees with, and
covenants to, the Company as follows:
(a) In accordance with the provisions of Section 251 of the DGCL and the
rules of the New York Stock Exchange, as promptly as practicable after the
date hereof, and in no event later than 11 business days hereafter, such
Shareholder shall deliver to Parent its written consent to authorize the
issuance of Parent Common Stock in the Merger as contemplated by the Merger
Agreement (the "SHAREHOLDER CONSENT").
(b) Such Shareholder shall not withdraw, amend or modify its Shareholder
Consent.
(c) At any meeting of shareholders of Parent or at any adjournment
thereof or in any other circumstances upon which their vote, consent or
other approval is sought, such Shareholder shall vote (or cause to be voted)
the Shares held by such Shareholder against any amendment of Parent's
certificate of incorporation or by-laws or any other proposal which
amendment or proposal would in any manner prevent or materially impede,
interfere with or delay the Merger, the Merger Agreement or any of the other
transactions contemplated by the Merger Agreement (including the issuance of
Parent Common Stock in the Merger).
Section 3. DISPOSITION OF SHARES. No Shareholder shall, without the prior
written consent of the Company, directly or indirectly, at any time prior to the
Consent Time, (i) grant or enter into any Lien,
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power of attorney or other agreement or arrangement with respect to the voting
of the Shares held by it, except by operation of the laws of inheritance,
(ii) sell, assign, transfer, encumber or otherwise dispose of, or enter into any
contract, option or other arrangement or understanding with respect to the
direct or indirect sale, assignment, transfer, encumbrance or other disposition
of, any of the Shares held by it or (iii) take any other action that would in
any way restrict, limit or interfere with performance of its obligations
hereunder or the transactions contemplated hereby, if, in each such case, as a
result of any such action, the Shareholders, collectively, shall no longer have
the ability to vote, or give consent or other approval with respect to, at least
fifty-one percent (51%) of the outstanding voting securities of Parent. Any
purported transfer in violation of the foregoing shall be null and void.
Section 4. GOVERNING LAW. This Agreement shall be governed by the laws of
the State of New York.
Section 5. NOTICES. Notices and other communications under this Agreement
shall be in writing and shall be deemed given as set forth in Section 8.2 of the
Merger Agreement, except that each Shareholder shall receive such notices at the
address set forth below such Shareholder's name on the signature page hereof.
Section 6. ENTIRE AGREEMENT; AMENDMENTS. This Agreement constitutes the
entire understanding of the parties with respect to the subject matter hereof.
There are no restrictions, agreements, promises, warranties, covenants or
undertakings with respect to the subject matter hereof other than those
expressly set forth herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to its subject matter and is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder. This Agreement may be amended only by a written instrument
duly executed by the Company and the Shareholders.
Section 7. ASSIGNMENT. Notwithstanding any other provision of this
Agreement, this Agreement shall not be assignable by any party hereto. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable against, as to each Shareholder, such Shareholder
and such Shareholder's beneficiaries and representatives, and the Company and
their successors and permitted assigns. Each Shareholder agrees that this
Agreement and the obligations of such Shareholder hereunder shall attach to such
Shareholder's Shares and shall be binding upon any person or entity to which
legal or beneficial ownership of such Shares shall pass.
Section 8. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity and enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or entity
or any circumstance, is invalid or unenforceable, a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and unenforceable, the intent and purpose of such invalid and
unenforceable provision and the remainder of this Agreement and the application
of such provision to other persons, entities or circumstances shall not be
affected by such invalidity or unenforceability, nor shall such invalidity and
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
Section 9. STOP TRANSFER ORDER. In furtherance of this Agreement,
concurrently herewith each Shareholder shall and hereby does authorize the
Company to notify Parent's transfer agent that there is a stop transfer order
with respect to all of the Shares subject to the terms of this Agreement (and
that this Agreement places limits on the voting and transfer of the Shares).
Each Shareholder further agrees to cause Parent not to register the transfer of
any certificate representing any of such Shareholder's Shares unless such
transfer is made in accordance with the terms of this Agreement.
Section 10. FURTHER ACTION. From time to time, at the request of the
Company and without further consideration, each Shareholder shall execute and
deliver to the Company such documents and take such action as the Company may
reasonably request in order to consummate the transactions contemplated hereby.
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Section 11. TERMINATION. This Agreement shall terminate and be of no
further force and effect upon the earlier to occur of the Effective Time and
upon the termination of the Merger Agreement pursuant to its terms.
Section 12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more of the counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
Section 13. SPECIFIC PERFORMANCE. The Shareholders and the Company
acknowledge that this Agreement and the Shares are unique and that no party will
have an adequate remedy at law if any other party breaches any covenant herein
or fails to perform its obligations hereunder. Accordingly, the Shareholders and
the Company agree that the others shall have the right, in addition to any other
rights which it may have, to specific performance and equitable injunctive
relief if any party shall fail or threaten to fail to perform any of its
obligations under this Agreement.
Section 14. EXPENSES. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such cost or expense.
Section 15. SHAREHOLDER CAPACITY. Each Shareholder signs solely in its
capacity as the record holder and beneficial owner of the Shares and nothing
herein shall limit or affect any actions taken or to be taken by any officer,
director or financial advisor of Parent or its subsidiaries in his, her or its
capacity as an officer, director or financial advisor of Parent.
Section 16. LIMITATION OF LIABILITY. Notwithstanding any other provision
in this Agreement, none of the managing members, members, general partners or
partners of any of the Shareholders, nor any of the future managing members,
members, general partners or partners or any of the Shareholders, shall have
personal liability for the performance of any of the obligations of the
Shareholders under this Agreement.
Section 17. NO WAIVER. No failure or delay by the Company to assert any of
its rights under this Agreement or otherwise shall constitute a waiver of such
rights. No single or partial exercise of any right, remedy, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, remedy, power or privilege. Any waiver shall be effective
only in the specific instance and for the specific purpose for which given and
shall not constitute a waiver to any subsequent or other exercise of any right,
remedy, power or privilege hereunder.
Section 18. SUBMISSION TO JURISDICTION. Each of the parties hereto
irrevocably agrees that any legal action or proceeding with respect to this
Agreement or for recognition and enforcement of any judgment in respect hereof
brought by any other party hereto or its successors or assigns may be brought
and determined in the courts of the State of New York, and each party hereto
hereby irrevocably submits with regard to any such action or proceeding for
itself and with respect to its property, generally and unconditionally, to the
nonexclusive jurisdiction of the aforesaid courts. Each of the parties hereto
hereby irrevocably waives, and agrees not to assert, by way of motion, as a
defense, counterclaim or otherwise, in any action or proceeding with respect to
this Agreement, any claim that it is not personally subject to the jurisdiction
of the above-named courts for any reason other than the failure to lawfully
serve process, that it or its property is exempt or immune from jurisdiction of
any such court or from any legal process commenced in such courts (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution of judgment, execution of judgment or otherwise), and to the fullest
extent permitted by applicable law, that the suit, action or proceeding in any
such court is brought in an inconvenient forum, the venue of such suit, action
or proceeding is improper and this Agreement, or the subject matter hereof, may
not be enforced in or by such courts.
Section 19. WAIVER OF JURY TRIAL. Each party hereto hereby irrevocably and
unconditionally waives any rights to a trial by jury in any legal action or
proceeding in relation to this Agreement and for any counterclaim therein.
Section 20. INTERPRETATION. The parties hereto agree that in interpreting
this Agreement there shall be no inferences against the drafting party.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed on its behalf by its representatives thereunto duly authorized, all
as of the day and year first above written.
ABOUT.COM, INC.
By: /s/ SCOTT KURNIT
--------------------------------------------
Name: Scott Kurnit
Title: Chairman and Chief Executive Officer
KKR 1996 FUND L.P.
By: KKR Associates 1996, L.P.
Its General Partner
By: KKR 1996 GP LLC
Its General Partner
By: /s/ PERRY GOLKIN
--------------------------------------------
Member
MA ASSOCIATES, L.P.
By: KKR Associates, L.P.
Its General Partner
By: /s/ PERRY GOLKIN
--------------------------------------------
A General Partner
FP ASSOCIATES, L.P.
By: KKR Associates, L.P.
Its General Partner
By: /s/ PERRY GOLKIN
--------------------------------------------
A General Partner
MAGAZINE ASSOCIATES, L.P.
By: KKR Associates, L.P.
Its General Partner
By: /s/ PERRY GOLKIN
--------------------------------------------
A General Partner
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PUBLISHING ASSOCIATES, L.P.
By: KKR Associates, L.P.
Its General Partner
By: /s/ PERRY GOLKIN
--------------------------------------------
A General Partner
CHANNEL ONE ASSOCIATES, L.P.
By: KKR Associates, L.P.
Its General Partner
By: /s/ PERRY GOLKIN
--------------------------------------------
A General Partner
KKR PARTNERS II, L.P.
By: KKR Associates, L.P.
Its General Partner
By: /s/ PERRY GOLKIN
--------------------------------------------
A General Partner
F-6
ANNEX G
SHAREHOLDER VOTING AGREEMENT
Shareholder Voting Agreement (this "AGREEMENT"), dated as of December 28,
2000, among About.com, Inc., a Delaware corporation (the "COMPANY"), and those
entities listed on the signature page hereof (each, a "SHAREHOLDER" and,
collectively, the "SHAREHOLDERS").
WHEREAS, PRIMEDIA Inc., a Delaware corporation ("PRIMEDIA"), Abracadabra
Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of
Primedia ("MERGER SUB"), and the Company have entered into an Agreement and Plan
of Merger (the "MERGER AGREEMENT") (capitalized terms used herein and not
defined shall have the meanings set forth in the Merger Agreement), dated as of
October 29, 2000; and
WHEREAS, each Shareholder beneficially owns the number of shares of common
stock, par value $0.001 per share, of the Company set forth below such
Shareholder's name on the signature page hereof (all such shares, together with
any other shares of capital stock of the Company such Shareholder acquires after
the date hereof, including, without limitation, as a result of a stock dividend,
stock split, recapitalization, combination, reclassification, exchange, or
change of such shares, or upon exercise or conversion of any securities, the
"SHARES").
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the parties hereby agree as follows
Section 1. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. Each
Shareholder severally represents and warrants to the Company as follows:
(a) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by such Shareholder, and no other proceedings on the part
of such Shareholder are necessary to authorize this Agreement or to
consummate the transactions so contemplated.
(b) This Agreement has been duly and validly executed and delivered by
such Shareholder and, assuming this Agreement constitutes a valid and
binding obligation of the Company, constitutes a legal, valid and binding
obligation of such Shareholder enforceable against such Shareholder in
accordance with its terms (except insofar as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally or by principles governing the
availability of equitable remedies).
(c) The execution, delivery and performance by such Shareholder of this
Agreement and the consummation of the transactions contemplated hereby do
not and will not (i) contravene or conflict with its organizational
documents; (ii) contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree
binding upon or applicable to such Shareholder or any of its properties; or
(iii) conflict with, or result in the breach or termination of or constitute
a default (with or without the giving of notice or the lapse of time or
both) under, or give rise to any right of termination, cancellation, or loss
of any benefit to which such Shareholder is entitled under any provision of
any agreement, contract, license or other instrument binding upon such
Shareholder or any of its properties, or allow the acceleration of the
performance of any obligation of such Shareholder under any indenture,
mortgage deed of trust, lease, license, contract, instrument or other
agreement to which such Shareholder is a party or by which such Shareholder,
its assets or properties is subject or bound, other than such
contraventions, conflicts, violations, breaches, defaults or other
occurrences that would not reasonably be expected to prevent, delay or
impair such Shareholder's ability to consummate the transactions
contemplated by this Agreement.
(d) Other than any filings required by the Exchange Act or the
rules and regulations promulgated thereunder, the execution, delivery and
performance by such Shareholder of this Agreement and the consummation of
the transactions contemplated hereby by such Shareholder
require no filings, notices, declarations, consents or other actions to be
made by such Shareholder with, nor are any approvals or other confirmations
or consents required to be obtained by such Shareholder from, any
governmental authority.
(e) As of the date hereof, there is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of such
Shareholder, threatened against such Shareholder or its properties before
any court or arbitrator or any governmental authority which challenges or
seeks to prevent, enjoin, alter or delay the Merger or any of the other
transactions contemplated hereby or by the Merger Agreement. As of the date
hereof, such Shareholder is not, and none of its properties is, subject to
any order, writ, judgment, injunction, decree, determination or award which
would prevent, delay or impair the consummation of the transactions
contemplated hereby.
(f) Such Shareholder is, and at the Effective Time will be, the sole
record and beneficial owner of and has, and at the Effective Time such
Shareholder will have, good and valid title to the Shares held by such
Shareholder, free and clear of any Liens, except for any Liens arising
hereunder. Such Shareholder has, and at the Effective Time will have, the
power to vote, dispose of and otherwise transfer such Shares without the
approval, consent or other action of any person.
(g) There are no options or rights to acquire, or understandings or
arrangements to which such Shareholder is a party relating to the Shares
held by such Shareholder, other than this Agreement.
(h) The Shares indicated below such Shareholder's name on the signature
page hereof represent all of the shares of Company Common Stock beneficially
owned (within the meaning of Rule 13d-3 under the Exchange Act) by such
Shareholder.
(i) Such Shareholder has received and read the preliminary Joint Proxy
Statement--Consent Solicitation--Prospectus of the Company and Primedia,
filed on December 7, 2000, relating to the Merger (the "PRELIMINARY PROXY").
Section 2. AGREEMENT TO VOTE; PROXY. Each Shareholder agrees with, and
covenants to, the Company as follows:
(a) At any meeting of shareholders of the Company called to vote upon
the Merger, the Merger Agreement or the other transactions contemplated by
the Merger Agreement or at which a vote, consent or other approval with
respect to the Merger, the Merger Agreement or the other transactions
contemplated by the Merger Agreement is sought, such Shareholder shall vote
(or cause to be voted) or shall consent, execute a consent or cause to be
executed a consent in respect of the Shares held by such Shareholder in
favor of the Merger, the execution and delivery by the Company of the Merger
Agreement and the approval of the terms thereof and each of the other
transactions contemplated by the Merger Agreement;
(b) At any meeting of shareholders of the Company or at any adjournment
thereof or in any other circumstances upon which their vote, consent or
other approval is sought, such Shareholder shall vote (or cause to be voted)
the Shares held by such Shareholder against (A) any Acquisition Proposal or
(B) any amendment of the Company's Certificate of Incorporation or By-laws
which amendment would in any manner prevent or materially impede, interfere
with or delay the Merger, the Merger Agreement or any of the other
transactions contemplated by the Merger Agreement; and
(c) Such Shareholder shall grant to, and appoint, Scott P. Kurnit and
Alan P. Blaustein or any other individual who is designated by the Company,
until the termination of this Agreement pursuant to Section 11, an
irrevocable proxy, coupled with an interest, and attorney-in-fact (with full
power of substitution), for and in the name, place and stead of such
Shareholder, with respect to the Shares held by such Shareholder, to vote
the Shares held by such Shareholder, or grant or
G-2
execute a consent or approval, in complete discretion of the Company, at any
meeting of shareholders of the Company or at any adjournment thereof or in
any other circumstances upon which their vote, consent or other approval is
sought in accordance with paragraph (a) of this Section 2. Such Shareholder
will take such further action and execute such other instruments as may be
necessary to effect the intent of this proxy, and hereby revokes any proxy
previously granted by it with respect to the Shares held by it. Such
Shareholder agrees that this Agreement, including the provisions of this
Section 2, will be recorded in the books and records of the Company.
Notwithstanding the foregoing, nothing in this Agreement shall limit or
affect such Shareholder's ability to vote in his, her or its sole discretion
on, and such Shareholder shall not grant or be deemed to grant any proxy or
power of attorney with respect to any matter other than those matters
specifically referred to in Section 2(a) above;
PROVIDED, HOWEVER, that such Shareholder shall not be obligated to so vote
and no such proxy shall be granted unless, prior to any such meeting, such
Shareholder shall have received the definitive Joint Proxy Statement - Consent
Solicitation - Prospectus of the Company and Primedia relating to the Merger and
the information contained in such definitive Joint Proxy Statement - Consent
Solicitation - Prospectus is not materially adversely different from the
information contained in the Preliminary Proxy.
Section 3. DISPOSITION OF SHARES. No Shareholder shall, without the prior
written consent of the Company, directly or indirectly, during the term of this
Agreement (i) grant or enter into any Lien, power of attorney or other agreement
or arrangement with respect to the voting of the Shares held by it, (ii) except
by operation of the laws of inheritance, sell, assign, transfer, encumber or
otherwise dispose of, or enter into any contract, option or other arrangement or
understanding with respect to the direct or indirect sale, assignment, transfer,
encumbrance or other disposition of any of the Shares held by it or (iii) take
any other action that would in any way restrict, limit or interfere with
performance of its obligations hereunder or the transactions contemplated
hereby. Each Shareholder hereby irrevocably waives any rights of appraisal or
rights to dissent from the Merger that such Shareholder may have. Any purported
transfer in violation of the foregoing shall be null and void.
Section 4. GOVERNING LAW. This Agreement shall be governed by the laws of
the State of New York.
Section 5. NOTICES. Notices and other communications under this Agreement
shall be in writing and shall be deemed given as set forth in Section 8.2 of the
Merger Agreement, except that each Shareholder shall receive such notices at the
address set forth below:
Abra LLC
c/o Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, New York 10019
Telecopy: (212) 750-0003
Attn: William Janetschek
Section 6. ENTIRE AGREEMENT; AMENDMENTS. This Agreement constitutes the
entire understanding of the parties with respect to the subject matter hereof.
There are no restrictions, agreements, promises, warranties, covenants or
undertakings with respect to the subject matter hereof other than those
expressly set forth herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to its subject matter and is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder. This Agreement may be amended only by a written instrument
duly executed by the Company and the Shareholders.
Section 7. ASSIGNMENT. Notwithstanding any other provision of this
Agreement, this Agreement shall not be assignable by any party hereto. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable against, (i) as to each Shareholder, such
G-3
Shareholder and such Shareholder's beneficiaries and representatives, and (ii)
the Company and their successors and permitted assigns. Each Shareholder agrees
that this Agreement and the obligations of such Shareholder hereunder shall
attach to such Shareholder's Shares and shall be binding upon any person or
entity to which legal or beneficial ownership of such Shares shall pass by the
laws of inheritance.
Section 8. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity and enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or entity
or any circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and unenforceable, the intent and purpose of such invalid and
unenforceable provision and (b) the remainder of this Agreement and the
application of such provision to other persons, entities or circumstances shall
not be affected by such invalidity or unenforceability, nor shall such
invalidity and unenforceability affect the validity or enforceability of such
provision, or the application thereof, in any other jurisdiction.
Section 9. STOP TRANSFER ORDER. In furtherance of this Agreement,
concurrently herewith each Shareholder shall and hereby does authorize the
Company to notify its transfer agent that there is a stop transfer order with
respect to all of the Shares subject to the terms of this Agreement (and that
this Agreement places limits on the voting and transfer of the Shares). Each
Shareholder further agrees to cause the Company not to register the transfer of
any certificate representing any of such Shareholder's Shares unless such
transfer is made in accordance with the terms of this Agreement.
Section 10. FURTHER ACTION. From time to time, at the request of the
Company and without further consideration, each Shareholder shall execute and
deliver to the Company such documents and take such action as the Company may
reasonably request in order to consummate the transactions contemplated hereby.
Section 11. TERMINATION. This Agreement shall terminate and be of no
further force and effect upon the earlier to occur of (a) the Effective Time and
(b) upon the termination of the Merger Agreement pursuant to its terms.
Section 12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more of the counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
Section 13. SPECIFIC PERFORMANCE. The Shareholders and the Company
acknowledge that this Agreement and the Shares are unique and that no party will
have an adequate remedy at law if any other party breaches any covenant herein
or fails to perform its obligations hereunder. Accordingly, the Shareholders and
the Company agree that the others shall have the right, in addition to any other
rights which it may have, to specific performance and equitable injunctive
relief if any party shall fail or threaten to fail to perform any of its
obligations under this Agreement.
Section 14. EXPENSES. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such cost or expense.
Section 15. NO WAIVER. No failure or delay by the Company to assert any of
its rights under this Agreement or otherwise shall constitute a waiver of such
rights. No single or partial exercise of any right, remedy, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, remedy, power or privilege. Any waiver shall be effective
only in the specific instance and for the specific purpose for which given and
shall not constitute a waiver to any subsequent or other exercise of any right,
remedy, power or privilege hereunder.
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Section 16. SUBMISSION TO JURISDICTION. Each of the parties hereto
irrevocably agrees that any legal action or proceeding with respect to this
Agreement or for recognition and enforcement of any judgment in respect hereof
brought by any other party hereto or its successors or assigns may be brought
and determined in the courts of the State of New York, and each party hereto
hereby irrevocably submits with regard to any such action or proceeding for
itself and with respect to its property, generally and unconditionally, to the
nonexclusive jurisdiction of the aforesaid courts. Each of the parties hereto
hereby irrevocably waives, and agrees not to assert, by way of motion, as a
defense, counterclaim or otherwise, in any action or proceeding with respect to
this Agreement, (a) any claim that it is not personally subject to the
jurisdiction of the above-named courts for any reason other than the failure to
lawfully serve process, (b) that it or its property is exempt or immune from
jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise),
and (c) to the fullest extent permitted by applicable law, that (i) the suit,
action or proceeding in any such court is brought in an inconvenient forum,
(ii) the venue of such suit, action or proceeding is improper and (iii) this
Agreement, or the subject matter hereof, may not be enforced in or by such
courts.
Section 17. WAIVER OF JURY TRIAL. Each party hereto hereby irrevocably and
unconditionally waives any rights to a trial by jury in any legal action or
proceeding in relation to this Agreement and for any counterclaim therein.
Section 18. INTERPRETATION. The parties hereto agree that in interpreting
this Agreement there shall be no inferences against the drafting party.
[The remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed on its behalf by its representatives thereunto duly authorized, all
as of the day and year first above written.
ABOUT.COM, INC.
By: /s/ SCOTT KURNIT
--------------------------------------------
Name: Scott Kurnit
Title: Chairman and CEO
ABRA LLC
By: KKR 1996 Fund, L.P.
Its Managing Member
By: KKR Associates 1996, L.P.
Its General Partner
By: KKR 1996 GP LLC
Its General Partner
By: /s/ MICHAEL TOKARZ
--------------------------------------------
Name: Michael Tokarz
Title: Member
Shares Beneficially Held: 2,236,641
G-6