Filed Pursuant to Rule 424(b)(3)
Registration No. 333-54540
PROSPECTUS
OFFER TO EXCHANGE SHARES OF PRIMEDIA INC.
COMMON STOCK FOR UP TO 3,764,000 SHARES OF
INTERNET GIFT REGISTRIES, INC.
COMMON STOCK AND UP TO 556,088 SHARES OF
INTERNET GIFT REGISTRIES, INC. SERIES B PREFERRED STOCK
PRIMEDIA INC.
---------------
We are offering to exchange shares of our common stock for up to 3,764,000
shares of Internet Gift Registries, Inc.'s common stock and up to 556,088 shares
of IGR's Series B voting preferred stock. The principal terms of the exchange
offer are:
- The holders of the IGR common stock and Series B preferred stock will
receive a number of shares of PRIMEDIA common stock equal to the exchange
ratio. The exchange ratio is determined by dividing $0.80, in the case of
the IGR common stock, and $8.00, in the case of the Series B preferred
stock, by the average closing price of the PRIMEDIA common stock on the
New York Stock Exchange for the thirty consecutive trading days ending
July 11, 2001;
- If the aggregate number of shares elected to be exchanged exceeds
3,764,000, in the case of the IGR common stock, or 556,088, in the case of
the Series B preferred stock, the number of shares you may be permitted to
exchange for PRIMEDIA common stock will be limited on a PRO-RATA basis
according to a proration formula, see "The Exchange Offer--Number of
Shares of Common Stock and Series B Preferred Stock to be Exchanged;
Proration;" and
- To participate in the exchange offer you must complete and mail the letter
of transmittal, together with the shares of IGR common stock or Series B
preferred stock being tendered, along with any other required documents
before 12:00 a.m., New York City time, on July 13, 2001, see "The Exchange
Offer--Procedures for Tendering."
Our common stock trades on the New York Stock Exchange under the symbol
"PRM."
INVESTMENT IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 9.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF OUR COMMON STOCK OFFERED BY THIS
PROSPECTUS OR HAS DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
June 7, 2001
ADDITIONAL INFORMATION
This prospectus incorporates important business and financial information
about PRIMEDIA from other documents that are not included in or delivered with
this 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 prospectus through the Securities and Exchange Commission website at
http://www.sec.gov or by requesting them in writing or by telephone from
PRIMEDIA at the following address:
PRIMEDIA Inc.
745 Fifth Avenue
New York, New York 10151
(212) 745-0100
Attention: Investor Relations
IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM PRIMEDIA, PLEASE DO SO BY
JULY 6, 2001 TO RECEIVE THEM BEFORE THE EXCHANGE OFFER EXPIRES.
TABLE OF CONTENTS
PAGE
--------
Questions and Answers about the Exchange Offer.............. 1
Summary..................................................... 3
The Company............................................... 3
The Exchange Offer........................................ 4
Risk Factors.............................................. 5
Market Prices and Dividends............................... 5
Selected Historical Consolidated Financial Data of
PRIMEDIA................................................ 6
Unaudited Per Share Data.................................. 8
Risk Factors................................................ 9
Risks Related to PRIMEDIA's Business...................... 9
Risks Related to PRIMEDIA's Common Stock.................. 15
Risks Related to the Failure to Exchange.................. 16
Cautionary Statement Concerning Forward-Looking
Information............................................... 17
Use of Proceeds............................................. 17
Business of IGR............................................. 18
The Exchange Offer.......................................... 19
Number of Shares of Common Stock and Series B Preferred
Stock to be Exchanged; Proration 19
What You Will Receive in the Exchange Offer............... 20
Terms of the Exchange Offer............................... 21
Expiration Date; Extensions; Amendments................... 22
Procedures for Tendering.................................. 23
Withdrawal of Tenders..................................... 24
Conditions of the Exchange Offer.......................... 24
Exchange Agent............................................ 25
Fees and Expenses......................................... 25
Consequences of Failure to Exchange....................... 25
Resales of the PRIMEDIA Common Stock...................... 26
Material United States Federal Income Tax Consequences of
the Exchange Offer...................................... 26
Investment in IGR........................................... 27
Series A Preferred Stock Purchase Agreement............... 27
Series E Preferred Stock Purchase Agreement............... 27
Restated IGR Certificate of Incorporation................. 28
IGR/PRIMEDIA Stockholders Agreement....................... 28
Advertising and Content License Agreement................. 29
Description of PRIMEDIA Capital Stock....................... 30
General................................................... 30
Description of PRIMEDIA Common Stock...................... 30
Description of Series D Exchangeable Preferred Stock...... 31
Description of Series F Exchangeable Preferred Stock...... 33
Description of Series H Exchangeable Preferred Stock...... 34
Comparison of Stockholder Rights............................ 36
Capitalization............................................ 36
i
PAGE
--------
Voting Rights............................................. 36
Number and Election of Directors.......................... 36
Vacancies on the Board of Directors and Removal of
Directors............................................... 37
Amendments to the Certificate of Incorporation............ 37
Amendments to By-Laws..................................... 37
Action by Written Consent................................. 37
Ability to Call Special Meetings.......................... 37
Notice of Stockholder Action.............................. 38
Limitation of Personal Liability of Directors and
Officers................................................ 38
Indemnification of Directors and Officers................. 39
Executives; Executive Compensation; Stock Ownership of
Directors, Executive Officers and Principal
Stockholders.............................................. 40
Legal Matters............................................... 44
Change in Independent Public Accountants.................... 44
Experts..................................................... 44
Where You Can Find More Information......................... 44
ii
QUESTIONS AND ANSWERS ABOUT THE EXCHANGE OFFER
Q: WHY IS PRIMEDIA PROPOSING THE EXCHANGE OFFER?
A: On October 24, 2000, PRIMEDIANET Inc., a subsidiary of PRIMEDIA entered into
a preferred stock purchase agreement for the acquisition of 39,151,000
shares of Series E preferred stock from IGR. The preferred stock purchase
agreement requires, PRIMEDIA to make this exchange offer.
Q: WHAT WILL I RECEIVE IN THE EXCHANGE OFFER?
A: Holders of IGR common stock and Series B preferred stock will receive a
number of shares of PRIMEDIA common stock determined pursuant to an exchange
ratio for each share of IGR common stock or Series B preferred stock they
own. PRIMEDIA will pay cash in lieu of fractional shares of PRIMEDIA common
stock.
IGR COMMON STOCK. IGR common stockholders will receive a number of shares
of PRIMEDIA common stock calculated by dividing $0.80 by the average closing
price of the PRIMEDIA common stock on the New York Stock Exchange for the
thirty consecutive trading days ending July 11, 2001. For example, if the 30
consecutive trading day measuring period had ended on May 23, 2001, the
PRIMEDIA common stock average closing price would have been $7.61.
Therefore, if a holder tendered 1,000 shares of IGR common stock and was not
prorated, the holder would have received 105 shares of PRIMEDIA common stock
and $0.95 in cash in exchange for the IGR shares.
IGR SERIES B PREFERRED STOCK. IGR Series B preferred stockholders will
receive a number of shares of PRIMEDIA common stock calculated by dividing
$8.00 by the average closing price of the PRIMEDIA common stock on the New
York Stock Exchange for the thirty consecutive trading days before the two
trading days before this exchange offer expires. For example, if the 30
consecutive trading day measuring period had ended on May 23, 2001, the
PRIMEDIA common stock average closing price would have been $7.61.
Therefore, if a holder tendered 1,000 shares of IGR Series B preferred stock
and was not prorated, the holder would have received 1,051 shares of
PRIMEDIA common stock and $1.89 in cash in exchange for the IGR shares.
If you wish to ascertain the exact amount of consideration to be received
prior to expiration of the exchange offer, you may call toll-free
1-800-507-9357.
Q: WILL I BE ABLE TO EXCHANGE ALL THE SHARES OF IGR SERIES B PREFERRED STOCK OR
COMMON STOCK I OWN?
A: Maybe. PRIMEDIA is offering to exchange its common stock for up to
3,764,000 shares of IGR common stock and up to 556,088 shares of IGR
Series B preferred stock. To the extent the aggregate number of shares
elected to be exchanged exceeds 3,764,000, in the case of the IGR common
stock, or 556,088, in the case of the Series B preferred stock, the number
of shares you may be able to exchange will be limited on a PRO-RATA basis
according to a proration formula contained in this prospectus. See "The
Exchange Offer--Number of Shares of Common Stock and Series B Preferred
Stock to be Exchanged; Proration" on page 18 of this prospectus.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE EXCHANGE OFFER TO ME?
A: The exchange will be a taxable transaction for holders of IGR common stock
and Series B preferred stock who elect to participate in the exchange offer.
Participating holders of IGR common stock and Series B preferred stock will
recognize gain or loss equal to the difference between the fair market value
of the PRIMEDIA common stock received in the exchange plus the amount of any
cash received instead of fractional shares and the tax basis of the IGR
common stock or Series B preferred stock exchanged. There will be no tax
consequences for holders of IGR common stock and Series B preferred stock
who do not elect to participate in the exchange offer.
1
See "The Exchange Offer--Material United States Federal Income Tax
Consequences of the Exchange Offer" on page 26 of this prospectus.
Q: WHEN DOES THE EXCHANGE OFFER EXPIRE?
A: The exchange offer will expire at 12:00 a.m., New York City time, on
July 13, 2001 unless the exchange offer is extended by PRIMEDIA.
Q: WHAT DO I NEED TO DO TO PARTICIPATE IN THE EXCHANGE OFFER?
A: You should mail or otherwise deliver the letter of transmittal, together
with the shares of IGR common stock or Series B preferred stock you wish to
exchange to the exchange agent at the address provided in this prospectus
prior to the date the exchange offer expires. See "The Exchange
Offer--Exchange Agent" on page 25 of this prospectus.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have any questions about the exchange offer or if you need additional
copies of this prospectus, you should contact:
PRIMEDIA Inc.
745 Fifth Avenue
New York, New York 10151
Telephone: (212) 745-0100
Attention: Chris Fraser
e-mail: cfraser@primedia.com
If you wish to ascertain the exact amount of consideration to be received
prior to expiration of the exchange offer, you may call toll-free
1-800-507-9357.
2
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION IN THIS PROSPECTUS AND MAY NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. YOU SHOULD CAREFULLY
READ THIS ENTIRE PROSPECTUS AND THE OTHER DOCUMENTS WE REFER YOU TO FOR A MORE
COMPLETE UNDERSTANDING OF THE EXCHANGE OFFER. IN ADDITION, WE INCORPORATE BY
REFERENCE IMPORTANT BUSINESS AND FINANCIAL INFORMATION ABOUT PRIMEDIA INTO THIS
PROSPECTUS. YOU MAY OBTAIN THE INFORMATION INCORPORATED BY REFERENCE INTO THIS
PROSPECTUS WITHOUT CHARGE BY FOLLOWING THE INSTRUCTIONS IN THE SECTION ENTITLED
"WHERE YOU CAN FIND MORE INFORMATION" THAT BEGINS ON PAGE 44 OF THIS PROSPECTUS.
THE COMPANY
PRIMEDIA INC.
745 Fifth Avenue
New York, New York 10151
(212) 745-0100
GENERAL. PRIMEDIA is the "new tradition in media" combining traditional and
new media. It is a targeted media company with leading positions in consumer and
business-to-business markets. Its properties utilize the full media arsenal to
deliver content via print (magazines and directories), video (digital broadband,
satellite and cable), live events (trade and consumer shows) and the Internet.
PRIMEDIA's products serve highly specialized niches and capitalize on the
growing trend toward targeted rather than mass information distribution.
PRIMEDIA believes that in 2000, PRIMEDIA sold the most ad pages of any magazine
publisher in the U.S. and sold the third most magazine copies at the newsstand
in the U.S.
Many of PRIMEDIA's products, such as those provided by PRIMEDIA's consumer
magazines, business-to-business magazines, CHANNEL ONE NEWS, the apartments and
homes guides and About's websites afford advertisers with an opportunity to
directly reach niche market audiences. In 2000, 51% of PRIMEDIA's total revenues
were from "lead generation" advertising, 14% were from brand awareness
advertising and 35% were from non-advertising sources. Lead generation
advertising is advertising focused on triggering a potential purchase decision
by the reader or viewer as opposed to general brand awareness advertising. In
2000, PRIMEDIA had over 87,000 advertising customers and a salesforce of over
1,600 to serve them.
In 2000, PRIMEDIA embarked on an initiative to integrate its operating
units. One aspect of the integration was to improve productivity through cost
reduction as PRIMEDIA entered into a strategic sourcing initiative to leverage
its purchasing power across all spending for certain manufacturing and
non-manufacturing commodities. Significant cost savings were achieved through
consolidating the procurement of goods and services such as paper and printing,
and centralizing support services such as accounting and payroll. During 2000,
the strategic sourcing initiative generated approximately $10.5 million in
savings.
PRIMEDIA has formed the PRIMEDIA Integrated Sales and Marketing Group to
sell integrated marketing packages across all PRIMEDIA's traditional and new
media vehicles. PRIMEDIA has also formed PRIMEDIA Internet Resource and
Technology Group to centralize and standardize its technology.
For the year ending December 31, 2000, PRIMEDIA's sales and net loss were
$1.7 billion and $347 million, respectively.
RECENT DEVELOPMENTS. On February 28, 2001, one of PRIMEDIA's wholly owned
subsidiaries merged with About.com, Inc. About.com common stockholders received
an aggregate of 45.0 million shares of PRIMEDIA's common stock, representing
approximately 21% of the outstanding shares of PRIMEDIA's common stock as of
March 31, 2001. About.com is a platform comprised of a network of more than 700
highly-targeted, topic-specific websites. Through the efforts of knowledgeable
human guides who manage the sites, the sites provide high-quality original
articles, moderated forums and chat
3
rooms and links to related websites. The About network has been one of the
fastest growing properties among the top 25 Internet properties ranked by MEDIA
METRIX since the launch of the About.com brand in May 1999. In March 2001, the
combined unique visitors to PRIMEDIA and About.com's web sites ranked fifth in
the United States according to Media Metrix, a leading Internet tracking firm.
PRIMEDIA believes that, through the merger with About.com:
- PRIMEDIA acquired a leading producer of original content on the Internet;
- PRIMEDIA can offer advertisers a complete marketing solution by reaching
highly targeted users through both traditional and new media platforms;
- PRIMEDIA can attract lead generation advertising to About.com's niche
content;
- PRIMEDIA has a marketing vehicle for reaching potential subscribers for
our other products with lower direct marketing costs; and
- PRIMEDIA has more quickly obtained a way of reaching users and advertisers
than if it had built a comparable network organically.
INTERNET GIFT REGISTRIES, INC.
200 Fillmore Street, Suite 400
Denver, Colorado 80206
(303) 329-3010
IGR is a Denver-based full-service online gift registry and retailing
company. IGR's weddingnetwork.com is one of the internet's most comprehensive
online wedding resources, offering creative tools, imaginative ideas and real
answers to help engaged couples plan unique wedding celebrations.
WeddingNetwork.com partners with a broad network of retailers to provide
traditional and unique online gift registry options. IGR is the official online
registry and content partner for Modern Bride magazine, Modern Bride
Connection's 16 regional publications and ModernBride.com.
For the twelve months ending December 31, 2000, IGR's sales and net loss
were $1.5 million and $14.6 million, respectively.
THE EXCHANGE OFFER
The following are the principal terms of the exchange offer:
- PRIMEDIA will offer to exchange shares of PRIMEDIA common stock for up to
3,764,000 shares of IGR common stock and up to 556,088 shares of IGR
Series B preferred stock;
- If the aggregate number of shares elected to be exchanged exceeds
3,764,000, in the case of the IGR common stock, or 556,088, in the case of
the Series B preferred stock, the number of shares you may be permitted to
exchange for PRIMEDIA common stock will be limited on a PRO-RATA basis
according to a proration formula, see "The Exchange Offer--Number of
Shares of Common Stock and Series B Preferred Stock to be Exchanged;
Proration;"
- The holders of the IGR common stock and Series B preferred stock will
receive a number of shares of PRIMEDIA common stock equal to the exchange
ratio. The exchange ratio is determined by dividing $0.80, in the case of
the IGR common stock, and $8.00, in the case of the Series B preferred
stock, by the average closing price of the PRIMEDIA common stock on the
New York Stock Exchange for the thirty consecutive trading days ending
July 11, 2001; and
- To participate in the exchange offer you must complete and mail the letter
of transmittal, together with the shares of IGR common stock or Series B
preferred stock being tendered, along with any other required documents to
the exchange agent before 12:00 a.m., New York City time, on July 13,
2001, see "The Exchange Offer--Procedures for Tendering."
4
RISK FACTORS
Prospective participants in the exchange offer should take into account the
specific considerations set forth under "Risk Factors" as well as the other
information in this prospectus. See "Risk Factors" beginning on page 9.
MARKET PRICES AND DIVIDENDS
PRIMEDIA's common stock trades on the New York Stock Exchange under the
symbol ``PRM". IGR's common stock has no established public trading market.
Neither PRIMEDIA nor IGR has ever declared or paid cash dividends on any of
their common stock and have no intention of doing so in the foreseeable future.
The table below shows the closing prices of the PRIMEDIA common stock at the
close of the regular trading session on October 24, 2000, the last trading day
before the public announcement of our investment in IGR's Series E preferred
stock, and June 4, 2001, the last trading day for which that information was
available before the filing of this prospectus.
DATE PRIMEDIA CLOSING PRICE
---- ----------------------
October 24, 2000............................................ $15.69
June 4, 2001................................................ $ 9.10
The following table sets forth the high and low sale prices for the PRIMEDIA
common stock. PRIMEDIA has not declared any dividends on its common stock. The
prices are as reported on the New York Stock Exchange, based on published
financial sources.
PRIMEDIA
COMMON STOCK
-------------------
CALENDAR QUARTERS HIGH LOW
----------------- -------- --------
(DOLLARS PER SHARE)
1998
First Quarter............................................. $ 14.88 $ 11.81
Second Quarter............................................ $ 15.00 $ 12.81
Third Quarter............................................. $ 13.81 $ 9.25
Fourth Quarter............................................ $ 11.94 $ 9.63
1999
First Quarter............................................. $ 14.00 $ 11.63
Second Quarter............................................ $ 17.75 $ 13.56
Third Quarter............................................. $ 17.19 $ 11.00
Fourth Quarter............................................ $ 16.50 $ 10.88
2000
First Quarter............................................. $ 34.88 $ 15.50
Second Quarter............................................ $ 32.00 $ 18.06
Third Quarter............................................. $ 22.31 $ 16.00
Fourth Quarter............................................ $ 17.00 $ 7.00
2001
First Quarter............................................. $ 12.94 $ 6.25
Second Quarter (through June 4, 2001)..................... $ 9.10 $ 4.87
BECAUSE THE EXCHANGE RATIO IS BASED ON THE AVERAGE CLOSING PRICE OF THE
PRIMEDIA COMMON STOCK FOR THE THIRTY CONSECUTIVE TRADING DAYS ENDING JULY 11,
2001, WE URGE HOLDERS OF IGR COMMON STOCK AND SERIES B PREFERRED STOCK TO
CALCULATE THE AVERAGE CLOSING PRICE FOR THE PRIMEDIA COMMON STOCK BY OBTAINING
CURRENT MARKET QUOTATIONS BEFORE MAKING ANY DECISION WITH RESPECT TO THE
EXCHANGE OFFER.
5
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF PRIMEDIA
The following financial information is to aid you in your analysis of the
financial aspects of the exchange offer. The following tables present 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, 2000 and from the unaudited
financial statements of PRIMEDIA contained in PRIMEDIA's Quarterly Report on
Form 10-Q for the period ended March 31, 2001. 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, 2000 and the Form 10-Q for the quarter ended March 31, 2001 which
have been incorporated by reference into this 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 three months ended
March 31 are not necessarily indicative of PRIMEDIA's results for any other
interim period or for the full year.
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------------- -------------------------------------------------------------------
2000 2001 1996 1997 1998 1999 2000
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
OPERATING DATA:
Sales, net...................... $ 404,450 $ 427,006 $ 1,374,449 $ 1,487,595 $ 1,573,573 $ 1,716,102 $ 1,690,952
Depreciation of property and
equipment..................... 11,288 14,816 38,233 37,334 42,214 47,653 52,920
Amortization of intangible
assets, excess of purchase
price over net assets acquired
and other..................... 34,384 42,174 152,469 146,831 176,755 176,361 128,355
Other (income) charges(1)....... 10,119 8,520 -- 138,640 (7,216) 62,208 41,570
Operating income (loss)(2)...... 352 (28,947) 85,901 (20,793) 118,157 54,332 33,834
Provision for the impairment of
securities(3)................. -- 3,248 -- -- -- -- 188,526
Interest expense................ 38,356 33,161 124,601 136,625 144,442 164,909 143,988
Income tax benefit
(expense)(4).................. -- -- 53,300 1,685 -- (6,500) (41,200)
Income (loss) before
extraordinary charge.......... (39,431) (85,808) 17,597 (157,439) (37,736) (120,113) (346,826)
Extraordinary
charge-extinguishment of
debt(5)....................... -- -- 9,553 15,401 -- -- --
Net income (loss)(2)............ (39,431) (85,808) 8,044 (172,840) (37,736) (120,113) (346,826)
Preferred stock dividends(6).... 13,266 13,674 43,526 65,073 63,285 53,062 53,063
Loss applicable to common
shareholders.................. (52,697) (99,482) (35,482) (237,913) (101,021) (173,175) (399,889)
Basic and diluted loss
applicable to common
shareholders per common
share(2)(7):
Loss before extraordinary
charge...................... $ (.35) $ (.54) $ (.20) $ (1.72) $ (.71) $ (1.19) $ (2.48)
=========== =========== =========== =========== =========== =========== ===========
Net loss...................... $ (.35) $ (.54) $ (.27) $ (1.84) $ (.71) $ (1.19) $ (2.48)
=========== =========== =========== =========== =========== =========== ===========
Basic and diluted common shares
outstanding................... 149,257,038 183,027,919 128,781,518 129,304,900 142,529,024 145,418,441 161,104,053
6
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------------- -------------------------------------------------------------------
2000 2001 1996 1997 1998 1999 2000
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
OTHER DATA:
EBITDA(8)....................... $ 56,143 $ 36,563 $ 276,603 $ 302,012 $ 329,910 $ 340,554 $ 256,679
Additions to property, equipment
and other, net................ 16,573 14,311 28,790 31,108 55,238 69,488 77,579
Net cash provided by (used in)
operating activities.......... (45,947) (101,830) 150,192 125,360 140,804 107,298 52,546
Net cash provided by (used in)
investing activities.......... (17,750) 75,346 (721,709) (185,725) (609,621) 186,081 (54,644)
Net cash provided by (used in)
financing activities.......... 66,726 14,929 580,946 46,688 470,377 (289,256) (2,873)
AT DECEMBER 31,
AT MARCH 31, -------------------------------------------------------------------
2001 1996 1997 1998 1999 2000
------------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
BALANCE SHEET DATA:
Cash and cash equivalents................... $ 12,135 $ 36,655 $ 22,978 $ 24,538 $ 28,661 $ 23,690
Working capital(9).......................... (271,079) (44,705) (146,245) (234,045) (200,458) (346,447)
Other intangible assets and excess of
purchase price over net assets acquired,
gross..................................... 3,392,854 2,649,805 2,508,650 3,171,598 3,024,955 2,854,492
Less: accumulated amortization............ 1,241,137 896,824 736,597 914,854 1,189,599 1,206,900
--------- ----------- ----------- ----------- ----------- -----------
Other intangible assets and excess of
purchase price over net assets acquired,
net....................................... 2,151,717 1,752,981 1,772,053 2,256,744 1,835,356 1,647,592
Total assets................................ 3,164,582 2,552,215 2,485,990 3,041,074 2,714,552 2,677,479
Long-term debt(10).......................... 1,529,976 1,577,469 1,682,224 1,956,997 1,732,896 1,503,188
Exchangeable preferred stock................ 561,732 442,729 470,280 557,841 559,689 561,324
Total shareholders' equity (deficiency)..... 285,854 81,557 (162,223) (83,703) (144,238) (236,026)
------------------------------
(1) Represents non-cash compensation of $2,560 and $14,792 for the three-months
ended March 31, 2001 and 2000, respectively, non-cash compensation and
non-cash non-recurring charges of $35,210 for the year ended December 31,
2000, a provision for severance, closures and integration costs of $6,487
and $6,319 for the three-months ended March 31, 2001 and 2000, respectively
and $20,798 and $22,000 for the years ended December 31, 2000 and 1999,
respectively, (gain) loss on the sales of businesses and other, net of
($527) and ($10,992) for the three-months ended March 31, 2001 and 2000,
respectively and ($14,438), ($235,580), ($7,216) and $138,640 for the years
ended December 31, 2000, 1999, 1998 and 1997, respectively, and a provision
for the impairment of long-lived assets of $275,788 for the year ended
December 31, 1999.
(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
and an equal decrease in net loss of approximately $2,900 ($.02 per share)
and $2,500 ($.02 per share) for the three-months ended March 31, 2001 and
2000, respectively and $12,500 ($.08 per share), $9,000 ($.06 per share) and
$12,450 ($.09 per share) for the years ended December 31, 2000, 1999 and
1998, respectively.
(3) Represents a provision for the impairment of various of the Company's
investments of approximately $3,200 for the three-months ended March 31,
2001 and a provision for the impairment of the Company's investment in CMGI,
Inc. of approximately $155,500, a provision for the impairment of the
Company's investment in Liberty Digital of approximately $21,900 and a
provision for the impairment of various PRIMEDIA Ventures' investments of
approximately $11,200 for the year ended December 31, 2000.
(4) During 2000, the Company increased its valuation allowance due to historical
operating losses and the impairment of securities, resulting in a provision
for income taxes of $41,200. 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. 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 December 31, 2000,
PRIMEDIA had aggregate net operating and capital loss carryforwards of
approximately $1,028,600 which will be available to reduce future taxable
income.
(5) Represents the write-off of unamortized deferred financing costs and the
premiums paid on the redemptions of PRIMEDIA's 10 5/8% Senior Notes.
(6) 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
7
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.
(7) 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 December 31, 2000 consolidated financial statements and
Note 10 of the notes to the March 31, 2001 unaudited condensed consolidated
financial statements incorporated by reference in this prospectus.
(8) Represents earnings before interest, taxes, depreciation, amortization and
other (income) and charges including non-cash compensation of $2,560 and
$14,792 for the three-months ended March 31, 2001 and 2000, respectively,
non-cash compensation and non-cash non-recurring charges of $35,210 for the
year ended December 31, 2000, a provision for severance, closures and
integration costs of $6,487 and $6,319 for the three-months ended March 31,
2001 and 2000, respectively and $20,798 and $22,000 for the years ended
December 31, 2000 and 1999, respectively, (gain) loss on the sales of
businesses and other, net of ($527) and ($10,992) for the three-months ended
March 31, 2001 and 2000, respectively and ($14,438), ($235,580), ($7,216)
and $138,640 for the years ended December 31, 2000, 1999, 1998 and 1997,
respectively, and a provision for the impairment of long-lived assets of
$275,788 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 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. Additionally, EBITDA is not
available for PRIMEDIA's discretionary use as there are legal requirements
to pay preferred stock dividends and repay debt, among other payments.
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, is not necessarily an accurate
measure of comparison between companies.
(9) 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.
(10) Excludes current maturities of long-term debt.
UNAUDITED PER SHARE DATA
The following table summarizes per share information for PRIMEDIA on a
historical basis. The following information should be read in conjunction with
the audited consolidated financial statements of PRIMEDIA and the selected
historical consolidated financial data.
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. You should read the information below in conjunction with the
financial statements and accompanying notes that are incorporated by reference
in this prospectus.
FOR THE FOR THE
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 2001 DECEMBER 31, 2000
------------------ ------------------
PRIMEDIA COMMON STOCK:
Loss per Share:
Basic and Diluted:
Historical..................................... $(.54 ) $(2.48)
Book Value Per Share at Period End
Historical....................................... $1.32 $(1.41)
8
RISK FACTORS
The exchange offer involves a high degree of risk. By exchanging your shares
in the exchange offer, you 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
prospectus, you should carefully consider the following risk factors in deciding
whether to participate in the exchange offer. In addition, if the exchange offer
is not completed, you may face additional risks which are specified below under
"Risks Related to the Failure to Exchange." Any of the following risks could
seriously harm PRIMEDIA's business and financial results and cause the value of
PRIMEDIA's securities to decline which, in turn, could cause you to lose all or
part of your investment.
RISKS RELATED TO PRIMEDIA'S BUSINESS
PRIMEDIA HAS SUBSTANTIAL INDEBTEDNESS AND OTHER MONETARY OBLIGATIONS 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 or otherwise. As of March 31, 2001,
PRIMEDIA had approximately $1644.9 million of outstanding indebtedness and
$561.7 million of outstanding preferred stock. A substantial portion of
PRIMEDIA's cash flow is dedicated to the payment of principal and interest on
indebtedness and to the payment of dividends on PRIMEDIA's preferred stock,
which reduces funds available for capital expenditures and business
opportunities and may limit PRIMEDIA's ability to respond to adverse
developments in its business or in the economy. For the year ended December 31,
2000, PRIMEDIA paid $117.7 million of principal and $141.9 million of interest
and for the three months ended March 31, 2001, PRIMEDIA paid $28.4 million of
interest. In addition, for the year ended December 31, 2000 and for the three
months ended March 31, 2001, PRIMEDIA made cash dividend payments of
$53.1 million and $13.3 million, respectively, on PRIMEDIA's outstanding
preferred stock.
At March 31, 2001, borrowings under PRIMEDIA's bank credit facilities were
approximately $957.5 million. 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
6.69% at March 31, 2001.
PRIMEDIA'S DEBT INSTRUMENTS LIMIT 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.
9
As of March 31, 2001, under PRIMEDIA's most restrictive debt covenants,
PRIMEDIA must maintain a minimum interest coverage ratio of 2.0 to 1 and a
minimum fixed charge coverage ratio of 1.05 to 1. PRIMEDIA's maximum allowable
debt leverage ratio is 5.5 to 1. The minimum interest coverage ratio and maximum
debt coverage ratio PRIMEDIA must maintain become more restrictive over time.
After December 31, 2001, PRIMEDIA must maintain a maximum leverage ratio of 5.0
to 1, and after December 31, 2002, PRIMEDIA must maintain a maximum leverage
ratio of 4.5 to 1. After December 31, 2001, PRIMEDIA must maintain a minimum
interest coverage ratio of 2.25 to 1, and after December 31, 2002, PRIMEDIA must
maintain a minimum interest coverage ratio of 2.5 to 1. For the year ended
December 31, 2000, PRIMEDIA's interest coverage ratio and fixed charge coverage
ratio were 2.3 to 1 and 1.5 to 1, respectively and for the last 12 months ended
March 31, 2001, PRIMEDIA's interest coverage ratio and fixed charge ratio were
2.39 to 1 and 1.79 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 $295.5 million and $348.6 million,
respectively, for the year ended December 31, 2000 and by $67.7 million and
$81.4 million, respectively for the three months ended March 31, 2001. Earnings
consist of loss before income taxes, fixed charges and equity in losses of
investees, and fixed charges consist of interest on all indebtedness,
amortization of deferred financing costs and that portion of rental expenses
that management believes to be representative of interest. Such earnings have
been reduced by net non-cash and non-recurring charges (including depreciation,
amortization, provision for severance, closures and integration costs, provision
for the impairment of securities, non-cash compensation, gain on the sale of
businesses and other, net, and non-cash interest expense on an acquisition
obligation and other current liabilities) of approximately $419.1 million and
$69.8 million for the year ended December 31, 2000 and the three months ended
March 31, 2001, respectively. Adjusted to eliminate these charges, earnings
would have exceeded fixed charges and fixed charges plus cash preferred stock
dividends, by approximately $123.7 million and $70.6 million, respectively, for
the year ended December 31, 2000. Adjusted to eliminate these charges, earnings
would have exceeded fixed charges by approximately $2.1 million; however,
earnings would have been inadequate to cover fixed charges plus cash preferred
stock dividends by $11.6 million, for the three months ended March 31, 2001.
PRIMEDIA cannot assure you that its cash flow will be sufficient in future
periods to permit it to make all of its required payments on its indebtedness
and preferred stock.
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
10
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.
KOHLBERG KRAVIS ROBERTS & CO. L.P., OR 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 March 31, 2001, approximately 60.8% of the shares of PRIMEDIA common
stock were held by investment partnerships, of which KKR Associates, L.P., a New
York limited partnership, or KKR GP 1996 LLC, a Delaware limited liability
company, each an affiliate of Kohlberg Kravis Roberts & Co. L.P., are the
general partners. KKR Associates and KKR GP 1996 have sole voting and investment
power with respect to these shares. Consequently, KKR Associates and KKR GP 1996
and their respective general partners and members, four of whom are also
directors of PRIMEDIA 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 GP 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 GP 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 increased in January 2001 and can be
expected to increase in the
11
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. Competition for these personnel
is intense. The loss of the services of any of PRIMEDIA's executive officers or
key employees may harm its business.
PRIMEDIA MAY NOT BE ABLE TO ACHIEVE THE EXPECTED RESULTS FROM THE MERGER WITH
ABOUT.COM OR ANY FUTURE ACQUISITIONS AND INVESTMENTS.
PRIMEDIA may not be able to integrate the business of About.com into its
existing businesses without encountering difficulties. In addition, PRIMEDIA may
make acquisitions and investments in the future. The integration of About.com
and other businesses PRIMEDIA may acquire in the future is and will be a
complex, time consuming and expensive process involving a number of issues,
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 a future acquisition
with rights that are superior to the rights of holders of PRIMEDIA's
currently outstanding securities; and
- the requirement to record potentially significant additional future
operating costs for the amortization of excess of purchase price over net
assets acquired and other intangible assets.
PRIMEDIA's future operating results will depend to a significant degree on
its ability to address these issues. In addition, PRIMEDIA has invested and may
invest in the future in some early-stage companies with limited operating
histories and limited or no revenues. PRIMEDIA may not be able to successfully
develop these young companies and, in some cases, may not own enough equity in
them to control their development.
GENERAL ECONOMIC TRENDS MAY REDUCE ITS ADVERTISING REVENUES.
PRIMEDIA's advertising revenues are subject to the risks arising from
adverse changes in domestic and global economic conditions. A decline in the
level of business activity of PRIMEDIA's advertisers could have an adverse
effect on its revenues and profit margins. Because of the recent economic
slowdown in the United States, many advertisers, particularly
business-to-business advertisers, are reducing advertising expenditures. The
impact of this slowdown on PRIMEDIA is difficult to predict, but it may result
in further reductions in purchases of advertising. If the current economic
slowdown continues or worsens, PRIMEDIA's results of operations may be adversely
affected.
12
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 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.
Any new law or regulation pertaining to the Internet or the application or
interpretation of existing laws could decrease the demand for PRIMEDIA's
Internet businesses, increase the cost of operating the business of About.com
and its other new media businesses 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. In addition, 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.
IN ORDER FOR ITS NEW MEDIA BUSINESSES TO SUCCEED, PRIMEDIA MUST RESPOND TO THE
RAPID CHANGES IN TECHNOLOGY.
The markets for Internet products and services are characterized by:
- rapidly changing technology;
- evolving industry standards;
- frequent new product and service introductions; 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.
13
THE SUCCESS OF PRIMEDIA'S NEW MEDIA BUSINESSES DEPENDS ON USE OF THE INTERNET BY
BUSINESSES AND INDIVIDUALS.
The success of PRIMEDIA's new media businesses depends on use of the
Internet for advertising, marketing, providing services and conducting business.
PRIMEDIA's new media businesses may suffer if commercial use of the Internet
fails to grow in the future. Commercial use of the Internet is currently at an
early stage of development and the future of the Internet is not clear. 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.
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. 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.
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 designed
to prevent security breaches and insurance programs obtained by PRIMEDIA to
address the potential losses 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.
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 traditional
businesses. The increased availability of information on the Internet subjects
its traditional business to additional competition, which may adversely affect
its future operating results. Its strategies for obtaining sustained revenue
14
growth and profitability in the market for new media products and services may
not 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 PRIMEDIA's products and services. Competition in
the market for Internet products and services may intensify in the future. In
addition, PRIMEDIA's current and potential competitors may have greater
financial, technical, operational and marketing resources. Competitive pressures
may also force prices for Internet goods and services down and those price
reductions may adversely affect PRIMEDIA's business.
PRIMEDIA MAY NOT BE ABLE TO PROTECT ITS INTELLECTUAL PROPERTY, AND IT MAY BE
LIABLE FOR INFRINGING THE INTELLECTUAL PROPERTY OF OTHERS.
Third parties may infringe or misappropriate PRIMEDIA's and subsidiaries'
patents, trademarks or other intellectual property, which could have a material
adverse effect on its business, results of operations or financial condition.
While PRIMEDIA and its subsidiaries enter into confidentiality agreements with
their material employees, guides, consultants and strategic partners, and
generally control access to and distribution of their proprietary information,
the steps they have taken to protect their intellectual property may not prevent
misappropriation. In addition, PRIMEDIA and its subsidiaries do not know whether
they will be able to defend their proprietary rights because the validity,
enforceability and scope of protection of proprietary rights in Internet-related
industries is still evolving.
Third parties may assert infringement claims against PRIMEDIA or its
subsidiaries. From time to time in the ordinary course of business, PRIMEDIA and
its subsidiaries have been, and they expect 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 PRIMEDIA and its subsidiaries to significant liability for
damages. In addition, even if PRIMEDIA and its subsidiaries prevail, litigation
could be time-consuming and expensive to defend and could result in the
diversion of PRIMEDIA's time and attention. Any claims from third parties may
also result in limitations on PRIMEDIA's and its subsidiaries' ability to use
the intellectual property subject to these claims unless PRIMEDIA is able to
enter into agreements with the third parties making these claims.
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;
- announcements of mergers, acquisitions, alliances and joint ventures by
PRIMEDIA;
- announcements of mergers and acquisitions and other actions by
competitors;
15
- 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.
144,488,261 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 and KKR 1996 GP LLC have 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 29,362,386 shares issuable upon the exercise of stock options
and approximately 68,635,948 shares of PRIMEDIA common stock outstanding as of
March 31, 2001 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 THE FAILURE TO EXCHANGE
CONSEQUENCES OF FAILURE TO TENDER
The shares of IGR common stock and Series B preferred stock which are not
exchanged for shares of PRIMEDIA common stock pursuant to the exchange offer
will remain restricted securities within the meaning of Rule 144 of the
Securities Act. Accordingly, these shares of IGR stock may be resold only
pursuant to an effective registration statement under the Securities Act or
pursuant to an applicable exemption from registration, as discussed in "The
Exchange Offer--Consequences of Failure to Exchange."
In addition, IGR is not a publicly traded company. As a result, there is no
public market for IGR's common stock or Series B preferred stock. We cannot
predict the extent to which there will ever be an active trading market in these
IGR securities or how liquid that market might become. Therefore, we cannot
assure you that you will be able to sell in the future any shares of IGR stock
not exchanged in this offer.
PRIMEDIA CAN MAKE NO REPRESENTATIONS ABOUT IGR'S FUTURE PROFITABILITY
If IGR's revenues do not increase substantially, IGR may never become
profitable. IGR has not generated enough revenues to exceed the substantial
amounts it has spent to create, launch, enhance and to grow its business. Even
if IGR does achieve profitability, it may not sustain or increase profitability
on a quarterly or annual basis in the future.
16
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This prospectus contains or incorporates by reference some forward-looking
statements within the meaning of federal securities laws concerning PRIMEDIA'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 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 results. Important factors that could cause PRIMEDIA's actual
results to differ from PRIMEDIA'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 represent management's best judgement at the
time they were made and are made as of the date of this prospectus or the
documents incorporated by reference in this prospectus. Other than as required
by law, PRIMEDIA assumes no obligation to update them.
USE OF PROCEEDS
There will be no cash proceeds to PRIMEDIA from the exchange offer.
17
BUSINESS OF IGR
IGR is a Denver-based full-service online gift registry and retailing
company. Major investors include Primedia Ventures, Commonwealth Associates,
Winfield Capital and The May Department Stores Company. IGR operates a flagship
site, www.weddingnetwork.com, which provides online wedding planning, content,
and tools, as well as gift registry services for both consumers and wedding-
related vendors. IGR's weddingnetwork.com is one of the internet's most
comprehensive online wedding resources, offering creative tools, imaginative
ideas and real answers to help engaged couples plan unique wedding celebrations.
Wedding Network is also the exclusive online partner for Modern Bride magazine,
Modern Bride Connection (a chain of 15 regional bridal magazines) and
www.modernbride.com. Through its relationship with Modern Bride, IGR hosts, and
has exclusive use of Modernbride.com's online content via contractual agreement.
In the last twelve months IGR has successfully marketed and developed a new
business: private label gift registry solutions. Today, it has a number of these
retail partner relationships either in place or soon to be under agreement. One
such example is with the May Company.
IGR's revenue goals stem from two distinct activities. First, IGR is focused
on monetizing the wedding process, helping engaged couples and their guests with
information and resources in connection with wedding-related, honeymoon and
post-wedding activities. Second, IGR is focused on helping vendors seek easier
and more effective ways to establish and maintain relationships with engaged
couples and their guests. IGR faces competition from various companies including
The Knot and The Wedding Channel.com. IGR believes that it competes with and
differentiates itself from these competitors on the basis of its private label
solution focus, its exclusive relationship with Modern Bride and the quality of
its management.
18
THE EXCHANGE OFFER
THIS SECTION OF THE PROSPECTUS DESCRIBES MATERIAL ASPECTS OF THE PROPOSED
EXCHANGE OFFER. WHILE WE BELIEVE THAT THE DESCRIPTION COVERS THE MATERIAL TERMS
OF THE EXCHANGE OFFER, THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT
IS IMPORTANT TO YOU. YOU SHOULD CAREFULLY READ THIS ENTIRE PROSPECTUS AND THE
OTHER DOCUMENTS WE REFER YOU TO FOR A MORE COMPLETE UNDERSTANDING OF THE
EXCHANGE OFFER. IN ADDITION, WE INCORPORATE IMPORTANT BUSINESS AND FINANCIAL
INFORMATION ABOUT PRIMEDIA INTO THIS PROSPECTUS BY REFERENCE. YOU MAY OBTAIN THE
INFORMATION INCORPORATED BY REFERENCE INTO THIS PROSPECTUS WITHOUT CHARGE BY
FOLLOWING THE INSTRUCTIONS IN THE SECTION ENTITLED "WHERE YOU CAN FIND MORE
INFORMATION" THAT BEGINS ON PAGE 44 OF THIS PROSPECTUS.
NUMBER OF SHARES OF COMMON STOCK AND SERIES B PREFERRED STOCK TO BE EXCHANGED;
PRORATION
In connection with PRIMEDIA's investment in the Series E preferred stock of
IGR, PRIMEDIA agreed to make the exchange offer. PRIMEDIA is offering to
exchange shares of its common stock for up to 3,764,000 shares of IGR common
stock and up to 556,088 shares of IGR Series B preferred stock. As of
December 31, 2000, 8,366,698 shares of IGR common stock and 1,235,791 shares of
Series B preferred stock were outstanding. There were approximately 104 holders
of IGR common stock as of December 31, 2000. PRIMEDIA has fixed the close of
business on May 16, 2001 as the record date for the exchange offer for purposes
of determining the persons to whom this prospectus and the letter of transmittal
will be mailed initially. Only a registered holder of the IGR common stock or
Series B preferred stock (or the holder's legal representative or
attorney-in-fact) as reflected on IGR's records may participate in the exchange
offer. PRIMEDIA will not tender any shares of IGR common stock or Series B
preferred stock it owns in the exchange offer. As of the date of this
prospectus, PRIMEDIA does not own any shares of IGR common stock and owns 30,000
shares of Series B preferred stock. However, PRIMEDIA has the right to acquire
24,016,134 shares of IGR common stock upon conversion of shares of IGR preferred
stock, including the Series B preferred stock, and upon the exercise of warrants
to purchase IGR common stock. See "Executives; Executive Compensation; Stock
Ownership of Directors, Executive Officers And Principal Stockholders" on page
39 of this prospectus.
If the aggregate number of shares elected to be exchanged exceeds 3,764,000,
in the case of the IGR common stock, or 556,088, in the case of the Series B
preferred stock, the number of shares you will be permitted to exchange for
PRIMEDIA common stock will be limited on a PRO-RATA basis according to the
proration formulas below:
- IGR COMMON STOCK: Multiply the total number of shares of IGR common stock
you have elected to exchange by a proration factor determined by dividing
3,764,000 by the total number of shares of common stock elected to be
exchanged in the exchange offer. For example, if you elected to exchange
100,000 shares of IGR common stock and the total number of shares of IGR
common stock elected to be exchanged by your fellow stockholders is
5,000,000 shares, you would only be allowed to exchange 75,280 shares of
common stock in the exchange offer.
- IGR SERIES B PREFERRED STOCK: Multiply the total number of shares of IGR
Series B preferred stock you have elected to exchange by a proration
factor determined by dividing 556,088 by the total number of shares of
Series B preferred stock elected to be exchanged in the exchange offer.
For example, if you elected to exchange 100,000 shares of IGR Series B
preferred stock and the total number of shares of IGR Series B preferred
stock elected to be exchanged by your fellow stockholders is 800,000
shares, you would only be allowed to exchange 69,511 shares of Series B
preferred stock in the exchange offer.
19
WHAT YOU WILL RECEIVE IN THE EXCHANGE OFFER
In the exchange offer, holders of IGR common stock and Series B preferred
stock will receive a number of shares of PRIMEDIA common stock determined
pursuant to an exchange ratio for each share of IGR stock they own.
- IGR COMMON STOCK: If you hold shares of IGR common stock, the exchange
ratio will be calculated by dividing $0.80 by the average closing price of
the PRIMEDIA common stock on the New York Stock Exchange for the thirty
consecutive trading days ending July 11, 2001. For example, if the 30
consecutive trading day measuring period had ended on May 23, 2001, the
PRIMEDIA common stock average closing price would have been $7.61.
Therefore, if you tendered 1,000 shares of IGR common stock and were not
prorated, you would have received 105 shares of PRIMEDIA common stock and
$0.95 in cash in exchange for the IGR shares.
- IGR SERIES B PREFERRED Stock: If you hold shares of IGR Series B preferred
stock, the exchange ratio will be calculated by dividing $8.00 by the
average closing price of the PRIMEDIA common stock on the New York Stock
Exchange for the thirty consecutive trading days ending July 11, 2001. For
example, if the 30 consecutive trading day measuring period had ended on
May 23, 2001, the PRIMEDIA common stock average closing price would have
been $7.61. Therefore, if you tendered 1,000 shares of IGR Series B
preferred stock and were not prorated, you would have received
1,051 shares of PRIMEDIA common stock and $1.89 in cash.
PRIMEDIA will not issue fractional shares of PRIMEDIA common stock. You will
be entitled to receive cash instead of fractional shares in an amount equal to
the product of any fractional share amount and the average closing price of the
PRIMEDIA common stock as calculated above.
The tables below show a range of assumed average closing prices of PRIMEDIA
common stock along with entries showing the corresponding exchange ratios, the
number of shares of PRIMEDIA common stock you would receive if you tendered
1,000 shares of IGR common stock or IGR Series B Preferred Stock, as the case
may be, and you were not prorated and the value of the shares of PRIMEDIA common
stock that would be issued in exchange for one share of IGR common stock or one
share of IGR Series B preferred stock, based on the assumed average trading
prices presented in the first column of the tables.
BECAUSE THE CALCULATION OF THE EXCHANGE RATIO DEPENDS ON THE ACTUAL AVERAGE
CLOSING PRICE FOR THE PRIMEDIA COMMON STOCK ON THE NEW YORK STOCK EXCHANGE FOR
THE THIRTY CONSECUTIVE TRADING DAYS ENDING JULY 11, 2001, THE ACTUAL NUMBER OF
SHARES OF PRIMEDIA COMMON STOCK THAT YOU WILL RECEIVE MAY BE DIFFERENT FROM THE
EXAMPLES LISTED IN THE TABLE BELOW AND IN THIS DOCUMENT. IN ADDITION, BECAUSE
THE EXCHANGE RATIO IS CALCULATED USING AN AVERAGE PRICE INSTEAD OF THE PRICE AT
THE TIME OF THE RECEIPT OF THE SHARES, THE ACTUAL VALUE OF THE PRIMEDIA COMMON
STOCK RECEIVED FOR A SHARE OF IGR COMMON STOCK OR SERIES B PREFERRED STOCK ARE
ILLUSTRATIVE ONLY AND DO NOT REPRESENT THE ACTUAL AMOUNT PER SHARE OF PRIMEDIA'S
COMMON STOCK THAT MIGHT BE REALIZED BY AN IGR STOCKHOLDER ON OR AFTER THE
CONSUMMATION OF THE EXCHANGE OFFER. WE URGE HOLDERS OF IGR COMMON STOCK AND
SERIES B PREFERRED STOCK TO CALCULATE THE AVERAGE CLOSING PRICE FOR PRIMEDIA
COMMON STOCK BY OBTAINING CURRENT MARKET QUOTATIONS BEFORE MAKING ANY DECISION
WITH RESPECT TO THE EXCHANGE OFFER.
20
TABLE OF ILLUSTRATIVE VALUES
FOR IGR COMMON STOCK
NUMBER OF SHARES OF ILLUSTRATIVE VALUE PER SHARE OF
ASSUMED PRIMEDIA COMMON STOCK YOU WOULD PRIMEDIA
AVERAGE CLOSING RECEIVE IF YOU TENDERED 1,000 SHARES COMMON STOCK YOU WILL
PRICE OF PRIMEDIA EXCHANGE OF IGR COMMON STOCK AND YOU WERE RECEIVE PER SHARE OF IGR
COMMON STOCK RATIO NOT PRORATED COMMON STOCK
----------------- -------- ------------------------------------- -------------------------------
$ 7.00 .114 114 $.80
7.50 .106 106 .80
8.00 .100 100 .80
8.50 .094 94 .80
9.00 .088 88 .80
9.50 .084 84 .80
10.00 .080 80 .80
10.50 .076 76 .80
11.00 .072 72 .80
11.50 .069 69 .80
12.00 .066 66 .80
12.50 .064 64 .80
13.00 .061 61 .80
TABLE OF ILLUSTRATIVE VALUES
FOR IGR SERIES B PREFERRED STOCK
NUMBER OF SHARES OF ILLUSTRATIVE VALUE PER SHARE OF
ASSUMED PRIMEDIA COMMON STOCK YOU WOULD PRIMEDIA
AVERAGE CLOSING RECEIVE IF YOU TENDERED 1,000 SHARES COMMON STOCK YOU WILL
PRICE OF PRIMEDIA EXCHANGE OF IGR SERIES B PREFERRED STOCK AND RECEIVE PER SHARE OF IGR
COMMON STOCK RATIO YOU WERE NOT PRORATED SERIES B PREFERRED STOCK
----------------- -------- -------------------------------------- -------------------------------
$ 7.00 1.142 1,142 $8.00
7.50 1.066 1,066 8.00
8.00 1.000 1,000 8.00
8.50 .941 941 8.00
9.00 .888 888 8.00
9.50 .842 842 8.00
10.00 .800 800 8.00
10.50 .761 761 8.00
11.00 .727 727 8.00
11.50 .695 695 8.00
12.00 .666 666 8.00
12.50 .640 640 8.00
13.00 .615 615 8.00
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, PRIMEDIA will accept any and all shares of IGR
common stock or Series B preferred stock validly tendered and not withdrawn
prior to the expiration date. PRIMEDIA will issue a number of shares of its
common stock, as determined by the exchange ratio, for each share of IGR common
stock or Series B preferred stock accepted in the exchange offer. Holders may
tender some or all of their shares of IGR common stock or Series B preferred
stock pursuant to the exchange offer.
21
PRIMEDIA intends to conduct the exchange offer in accordance with the applicable
requirements of the Securities Exchange Act of 1934 and the rules and
regulations of the SEC thereunder.
PRIMEDIA will be deemed to have accepted validly tendered shares of IGR
common stock or Series B preferred stock when PRIMEDIA has given oral or written
notice of acceptance to the exchange agent. The exchange agent will act as agent
for the tendering holders of the IGR common stock or Series B preferred stock
for the purposes of receiving the PRIMEDIA common stock from PRIMEDIA.
If any tendered shares of IGR common stock or Series B preferred stock are
not accepted for exchange because of an invalid tender, proration or the
occurrence of certain other events set forth in this prospectus, the letter of
transmittal or otherwise, certificates for those unaccepted shares of IGR common
stock or Series B preferred stock will be returned to the tendering holder as
promptly as practicable after the expiration date.
Holders who tender shares of IGR common stock or Series B preferred stock in
the exchange offer will be required to pay any applicable transfer taxes with
respect to the exchange of shares of IGR common stock or Series B preferred
stock pursuant to the exchange offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The expiration date will be 12:00 a.m., New York City time, on July 13, 2001
unless PRIMEDIA, in its sole discretion extends the exchange offer, in which
case the expiration date will be 12:00 a.m., New York City time, on the last day
of the last extension.
In order to extend the exchange offer, PRIMEDIA will notify the exchange
agent of any extension by oral or written notice and will make a public
announcement, each before 9:00 a.m., New York City time, on the next business
day after the previously scheduled expiration date.
PRIMEDIA reserves the right:
- to delay accepting any shares of IGR common stock or Series B preferred
stock;
- to extend the exchange offer;
- if any of the conditions set forth below under "--Conditions of the
Exchange Offer" have not been satisfied, to terminate the exchange offer;
or
- to amend the terms of the exchange offer in any manner.
PRIMEDIA may delay, extend, terminate or change the exchange offer by giving
notice to the exchange agent. PRIMEDIA will publicly announce any delay,
termination, extension or change in the exchange offer. If PRIMEDIA materially
changes the exchange offer, PRIMEDIA will promptly disclose the changes by means
of a prospectus supplement that will be sent to the registered holders of IGR
common stock and Series B preferred stock. In the case of any material changes
to the exchange offer, PRIMEDIA will extend the exchange offer, if the exchange
offer would have otherwise expired during five to ten business days after the
change, for a period of five to ten business days, depending upon the
significance of the changes and the manner by which the registered holders were
informed of the change.
Without limiting the manner in which PRIMEDIA may choose to make a public
announcement of any delay, extension, termination or change of the exchange
offer, PRIMEDIA will not have an obligation to publish, advertise, or otherwise
communicate any public announcement, other than by making a timely release to
the DOW Jones New Service.
22
PROCEDURES FOR TENDERING
Only a registered holder of shares of IGR common stock or Series B preferred
stock may tender shares in the exchange offer. To tender in the exchange offer a
holder must complete, sign and date the letter of transmittal, or a facsimile,
have the signatures guaranteed (if required by the letter of transmittal) and
mail or otherwise deliver the letter of transmittal or the facsimile, together
with the shares of IGR common stock or Series B preferred stock, as applicable,
and any other required documents, to the exchange agent at the address set forth
below under "--Exchange Agent" for receipt before the expiration date.
The tender by a holder will constitute an agreement between the holder and
PRIMEDIA in accordance with the terms and subject to the conditions set forth in
this prospectus and in the letter of transmittal.
EACH HOLDER MAY ELECT THE METHOD OF DELIVERY OF THE SHARES OF IGR COMMON
STOCK OR SERIES B PREFERRED STOCK, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT, BUT THE HOLDER WILL BEAR THE RISK THAT
THESE ITEMS ARE NOT RECEIVED. INSTEAD OF DELIVERY BY MAIL, WE RECOMMEND THAT
HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, YOU SHOULD
ALLOW SUFFICIENT TIME TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR SHARES OF IGR COMMON STOCK OR
SERIES B PREFERRED STOCK SHOULD BE SENT TO PRIMEDIA.
If a person other than the registered holder of any shares of IGR common
stock or Series B preferred stock signs the letter of transmittal, the shares of
IGR common stock or Series B preferred stock, as applicable, must be endorsed or
accompanied by a properly completed stock power, signed by the registered holder
as that registered holder's name appears on the shares of IGR common stock or
Series B preferred stock, as applicable.
If any trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity sign the letter of transmittal or any shares of IGR common stock or
Series B preferred stock or stock powers, the fiduciary or representative should
indicate that fact when signing, and evidence satisfactory to PRIMEDIA of their
authority to act must be submitted with the letter of transmittal.
PRIMEDIA will determine in its sole discretion all questions as to the
validity, form, eligibility (including time of receipt), acceptance and
withdrawal of tendered shares of IGR common stock or Series B preferred stock,
which determination will be final and binding. PRIMEDIA reserves the absolute
right to reject any and all shares of IGR common stock or Series B preferred
stock not properly tendered or any shares of IGR common stock or Series B
preferred stock PRIMEDIA's acceptance of which would, in the opinion of counsel
for PRIMEDIA, be unlawful. PRIMEDIA also reserves the right to waive any
defects, irregularities or conditions of tender as to particular shares of IGR
common stock or Series B preferred stock. PRIMEDIA's interpretation of the terms
and conditions of the exchange offer (including the instructions in the letter
of transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of the shares of IGR common
stock or Series B preferred stock must be cured within the time PRIMEDIA
determines. Although PRIMEDIA intends to notify holders of defects or
irregularities with respect to tenders of the shares of IGR common stock or
Series B preferred stock, neither PRIMEDIA, the exchange agent nor any other
person will be liable for failure to give such notification. Tenders of the
shares of IGR common stock or Series B preferred stock by IGR stockholders will
not be deemed to have been made until any defects regarding the IGR common stock
or Series B preferred stock tendered have been cured or waived. If the exchange
agent receives any shares of IGR common stock or Series B preferred stock that
are not validly tendered, the exchange agent will return those shares to the
tendering holders, unless otherwise provided in the letter of transmittal, as
soon as practicable following the expiration date.
23
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus or the letter of
transmittal, tenders of the shares of IGR common stock or Series B preferred
stock may be withdrawn at any time before the expiration date or, if tendered
shares have not yet been accepted for exchange, after the expiration of forty
business days from the commencement of the exchange offer.
To withdraw a tender of shares of IGR common stock or Series B preferred
stock in the exchange offer, the exchange agent must receive at its address set
forth in this prospectus before the expiration date a written or facsimile
transmission notice of withdrawal. Any notice of withdrawal must:
- specify the name of the person having deposited the shares of IGR common
stock or Series B preferred stock to be withdrawn;
- identify the shares of IGR common stock or Series B preferred stock to be
withdrawn (including the certificate number or numbers and number of
shares); and
- be signed by the holder in the same manner as the original signature on
the letter of transmittal by which the shares of IGR common stock or
Series B preferred stock were tendered.
PRIMEDIA will determine in its sole discretion all questions as to the
validity, form and eligibility (including time of receipt) of such notice, which
determination will be final and binding on all parties. Any shares of IGR common
stock or Series B preferred stock withdrawn will be deemed not to have been
validly tendered for purposes of the exchange offer and PRIMEDIA will not issue
shares of common stock with respect to the withdrawn shares unless the withdrawn
shares are validly tendered. Properly withdrawn shares of IGR common stock or
Series B preferred stock may be tendered by following one of the procedures
described above under "--Procedures for Tendering" at any time before the
expiration date.
Any shares of IGR common stock or Series B preferred stock which have been
tendered but which are not accepted for exchange due to rejection of tender,
termination of the exchange offer, proration or which have been validly
withdrawn will be returned as soon as practicable to the holder without cost to
such holder.
CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other term of the exchange offer, PRIMEDIA is not
required to accept for exchange, or exchange shares of PRIMEDIA common stock
for, any shares of IGR common stock or Series B preferred stock, and may
terminate the exchange offer before the acceptance of any shares of IGR common
stock or Series B preferred stock, if:
- any action or proceeding is instituted or threatened in any court or by or
before any governmental agency with respect to the exchange offer which,
in the sole judgment of PRIMEDIA, might materially impair the ability of
PRIMEDIA to proceed with the exchange offer; or
- any law, statute, rule or regulation is proposed, adopted or enacted,
which, in the sole judgment of PRIMEDIA might materially impair the
ability of PRIMEDIA, to proceed with the exchange offer.
If PRIMEDIA determines in its reasonable discretion that any of the
conditions are not satisfied prior to the expiration date of the exchange offer,
PRIMEDIA may:
- terminate the exchange offer before the acceptance of any shares of IGR
common stock or Series B preferred stock, refuse to accept any shares of
IGR common stock or Series B preferred stock and return all tendered
shares of IGR common stock or Series B preferred stock, as applicable, to
the tendering holders;
24
- extend the exchange offer and retain all shares of IGR common stock or
Series B preferred stock tendered prior to the expiration date, subject,
however, to the rights of holders to withdraw their previously tendered
shares of IGR common stock or Series B preferred stock, as applicable, see
"--Withdrawal of Tenders;" or
- waive the unsatisfied conditions with respect to the exchange offer and
accept all validly tendered shares of IGR common stock or Series B
preferred stock which have not been withdrawn.
All conditions, other than those involving receipt of necessary government
approvals, will be satisfied or waived on or before expiration of the offer. If
any determination or waiver constitutes a material change to the exchange offer,
PRIMEDIA will promptly disclose the determination or waiver by means of a
prospectus supplement that will be distributed to the registered holders, and
PRIMEDIA will extend the exchange offer for a period of five to ten business
days, depending upon the significance of the waiver and the manner of disclosure
to the registered holders, if the exchange offer would otherwise have expired
during that five to ten business day period.
EXCHANGE AGENT
The Bank of New York has been appointed as exchange agent for the exchange
offer. Questions and requests for assistance, request for additional copies of
this prospectus or of the letter of transmittal should be directed to the
exchange agent addressed as follows:
BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
Tender & Exchange Department (For Eligible Institutions Tender & Exchange Department
Only)
P.O. Box 11248 (212) 815-6213 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
CONFIRM FACSIMILE BY TELEPHONE:
(212) 815-6173
FEES AND EXPENSES
PRIMEDIA will bear the expenses of soliciting tenders. The principal
solicitation is being made by mail; however, additional solicitation may be made
by telecopy, telephone or in person by officers and regular employees of
PRIMEDIA and its affiliates.
PRIMEDIA has not retained any dealer-manager in connection the exchange
offer and will not make any payments to brokers, dealers or others soliciting
acceptance of the exchange offer. PRIMEDIA, however, will pay the exchange agent
reasonable and customary fees for its services and will reimburse it for
reasonable out-of-pocket expenses in connection with the exchange offer.
The holders of IGR common stock or Series B preferred stock, as applicable,
will pay all transfer taxes, if any, applicable to the exchange of the IGR
common stock or Series B preferred stock pursuant to the exchange offer. If
satisfactory evidence of payment or exemption from these taxes is not submitted
with the letter of transmittal, the amount of the transfer taxes will be
directly billed to the tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
The shares of IGR common stock or Series B preferred stock which are not
exchanged for shares of PRIMEDIA common stock pursuant to the exchange offer
will remain restricted securities of IGR. Accordingly, shares of IGR common
stock or Series B preferred stock that are not exchanged may be
25
resold only pursuant to an effective registration statement under the Securities
Act or an available exemption from registration, if any. There is no public
market for the shares of IGR common stock or Series B preferred stock and we
cannot assure you that any public market for your shares will exist in the
future. Therefore, if you do not elect to exchange your shares in the exchange
offer, your liquidity options will be limited.
Any transfer must be in accordance with any applicable securities laws of
any state of the United States and subject to certain requirements of the
transfer agent and registrar being met.
RESALES OF THE PRIMEDIA COMMON STOCK
The shares of PRIMEDIA common stock received in exchange for your shares of
IGR common stock or Series B preferred stock will be freely tradeable, subject
to the following restrictions:
- holders may only sell 10% of the total number of shares of PRIMEDIA common
stock received in the exchange offer each week commencing the first week
after the closing date of the exchange offer, with all the shares of the
PRIMEDIA common stock becoming freely tradeable 10 weeks after the closing
date of the exchange offer; and
- the five largest holders of IGR common stock must provide PRIMEDIA with
24 hours written notice prior to any sale, transfer or disposition of
shares of PRIMEDIA common stock received in the exchange offer with all
the shares of PRIMEDIA common stock becoming freely tradeable 10 weeks
after the closing date of the exchange offer.
By completing and signing the letter of transmittal, all holders are
electing to participate in the exchange offer on the terms and conditions
contained in the letter of transmittal and this prospectus and agreeing to be
bound by these transfer restrictions.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFER
The following summary describes the material United States federal income
tax consequences of the exchange offer to holders of IGR common stock and
Series B preferred stock that are United States persons. This discussion is
necessarily general and does not deal with special situations. PERSONS
CONSIDERING PARTICIPATING IN THE EXCHANGE OFFER SHOULD CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES IN LIGHT
OF THEIR PARTICULAR SITUATIONS, AS WELL AS ANY CONSEQUENCES ARISING UNDER THE
LAWS OF ANY OTHER TAXING JURISDICTION.
The exchange will be a taxable transaction for holders of IGR common stock
and Series B preferred stock who elect to participate in the exchange offer.
Participating holders of IGR common stock and Series B preferred stock will
recognize gain or loss equal to the difference between the fair market value of
the PRIMEDIA common stock received in the exchange plus the amount of any cash
received instead of fractional shares and the tax basis of the IGR common stock
or Series B preferred stock exchanged therefor. Such gain or loss will generally
be a capital gain or loss for holders that hold their shares of IGR common stock
or Series B preferred stock as capital assets. Capital gains of individuals
derived with respect to capital assets held for more than one year are eligible
for reduced rates of taxation. The deductibility of capital losses is subject to
limitations.
There will be no United States federal income tax consequences for holders
of IGR common stock and Series B preferred stock who do not elect to participate
in the exchange offer.
HOLDERS OF IGR COMMON STOCK AND SERIES B PREFERRED STOCK THAT ARE NOT UNITED
STATES PERSONS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE TAX
CONSEQUENCES OF THE EXCHANGE OFFER TO THEM.
26
INVESTMENT IN IGR
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
On March 17, 1998 PRIMEDIA Magazines Inc., a subsidiary of PRIMEDIA, made an
initial investment in IGR. Pursuant to the terms of the initial investment,
PRIMEDIA Magazines purchased 2,100,000 shares of IGR's Series A Convertible
Preferred Stock for an aggregate consideration of $2,331,000. As a result of the
investment in the Series A preferred stock, PRIMEDIA and its affiliates owned
20.1% of the voting power outstanding of the IGR common stock and were entitled
to designate one member to IGR's board of directors.
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
On October 24, 2000 PRIMEDIANET Inc., a subsidiary of PRIMEDIA, entered into
a preferred stock purchase agreement for the acquisition of 39,151,000 shares of
Series E preferred stock from IGR for an aggregate consideration of $41,500,000.
The $41,500,000 purchase price paid by PRIMEDIANET for the Series E preferred
stock was comprised of cash and other consideration, including intellectual
property and the services provided pursuant to the Advertising and Content
License Agreement described below, see "--Advertising and Content License
Agreement."
In addition, under the purchase agreement as long as PRIMEDIANET and its
affiliates maintain the ownership interests specified below in the voting stock
of IGR, PRIMEDIANET has protective rights of approval relating to specified IGR
actions, such as:
PRIMEDIA OWNERSHIP INTEREST 10%
- entering into any sale, lease or other disposition of substantially all
the assets of IGR;
- declaring or paying of any dividend on IGR securities junior to its
preferred stock; or
- modifying or amending IGR's charter or bylaws.
PRIMEDIA OWNERSHIP INTEREST 15%
- making capital expenditures in excess of $400,000;
- incurring indebtedness in excess of $500,000;
- selling equity interests in IGR for gross proceeds in excess of $2,000,000
in any six month period; or
- changing the scope or nature of IGR's existing businesses.
PRIMEDIA OWNERSHIP INTEREST 25%
- entering into transactions by which a third party acquires more than 50%
of the voting rights of IGR.
Following the purchase of the Series E preferred stock and the subsequent
restatement of the IGR certificate of incorporation, PRIMEDIA and its affiliates
own, in addition to the IGR securities previously owned, 21,590,134 shares of
Series E voting preferred stock and 17,560,866 shares of IGR Series E non-voting
preferred stock. As a result, PRIMEDIA and its affiliates own 49.9% of the
outstanding voting power of the IGR stock and are entitled to appoint 40% of the
directors constituting the board of directors of IGR. Holders of the Series E
voting preferred stock and the Series E non-voting preferred stock have similar
rights, except that holders of the Series E non-voting preferred stock may not
vote on an as converted basis with the common stock and the Series E non-voting
preferred stock ranks subordinate to the existing IGR preferred stock, including
the Series E
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voting preferred stock. For a description of the rights of the Series E voting
preferred stock and the Series E non-voting preferred stock, see "--Restated IGR
Certificate of Incorporation."
Upon completion of PRIMEDIA's exchange offer, PRIMEDIA intends to convert a
sufficient number of shares of Series E voting preferred stock to Series E
non-voting preferred stock so that PRIMEDIA and its affiliates will maintain
their 49.9% ownership of the outstanding voting power of the IGR stock.
RESTATED IGR CERTIFICATE OF INCORPORATION
Some of the significant provisions of the certificate of incorporation of
IGR as currently in effect include the following:
- The Series E Preferred Stock is divided into two classes, one voting and
one non-voting. The Series E voting preferred stock is convertible into
IGR common stock at a conversion ratio of one share of common stock for
each share of Series E voting preferred stock. The Series E non-voting
preferred stock is convertible into IGR Class A non-voting common stock at
a conversion ratio of one share of non-voting common stock for each share
of Series E non-voting preferred stock. The Series E voting stock ranks on
parity with the existing IGR preferred stock with respect to rights to
future dividends, rights on liquidation and winding-up. The Series E
non-voting stock is subordinate to the existing preferred stock and senior
to the common stock of IGR with respect to rights to future dividends,
rights on liquidation and winding up and does not vote with the common
stock on an as converted basis;
- PRIMEDIA, as a holder of IGR's Series E voting preferred stock, may
nominate a majority of IGR's board of directors as long as PRIMEDIA or any
of its affiliates owns at least 50% of IGR's voting stock. If PRIMEDIA's
ownership of voting stock of IGR declines in the future, through sale or
dilution, PRIMEDIA's board representation will decline as follows:
PRIMEDIA OWNERSHIP PERCENTAGE OF BOARD
------------------ -------------------
Less than 50% but greater than or equal to 40% 40%
Less than 40% but greater than or equal to 30% 30%
Less than 30% but greater than or equal to 20% 20%
Less than 20% but greater than or equal to 10% 10%
Less than 10% but greater than or equal to 5% 5%
- PRIMEDIA has protective rights of approval involving various corporate
activities of IGR, including any amendment to the certificate of
incorporation or the creation of any series of stock on parity with or
senior to the Series E preferred stock. The restated certificate of
incorporation also contains protective provisions similar to those
contained in the Series E Purchase Agreement so long as PRIMEDIA maintains
ownership interests, ranging from 10%-25%, in the IGR voting stock, see
"--Series E Preferred Stock Purchase Agreement."
The IGR board of directors has also approved an amendment to the restated
certificate of incorporation which provides that PRIMEDIA may nominate 50% of
IGR's board of directors if PRIMEDIA and its affiliates own less than 50% but
greater than 49% of the voting power of IGR. The amendment is subject to the
approval of the IGR shareholders prior to becoming effective.
IGR/PRIMEDIA STOCKHOLDERS AGREEMENT
In connection with the execution and delivery of the Series E purchase
agreement, PRIMEDIANET and PRIMEDIA Magazines entered into a stockholders
agreement with IGR. The stockholders agreement provides that PRIMEDIA and its
affiliates will have the right to appoint the number of directors to the IGR
board of directors permitted, based on PRIMEDIA's percentage
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ownership of the voting stock of IGR, by IGR's restated certificate of
incorporation. See "--Restated Certificate of Incorporation."
ADVERTISING AND CONTENT LICENSE AGREEMENT
In connection with the execution and delivery of the Series E purchase
agreement, PRIMEDIA Magazines also entered into an advertising and content
license agreement with IGR. The advertising and content license agreement
provides that PRIMEDIA Magazines will grant to IGR:
- a five year license for all past and future editorial content from certain
print consumer magazines of PRIMEDIA Magazines;
- a five year license for certain registered trademarks, trademark
applications and URL's; and
- advertisements in selected magazines of PRIMEDIA Magazines.
Pursuant to the advertising and content license agreement, IGR's wedding
related website located at www.weddingnetwork.com will be rebranded as
www.modernbride.com and PRIMEDIA Magazines must use IGR as its platform for
future growth in the online wedding related market for the term of the
agreement. The advertising and content license agreement also subjects both IGR
and PRIMEDIA Magazines to non-compete provisions for the five-year term of the
agreement. Specifically, IGR may not incorporate any content or branding
elements of some of the direct competitors of PRIMEDIA Magazines into
www.weddingnetwork.com, www.modernbride.com or any of the URLs licensed pursuant
to the advertising and content license agreement and PRIMEDIA Magazines agrees
not to provide or license past or future editorial content of some of PRIMEDIA
Magazine's print consumer magazines to direct competitors of
www.weddingnetwork.com, www.modernbride.com or any of the URLs transferred
pursuant to the agreement.
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DESCRIPTION OF PRIMEDIA CAPITAL STOCK
GENERAL
As of December 31, 2000, PRIMEDIA had 300,000,000 shares of authorized
capital stock. Those shares consisted of:
- 250,000,000 shares of common stock, of which 167,798,702 shares were
outstanding and held by 214 shareholders; 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 IGR stockholders who acquire shares of PRIMEDIA common stock
offered by this 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
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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.
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
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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.
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 shareholders $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.
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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;
- 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 and unpaid 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 shareholders $100 per share per share, plus any accrued and unpaid
dividends 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.
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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 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 8 5/8% 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
8 5/8% 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 shareholders $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 IGR are both organized under the laws of the State of Delaware.
Any differences, therefore, in the rights of holders of PRIMEDIA capital stock
and IGR capital stock arise primarily from differences in their respective
certificates of incorporation and by-laws. After the expiration of the exchange
offer and the acceptance of the tendered shares by PRIMEDIA, the rights of
holders of IGR common stock and Series B preferred stock who have successfully
tendered their shares 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.
IGR. The authorized capital stock of IGR consists of:
- 150,000,000 shares of common stock, par value $0.001 per share;
- 39,151,000 shares of Class A common stock, par value $0.001 per share; and
- 114,151,000 shares of preferred stock, par value $0.001 per share.
VOTING RIGHTS
In the case of both PRIMEDIA and IGR, 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. Holders of
IGR Class A common stock have no voting rights with respect to their shares of
Class A common stock, except as required by law.
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." IGR Series B preferred
stock holders are entitled to vote on any matter required or permitted by
Delaware law to be voted on by the holders of common stock of IGR. For each
share of Series B preferred stock held, the holder is entitled to cast eight
votes. The Series B preferred stock holders are also entitled to elect one
director to IGR's board of directors as long the Series B preferred stock
represents in excess of 5% of the issued and outstanding common stock of IGR,
assuming conversion of all voting preferred stock of IGR into common stock.
NUMBER AND ELECTION OF DIRECTORS
PRIMEDIA. The board of directors of PRIMEDIA currently has ten 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.
IGR. The board of directors of IGR currently has six members. IGR's third
amended and restated certificate of incorporation and IGR's amended and restated
by-laws state that the number of directors will be fixed by the board of
directors from time to time.
IGR's third amended and restated certificate of incorporation and amended
and restated by-laws do not provide for a staggered board of directors.
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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.
IGR. The amended and restated by-laws provide that vacancies and newly
created directorships are filled by the affirmative vote of a majority of the
directors then in office (unless the board of directors determines that the
vacancy or newly created directorship should be filled by the stockholders), for
the remainder of the full term of the director for which the vacancy was created
or occurred and until the director's successor is elected and qualified. Any
director or the entire board of directors may be removed with cause by the
affirmative vote of the holders of a majority of the outstanding shares of IGR
capital stock entitled to vote in the election of directors. Any director or the
entire board of directors may be removed without cause by the affirmative vote
of 66 2/3% of the outstanding shares of IGR capital stock entitled to vote in
the election of directors.
AMENDMENTS TO THE CERTIFICATE OF INCORPORATION
PRIMEDIA AND IGR. The provisions of Delaware law regarding amendments to
the certificate of incorporation govern the amendment of certificates of
incorporation of both PRIMEDIA and IGR. 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.
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.
IGR. The third amended and restated certificate of incorporation of IGR
authorizes the board of directors to adopt, amend or repeal any provision of
IGR's by-laws, provided that the stockholders may change or repeal any by-law
adopted by the board of directors by the affirmative vote of the holders of a
majority of the voting power of the outstanding shares of common stock.
ACTION BY WRITTEN CONSENT
PRIMEDIA AND IGR. The provisions of Delaware law regarding actions by
written consent govern actions by written consent of PRIMEDIA and IGR
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.
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.
IGR. Under the amended and restated by-laws, special meetings of IGR
stockholders may be called by the chairman of the board of directors, the chief
executive officer, a majority of the total number of authorized directors or the
holders of shares entitled to cast not less than 10% of the votes
37
at the meeting. Business transacted at any special meting will 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.
IGR. Under IGR's amended and restated by-laws in order for a stockholder to
take any action at an annual meeting, timely notice must be given to the
secretary of IGR. To be timely, a stockholder's notice must be received at the
principal executive offices of IGR no later than 60 days nor earlier than
90 days before the first anniversary of the preceding year's annual meeting. In
the event that no annual meeting was held in the previous year or the date of
the annual meeting has been changed by more than 30 days from the date
contemplated at the time of the previous year's proxy statement, notice must be
received no later than 60 days nor earlier than 90 days prior to the date of the
meeting. If less than 70 days' notice of the date of the meeting is given to
stockholder's, to be timely, notice by a stockholder must be received by the
secretary no later than close of business on the tenth day following the day on
which the notice of the meeting was given.
A stockholder's notice to IGR must set forth all of the following:
- a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting the business at the annual
meeting;
- the name and address, as they appear on IGR's books, of the stockholder
proposing the business;
- the class and number of shares of IGR that are beneficially owned by the
stockholder;
- any material interest of the stockholder in the business; and
- all information required to be disclosed in solicitations of proxies, or
otherwise required by applicable law.
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;
38
- 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 third
amended and restated certificate of incorporation of IGR 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 IGR, 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.
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.
IGR. The amended and restated by-laws of IGR provide that IGR will
indemnify its directors and executive officers to the fullest extent permitted
by Delaware law. IGR may modify the extent of indemnification by individual
contracts with its directors and executive officers. IGR will not be required to
indemnify the director or executive officer in connection with a proceeding
initiated by that person unless it is required by law, the proceeding was
authorized by IGR's board of directors or IGR decides, in its sole discretion,
to do so.
Additionally, 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 IGR
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. No expenses
will be advanced, however, if a majority of a quorum of the board of directors
who are not parties to the proceeding or, if a quorum of disinterested directors
directs, by a written opinion of independent legal counsel that the known facts
demonstrate clearly and convincingly that the person seeking the advance acted
in bad faith or in a manner that the person did not believe to be in the best
interests of IGR.
39
EXECUTIVES; EXECUTIVE COMPENSATION; STOCK OWNERSHIP OF DIRECTORS,
EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS
For information regarding existing material relationships between PRIMEDIA
and IGR, see "Investment in IGR."
Information concerning current directors and officers of PRIMEDIA and
executive compensation is contained in PRIMEDIA's proxy statement for its 2001
annual meeting of stockholders dated April 30, 2001, and is incorporated herein
by reference.
The following table sets forth, as of March 31, 2001, the number and
percentage of outstanding shares of PRIMEDIA common stock beneficially owned by:
- each beneficial owner of more than 5% of the PRIMEDIA's outstanding common
stock;
- each director of PRIMEDIA;
- each named executive officers of PRIMEDIA; and
- all directors and executive officers of the PRIMEDIA as a group.
No information is given for named executives who were not officers on
March 31, 2001.
NUMBER OF SHARES OF
COMMON STOCK PERCENTAGE OF
BENEFICIALLY OWNED COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER (1)(2) STOCK
------------------------------------ ------------------- -------------
KKR Associates(3) .......................................... 106,886,265 50.2%
9 West 57th Street
New York, New York 10019
KKR 1996 GP LLC(4)(5) ...................................... 22,594,294 10.6
9 West 57th Street
New York, New York 10019
Thomas S. Rogers(2)......................................... 4,698,460 2.2
Scott P. Kurnit(2).......................................... 3,466,052 1.6
Charles G. McCurdy(2)(6).................................... 2,738,112 1.3
Beverly C. Chell(2)......................................... 2,125,357 1.0
Henry R. Kravis(7).......................................... 129,479,559 60.8
Meyer Feldberg.............................................. 31,250 *
H. John Greeniaus........................................... 65,497 *
Perry Golkin(7)............................................. 129,482,559 60.8
George R. Roberts(7)........................................ 129,479,559 60.8
Michael T. Tokarz(7)........................................ 129,484,559 60.8
All directors and executive officers as a group (17 142,961,945 66.9
persons)..................................................
------------------------
* Less than 1%.
(1) For purposes of this table, a person or group is deemed to have "beneficial
ownership" of any shares as of a given date which such person has the right
to acquire within 60 days after such date. For purposes of computing the
percentage of outstanding shares held by each person or group of persons
named above on a given date, any security which such person or persons has
the right to
40
acquire within 60 days after such date is deemed to be outstanding, but is
not deemed to be outstanding for the purpose of computing the percentage of
ownership of any other person.
(2) Of the shares shown as owned, 3,125,010, 2,311,298, 417,974 and 1,720,484
shares, respectively, for Messrs. Rogers, McCurdy, Kurnit and Ms. Chell are
in fact represented by options which were either exercisable on March 31,
2001 or become exercisable within 60 days thereafter.
(3) Shares of common stock shown as owned by KKR Associates are owned of record
by MA Associates, L.P., FP Associates, L.P., Magazine Associates, L.P.,
Publishing Associates, L.P., Channel One Associates, L.P., KKR 1996 Fund
L.P., and KKR Partners II, L.P., of which KKR Associates is the sole general
partner and as to which it possessed sole voting and investment power.
Messrs. Kravis, Roberts, Tokarz and Golkin (directors of PRIMEDIA) and Paul
E. Raether, Michael W. Michelson, James H. Greene, Edward A. Gilhuly, and
Scott M. Stuart, as the general partners of KKR Associates, may be deemed to
share beneficial ownership of the shares shown as beneficially owned by KKR
Associates. Such persons disclaim beneficial ownership of such shares.
(4) 16,666,667 shares of common stock shown as owned by KKR 1996 GP LLC are
owned of record by KKR 1996 Fund L.P., of which KKR Associates 1996 L.P. is
the sole general partner. KKR 1996 GP LLC is the sole general partner of KKR
Associates 1996 L.P. and possesses sole voting and investment power. Messrs.
Kravis, Roberts, Tokarz and Golkin (directors of PRIMEDIA) and Paul E.
Raether, Michael W. Michaelson, James H. Greene, Edward A. Gilhuly, Scott
M. Stuart, Todd Fisher, Johannes Huth, Alexander Navab and Neil Richardson
are the members of KKR 1996 GP LLC. Messrs. Kravis and Roberts constitute
the management committee of KKR 1996 GP LLC. Each of such persons disclaims
beneficial ownership of such shares.
(5) 5,927,627 shares of common stock shown as owned by KKR 1996 GP LLC are owned
of record by Abra LLC of which KKR 1996 Fund L.P. is its senior member and
has sole and exclusive power and authority to bind Abra LLC. KKR Associates
1996 L.P. is the sole general partner of KKR 1996 Fund L.P. and KKR 1996 GP
LLC is the sole general partner of KKR Associates 1996 L.P. and possesses
sole voting and investment power. Messrs. Kravis, Roberts, Tokarz and Golkin
(directors of PRIMEDIA) and Paul E. Raether, Michael W. Michaelson, James H.
Greene, Edward A. Gilhuly, Scott M. Stuart, Todd Fisher, Johannes Huth,
Alexander Navab and Neil Richardson are the members of KKR 1996 GP LLC.
Messrs. Kravis and Roberts constitute the management committee of KKR 1996
GP LLC. Each of such persons disclaims beneficial ownership of such shares.
(6) Includes 160,000 shares held in trust for his minor children.
(7) Includes 106,886,265 shares of common stock owned by KKR Associates and
22,594,294 shares of common stock owned by KKR 1996 GP LLC. Messrs. Kravis,
Roberts, Tokarz and Golkin (directors of PRIMEDIA) and Paul E. Raether,
Michael W. Michelson, James H. Greene, Edward A. Gilhuly, and Scott M.
Stuart, as the general partners of KKR Associates, may be deemed to share
beneficial ownership of the shares shown as beneficially owned by KKR
Associates. Such persons disclaim beneficial ownership of such shares.
Messrs. Kravis, Roberts, Tokarz and Golkin (directors of PRIMEDIA) and Paul
E. Raether, Michael W. Michaelson, James H. Greene, Edward A. Gilhuly, Scott
M. Stuart, Todd Fisher, Johannes Huth, Alexander Navab and Neil Richardson,
as members of KKR 1996 GP LLC, and Messrs. Kravis and Roberts, as
constituting the management committee of KKR 1996 GP LLC, may be deemed to
share beneficial ownership of the shares shown as beneficially owned by KKR
1996 GP LLC. Such persons disclaim beneficial ownership of such shares.
41
The following table sets forth, as of January 16, 2001, based on information
provided to PRIMEDIA by IGR, the number and percentage of outstanding shares of
IGR common stock and preferred stock beneficially owned by:
- each person known by IGR to beneficially own more than 5% of their stock;
- each director of IGR;
- each executive officer of IGR required to be disclosed; and
- all executive officers and directors of IGR as a group.
SHARES OF
SHARES OF COMMON PERCENT OF PREFERRED STOCK PERCENT OF
NAME AND ADDRESS STOCK BENEFICIALLY COMMON BENEFICIALLY PREFERRED
OF BENEFICIAL OWNER OWNED STOCK(1) OWNED STOCK(2)
------------------- ------------------ ---------- --------------- ----------
PRIMEDIA Inc.(3) ........................... 24,016,134(4) 74.2% 23,720,134(5) 59.9%
745 Fifth Avenue
New York, New York 10151
The May Department Store Company ........... 7,777,592(6) 48.2% 7,621,592(7) 18.5%
611 Olive Street, Suite 1200
St. Louis, Missouri 63101-1756
Commonwealth Associates .................... 1,468,152(8) 15.8% 22,653(9) *
830 Third Avenue (4th Floor)
New York, New York 10022
Charles G. McCurdy.......................... 24,016,134(10) 74.2% 23,720,134(11) 59.9%
Carolyn Everson............................. -- -- -- --
John Loughlin............................... -- -- -- --
Keith Rosenbloom............................ 150,239(12) 1.8% 2,516(13) *
Margery Gladstone........................... -- -- -- --
Stephen Cunningham.......................... 2,801,083(14) 31.6% 5,000(15) *
William Edkins.............................. -- -- -- --
Carole Couture.............................. 91,666(16) 1.1% -- --
Marc Wheeler................................ 61,667(17) * -- --
Stephen Portnoy............................. 75,000(18) * -- --
Thomas Villani.............................. -- -- -- --
Don Fuqua................................... 36,333(19) * -- --
All directors and executive officers as a 3,215,988 35.1% 7,516 *
group.....................................
------------------------
* Represents less than 1.0%.
(1) Percentage of common stock ownership is based on 8,366,698 shares of IGR
common stock outstanding as of January 16, 2001.
(2) Percentage of preferred stock ownership is based on 39,598,054 shares of IGR
preferred stock outstanding as of January 16, 2001.
(3) These shares are owned by PRIMEDIA Inc. through its subsidiaries, PRIMEDIA
Magazines and PRIMEDIANET.
(4) Comprised of 2,100,000 shares of IGR common stock issuable upon conversion
of 2,100,000 shares of IGR Series A preferred stock, 21,590,134 shares of
IGR common stock issuable upon conversion of 21,590,134 shares of IGR
Series E voting preferred stock, 240,000 shares of IGR common stock issuable
upon conversion of 30,000 shares of IGR Series B preferred stock and
currently exercisable warrants to purchase 86,000 shares of IGR common
stock.
(5) Comprised of 2,100,000 shares of IGR Series A preferred stock, 21,590,134
shares of IGR Series E voting preferred stock and 30,000 shares of IGR
Series B preferred stock.
42
(6) Comprised of 1,040,000 shares of IGR common stock issuable upon conversion
of 1,040,000 shares of IGR Series C preferred stock, 4,981,592 shares of IGR
common stock issuable upon conversion of 4,981,592 shares of IGR Series D
preferred stock, 1,600,000 shares of IGR common stock issuable upon exercise
of a currently exercisable warrant owned by May Co. and 156,000 shares of
IGR common stock issuable upon exercise of a currently exercisable warrant
owned by May Co.
(7) Comprised of 1,040,000 shares of IGR Series C preferred stock, 4,981,592
shares of IGR Series D preferred stock and 1,600,000 shares of IGR Series C
preferred stock issuable upon exercise of a currently exercisable warrant
owned by May Co.
(8) Comprised of 560,375 shares of IGR common stock, currently exercisable
warrants to purchase 726,553 shares of IGR common stock and 181,224 shares
of IGR common stock issuable upon conversion of 22,653 shares of IGR
Series B preferred stock.
(9) Comprised of 22,653 shares of IGR Series B preferred stock.
(10) Comprised of 2,100,000 shares of IGR common stock issuable upon conversion
of 2,100,000 shares of IGR Series A preferred stock, 21,590,134 shares of
IGR common stock issuable upon conversion of 21,590,134 shares of Series E
voting preferred stock, 240,000 shares of IGR common stock issuable upon
conversion of 30,000 shares of IGR Series B preferred stock and currently
exercisable warrants to purchase 86,000 shares of IGR common stock owned by
PRIMEDIA through its subsidiaries, PRIMEDIA Magazines and PRIMEDIANET,
respectively. Mr. McCurdy, as an executive officer and director of PRIMEDIA,
may be deemed to share beneficial ownership of the shares beneficially owned
by PRIMEDIA. Mr. McCurdy disclaims beneficial ownership of those shares.
(11) Comprised of 2,100,000 shares of IGR Series A preferred stock, 21,590,134
shares of IGR Series E voting preferred stock and 30,000 shares of IGR
Series B preferred stock owned by PRIMEDIA through its subsidiaries,
PRIMEDIA Magazines and PRIMEDIANET, respectively. Mr. McCurdy, as an
executive officer and director of PRIMEDIA, may be deemed to share
beneficial ownership of the shares beneficially owned by PRIMEDIA.
Mr. McCurdy disclaims beneficial ownership of those shares.
(12) Comprised of 102,092 shares of IGR common stock, currently exercisable
options to purchase 25,000 shares of IGR common stock, currently exercisable
warrants to purchase 3,019 shares of IGR common stock and 20,128 shares of
IGR common stock issuable upon conversion of 2,516 shares of Series B
preferred stock.
(13) Comprised of 2,516 shares of Series B preferred stock.
(14) Comprised of 2,317,583 shares of IGR common stock, currently exercisable
options to purchase 400,000 shares of IGR common stock, currently
exercisable warrants to purchase 43,500 shares of IGR common stock and
40,000 shares of IGR common stock issuable upon conversion of 5,000 shares
of IGR Series B preferred stock.
(15) Comprised of 5,000 shares of Series B preferred stock.
(16) Comprised of currently exercisable options to purchase 91,666 shares of IGR
common stock.
(17) Comprised of currently exercisable options to purchase 61,667 shares of IGR
common stock.
(18) Comprised of currently exercisable options to purchase 75,000 shares of IGR
common stock.
(19) Comprised of currently exercisable options to purchase 36,333 shares of IGR
common stock.
There are 17,560,866 shares of Series E non-voting preferred stock
outstanding. PRIMEDIA owns all of these outstanding Series E non-voting
preferred shares.
See "Where You Can Find More Information."
43
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
prospectus.
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 consolidated 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, 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, 1999 and
2000 and for each of the three years in the period ended December 31, 2000 and
the related financial statement schedule incorporated in this prospectus by
reference from the PRIMEDIA Annual Report on Form 10-K for the year ended
December 31, 2000 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports, which are incorporated herein by reference
from the PRIMEDIA Annual Report on Form 10-K for the year ended December 31,
2000, 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 of About, as of December 31,
2000, and for the year then ended, incorporated in this prospectus by reference
from PRIMEDIA's Current Report on Form 8-K/A filed April 26, 2001, have been
audited by Ernst & Young LLP, independent auditors, as stated in their report,
which is incorporated herein by reference from PRIMEDIA's Current Report on
Form 8-K/A filed April 26, 2001, and has been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
The consolidated financial statements of About, as of December 31, 1999 and
for each of the years in the two year period ended December 31, 1999,
incorporated in this prospectus by reference from PRIMEDIA's Current Report on
Form 8-K/A filed April 26, 2001, have been audited by KPMG LLP, independent
auditors, as stated in their report, which is incorporated herein by reference
from PRIMEDIA's Current Report on Form 8-K/A filed April 26, 2001, and has been
so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
PRIMEDIA files 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.
44
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
exchange offer. This prospectus constitutes the prospectus of PRIMEDIA filed as
part of the registration statement. This 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 prospectus
documents filed with the SEC by PRIMEDIA. 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
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 pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this prospectus and before the
date of each company's special meeting:
PRIMEDIA FILINGS (SEC FILE NUMBER 1-5805): PERIODS
--------------------------------------------- ---------------------------------------------
Annual Report on Form 10-K................... Year ended December 31, 2000
Quarterly Report on Form 10-Q................ Quarter ended March 31, 2001
Current Report on Form 8-K................... Filed March 1, 2001
Current Report on Form 8-K/A................. Filed April 26, 2001
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 2001
annual meeting of stockholders............... April 30, 2001
You may request a copy of the documents incorporated by reference into this
prospectus by writing to or telephoning PRIMEDIA.
Requests for documents should be directed to:
Investor Relations
PRIMEDIA Inc.
745 Fifth Avenue
New York, New York 10151
(212) 745-0100
This prospectus does not constitute an offer to sell, or a solicitation of
an offer to purchase, the securities offered by this prospectus, in any
jurisdiction to or from any person to whom or from whom it is unlawful to make
such offer or solicitation of an offer in such jurisdiction. Neither the
delivery of this prospectus nor any distribution of securities pursuant to this
prospectus shall, under any circumstances, create any implication that there has
been no change in the information set forth or incorporated into this prospectus
by reference or in our affairs since the date of this prospectus.
45