`
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PRIMEDIA INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: Common
Stock, par value $.01 per share ("Common Stock"), of the Registrant
(2) Aggregate number of securities to which transaction applies: 130,283,909
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined): N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total Fee Paid: N/A
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(3) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: N/A
(2) Form, Schedule or Registration Statement No.: N/A
(3) Filing Party: N/A
(4) Date Filed: February 26, 1998
PRIMEDIA INC.
745 FIFTH AVENUE
NEW YORK, NY 10151
February 26, 1998
FELLOW SHAREHOLDERS:
PRIMEDIA Inc. has completed the last major steps in a focusing program
announced last year to concentrate on our fastest growth opportunities,
strengthen our balance sheet and enhance future earnings.
PRIMEDIA today is a targeted media company (specialty magazines, education
and information) with significantly enhanced growth opportunities in all of our
businesses. Our authoritative brands include SEVENTEEN, HORTICULTURE, WEEKLY
READER, CHANNEL ONE, WARD'S AUTOMOTIVE AND REGISTERED REPRESENTATIVE. PRIMEDIA
is an extraordinary targeted media company with financial flexibility to
accelerate our sales and earnings growth. We are developing new products,
including electronic products; expanding internationally; taking advantage of
new technology; licensing our brands; forming joint ventures; and acquiring
niche products.
PROGRAMS COMPLETED
The completed focusing program includes:
- - - The divestiture of non-core units, enabling PRIMEDIA to focus on its fastest
growing businesses. In 1997, we divested 6 units for total proceeds of $172
million (only one unit remains and we believe that it will be divested in
early 1998). PRIMEDIA's on-going businesses (continuing businesses) reported
1997 sales of $1.24 billion, up 16.2% from 1996, and earnings before income,
taxes, depreciation and amortization of $286.4 million, up 15.6% from 1996.
- - - Three financing actions enabling PRIMEDIA to accelerate its growth by
strengthening the Company's balance sheet, reduce financing costs and the
cost of capital. These actions are:
- The sale by PRIMEDIA of 16,666,667 new shares of PRIMEDIA common stock for
$200 million to an investment fund managed by Kohlberg Kravis & Roberts &
Co. The price per share was based on the prior seven-day average price of
$12.77 less a discount, for net proceeds to the Company of $12.00 per
share. The discount reflects the fact that PRIMEDIA did not have to take
on any of the risks and certain costs associated with making a stock
offering to the public. Investment funds managed by KKR together are the
largest PRIMEDIA shareholder. PRIMEDIA's stock closed at $13 13/16 on
February 20, 1998. As described in the attached Statement in Connection
with Solicitation of Stockholder Consents, you are being asked to consent
to this transaction.
- The issuance of a new $250 million 12-year 8 5/8% exchangeable preferred
stock. A majority of the proceeds of the new issue is being used to call
the more costly 11 5/8% Series B Preferred issue and the balance is being
used to pay down bank debt.
- The issuance of $250 million of 10-year Senior Notes at a rate of 7 5/8%.
The proceeds, being used to pay down bank borrowings, capitalize on
today's attractive interest rate environment. Including these new actions,
since the beginning of 1997, we have eliminated three of our most costly
financial obligations and reduced our average fixed rate financing cost by
over 1 1/4% while deleveraging the Company.
PRIMEDIA ENDS BUILD-UP PHASE
With the completion of the focusing program, PRIMEDIA ends the build-up
phase we began nine years ago when the Company was founded. Then, we needed to
make large acquisitions financed with costly financing instruments. We are now
the largest specialty media company in America, we have significant growth
prospects in all of our businesses and our balance sheet is stronger and more
flexible than ever. 1998 will be an excellent year for PRIMEDIA as our three
segments, specialty magazines, education and information show solid organic
growth and we make niche product acquisitions that fit within these segments. We
have already announced our plan to purchase Cowles Enthusiast Media and Cowles
Business Media which will enhance our position as the largest special interest
consumer magazine publisher in the U.S. and one of the strongest technical and
trade magazine publishers.
Sincerely,
[LOGO]
William F. Reilly
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PRIMEDIA INC.
745 FIFTH AVENUE
NEW YORK, NY 10151
STATEMENT IN CONNECTION WITH SOLICITATION OF
STOCKHOLDER CONSENTS
DESCRIPTION OF ACTION TO BE TAKEN
This statement in connection with solicitation of stockholder consents is
being furnished to the stockholders of PRIMEDIA Inc. (the "Company") to solicit
consents to the issuance of 16,666,667 shares of the Company's common stock, par
value $.01 per share (the "Common Stock"), to KKR 1996 Fund L.P. ("KKR 1996")
for a net purchase price of $12 per share in cash to the Company or an aggregate
purchase price of $200,000,004 (the "Purchase Price"). After consummation of KKR
1996's purchase of such shares of Common Stock (the "Transaction"), KKR 1996
will own approximately 84.6% of the issued and outstanding Common Stock. The
proceeds will be used to enhance the Company's capital structure and fund growth
opportunities. The purchase is expected to close on or about March 19, 1998. The
Common Stock will be issued in a private placement exempt from registration
under section 4(2) of the Securities Act of 1933, as amended.
This Statement is first being mailed to the Company's stockholders on or
about February 26, 1998.
INTERESTS OF CERTAIN PERSONS IN THE PURCHASE
Investment partnerships (the "Investment Partnerships") formed at the
direction of Kohlberg Kravis Roberts & Co. ("KKR") and certain members of senior
management have executed a written consent dated February 5, 1998 (the
"Stockholders Consent") to the Transaction. The Investment Partnerships
currently own approximately 82.6% of the issued and outstanding Common Stock.
KKR 1996 is also an investment partnership formed at the direction of KKR. After
the consummation of the transaction the Investment Partnerships and KKR 1996
will own approximately 84.6% of the issued and outstanding shares of the
Company's Common Stock.
KKR Associates, L.P. ("KKR Associates") is the general partner and a number
of institutional and other investors associated with KKR are the limited
partners of the Investment Partnerships. KKR Associates is a New York limited
partnership of which Henry R. Kravis, George R. Roberts, Robert I. MacDonnell,
Paul E. Raether, Michael W. Michelson, James H. Greene, Jr., Michael T. Tokarz,
Edward H. Gilhuly, Perry Golkin, Clifton S. Robbins and Scott M. Stuart are the
general partners and of which certain past and present employees of KKR and
partnerships and trusts for the benefit of the families of such general partners
and employees and a former partner of KKR are the limited partners.
KKR 1996 is a limited partnership of which KKR Associates 1996 L.P. is the
general partner and a number of institutional and other investors associated
with KKR are the limited partners. KKR Associates 1996 L.P. is a limited
partnership of which KKR 1996 GP LLC is the general partner and employees of KKR
and partnerships and trusts for the benefit of the families of members of such
general partner and a former partner of KKR are the limited partners. KKR 1996
GP LLC is a limited liability corporation of which Henry R. Kravis, George R.
Roberts, Robert I. MacDonnell, Paul E. Raether, Michael W. Michelson, James H.
Greene, Jr., Michael T. Tokarz, Edward H. Gilhuly, Perry Golkin, Clifton S.
Robbins and Scott M. Stuart are the members. Messrs. Kravis, Roberts, Tokarz and
Golkin are directors of the Company.
BACKGROUND
In March 1997 the Company attempted to raise common equity by filing a
registration statement for 12,500,000 shares of newly issued common stock with
the Securities and Exchange Commission. The filing of the registration statement
caused a sharp decline in the market price of the Common Stock and the Company
withdrew the registration statement.
In December 1997 and January 1998, the Company and KKR met with Morgan
Stanley & Co. Incorporated ("Morgan Stanley") and Salomon Smith Barney, Inc.
("Salomon Smith Barney") to discuss the Company's various financing
alternatives.
In January 1998, representatives of KKR 1996 approached the Company
regarding a potential investment. The Company encouraged KKR 1996 to make a
proposal to the Company. In anticipation of receiving such proposal, on January
27, 1998, the Board of Directors established a Special Committee (the "Special
Committee") comprised of the Board's independent director, Professor Meyer
Feldberg, who was charged with receiving such proposal, negotiating with KKR and
making a recommendation to the entire Board of Directors on whether to accept or
reject the proposal. On January 28, 1998, the Special Committee retained Morgan
Stanley as its investment bankers and Chadbourne & Parke LLP ("Chadbourne &
Parke") as its legal counsel.
KKR retained Salomon Smith Barney in connection with formulating its offer.
In anticipation of receiving an offer from KKR, the Special Committee met
with its legal counsel on January 28, 1998 and on February 2, 1998. At such
later meeting, the Special Committee discussed the potential transaction with
each of Morgan Stanley and the Company's management.
On February 2, 1998, a representative of Salomon Smith Barney contacted a
representative of Morgan Stanley in order to discuss pricing issues in
connection with any proposal to be made by KKR. During such discussions Salomon
Smith Barney indicated to Morgan Stanley that it estimated that the price at
which the Company could raise equity in a registered public offering would be in
the range of $10.93 to $11.29 per share of Common Stock, net to the Company,
assuming an offering size of $200 million.
On February 3, 1998, Salomon Smith Barney and Morgan Stanley continued their
discussions. During the afternoon of February 3, 1998, Salomon Smith Barney
indicated to Morgan Stanley that it believed KKR would not be willing to acquire
Common Stock for a price which was greater than the price at which the Company
could raise equity in a registered public offering. Morgan Stanley indicated to
Salomon Smith Barney that Morgan Stanley was not in a position to recommend a
transaction priced in that range to the Special Committee. At the end of the day
on February 3, 1998, a representative of KKR 1996 contacted Professor Feldberg
and made a formal proposal to acquire $200,000,000 worth of shares of Common
Stock at a price of $11.75 per share, net to the Company in cash.
On the morning of February 4, 1998, the Special Committee met with its
financial and legal advisors to review the events since the last meeting of the
Special Committee. Also at such meeting, the Special Committee authorized Morgan
Stanley to communicate to KKR 1996's representatives that the Special Committee
was unwilling to recommend that the Company's Board of Directors approve a
transaction at the $11.75 proposed per share price. However, the Special
Committee did authorize Morgan Stanley and Chadbourne & Parke to continue
discussions with representatives of the Company and KKR 1996 regarding the
financial and legal terms of any proposed transaction. These discussions with
the Company continued throughout the day and into the morning of February 5,
1998. On the morning of February 5, 1998, the Special Committee again met with
its financial and legal advisors to review the status of the ongoing
discussions. On the afternoon of February 5, 1998, the Special Committee and KKR
1996 reached an agreement, subject to definitive documentation and the approval
of the Company's Board of Directors, on a transaction whereby KKR 1996 would
acquire $200,000,004 worth of shares of Common Stock at a price of $12.00 per
share. The price of $12.00 per share was based on the prior seven-day average of
$12.77 less a discount that reflected the fact that the Company would not have
to take on certain risks and costs associated with making a stock offering to
the public.
At a meeting of the Special Committee and the Board of Directors which
occurred late in the afternoon of February 5, 1998, the Special Committee
received an oral opinion from Morgan Stanley, which opinion was subsequently
delivered in writing, to the effect that, based upon and subject to the
assumptions made, matters considered and limits of review set forth in such
opinion, as of such date the
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consideration to be received by the Company pursuant to the Securities Purchase
Agreement was fair, from a financial point of view, to the Company. The full
text of Morgan Stanley's opinion which sets forth, among other things,
assumptions made, procedures followed, matters considered and limitations of the
review undertaken, is attached as Annex I to this Statement and is incorporated
herein by reference. Holders of Common Stock are urged to read such opinion in
its entirety. The opinion of Morgan Stanley is addressed to the Special
Committee and the Board of Directors of the Company, addresses only the fairness
to the Company of the consideration to be received by the Company pursuant to
the Securities Purchase Agreement from a financial point of view, and does not
address any other aspect of the Securities Purchase Agreement or express any
opinion as to the decision by the Company to enter into the Securities Purchase
Agreement or as to the price at which the Common Stock will trade at any time,
nor does it constitute an opinion or recommendation as to how any stockholder
should vote. On February 5, 1998, after considering the advice of its investment
bankers and counsel, the Special Committee recommended that the Board of
Directors approve the Transaction. The Board of Directors approved the
Transaction on February 5, 1998 and received an executed Stockholders Consent
representing in excess of 80% of the shares of PRIMEDIA Common Stock issued and
outstanding.
In connection with the Transaction, the Company will indemnify KKR 1996 and
give registration rights to KKR 1996 on substantially the same terms as the
Company has indemnified and given registration rights to the Investment
Partnerships in connection with their investments in the Company. The Company
has also agreed to pay the expenses of 1996 Fund's counsel and investment
banker.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of December 31, 1997 by (i) each beneficial
owner of more than five percent of the Company's outstanding Common Stock, (ii)
each of the Company's directors, (iii) the chief executive officer and the four
highest compensated executive officers as of December 31, 1997 and (iv) all
directors and executive officers of the Company as a group.
NUMBER OF
SHARES
BENEFICIALLY
NAME OWNED(1) PERCENTAGE
- - --------------------------------------------------------------------------------------- ------------- -------------
KKR Associates(3)
9 West 57th Street
New York, New York 10019.............................................................. 106,886,265 82.6%
William F. Reilly (2)(4)............................................................... 4,591,653 3.5
Charles G. McCurdy(2)(5)............................................................... 2,366,612 1.8
Beverly C. Chell(2).................................................................... 2,031,557 1.6
Jack L. Farnsworth(2).................................................................. 340,300 *
Henry R. Kravis (3).................................................................... -- --
Meyer Feldberg......................................................................... 6,250 *
Perry Golkin(3)........................................................................ 3,000 *
George R. Roberts(3)................................................................... -- --
Michael T. Tokarz(3)................................................................... 5,000 *
All Directors and executive officers as a group (13 persons)........................... 9,612,942 7.0
- - ------------------------
(1) For purposes of this table, a person or group of persons 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
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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, 3,042,960, 1,949,798, 1,622,484 and 266,800
for Messrs. Reilly and McCurdy, Ms. Chell, and Mr. Farnsworth, respectively,
consist of options which were either exercisable on December 31, 1997 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. and KKR Partners
II, L.P., of which KKR Associates is the sole general partner and as to
which it possesses sole voting and investment power. Messrs. Kravis,
Roberts, Tokarz and Golkin (directors of PRIMEDIA) and Robert I. MacDonnell,
Paul E. Raether, Michael W. Michelson, James H. Greene, Jr., Edward A.
Gilhuly, Clifton S. Robbins 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) Disclaims beneficial ownership of 200,000 of such shares.
(5) Disclaims beneficial ownership of 160,000 of such shares.
* Less than one percent.
INCORPORATION BY REFERENCE
The Company incorporates by reference the following documents filed by the
Company with the Securities and Exchange Commission (the "Commission"):
(a) the Annual Report on Form 10-K for the fiscal year ended December 31,
1996; and
(b) the Quarterly Reports on Form 10-Q for the quarters ended March 31,
1997, June 30, 1997 and September 30, 1997; and
(c) the Current Report on Form 8-K dated February 9, 1998.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
subsequent to the date of this Statement and prior to the consummation of the
purchase made hereby shall be deemed to be incorporated by reference in this
Statement and to be part of this Statement from the date of the filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference in this Statement shall be deemed to be modified or
superseded for purposes of this Statement to the extent that a statement
contained in this Statement or in any subsequently filed document which also is
or is deemed to be incorporated by reference in this Statement modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Statement.
Copies of the above documents (other than exhibits not specifically
incorporated by reference into the text of such documents) may be obtained upon
written or oral request without charge by each person to whom this Statement is
delivered from PRIMEDIA at 745 Fifth Avenue, New York, New York 10151,
212-745-0615, Attention: Warren Bimblick, Vice President, Investor Relations.
RECORD DATE; RETURN OF CONSENTS
The Board of Directors of the Company has fixed the close of business on
February 19, 1998 as the Record Date for the determination of stockholders
entitled to consent to the Transaction. At the Record Date, there were
130,283,909 shares of Common Stock issued and outstanding and entitled to
consent to the Transaction. Holders of shares of Common Stock are entitled to
one vote for each share of Common Stock held of record by them at the Record
Date.
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Consents are in the form attached as Annex II. Consents should be returned
to the Bank of New York by the attached return envelope.
VOTE REQUIRED
The affirmative consent of a majority of the outstanding shares of Common
Stock entitled to vote as of the Record Date is required for approval of the
Transaction. The receipt by the Company of the Stockholders Consent on February
5, 1998 was sufficient to approve the Transaction.
BEVERLY C. CHELL
Vice-Chairman and
Secretary
February 26, 1998
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ANNEX I
MORGAN STANLEY
MORGAN STANLEY & CO.
INCORPORATED
1585 BROADWAY
NEW YORK, NEW YORK 10036
(212) 761-4000
February 5, 1998
Special Committee of the Board of Directors
PRIMEDIA Inc.
745 Fifth Avenue
New York, NY 10151
Board of Directors
PRIMEDIA Inc.
745 Fifth Avenue
New York, NY 10151
Members of the Special Committee of the Board and Members of the Board:
We understand that PRIMEDIA Inc. ("PRIMEDIA" or the "Company") and KKR 1996
Fund L.P. ("KKR 1996") propose to enter into a Securities Purchase Agreement
substantially in the form of the draft dated February 5, 1998 (the "Securities
Purchase Agreement"). Pursuant to the Securities Purchase Agreement, PRIMEDIA
will sell to KKR 1996 16,666,667 shares of common stock, par value $.01 per
share, of PRIMEDIA (the "Common Stock") at a price of $12.00 per share, for an
aggregate purchase price of $200,000,004 (the "Sale"). The terms and conditions
of the Sale are more fully set forth in the Securities Purchase Agreement.
You have asked for our opinion as to whether the consideration to be
received by the Company pursuant to the Securities Purchase Agreement is fair
from a financial point of view to the Company.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of PRIMEDIA;
(ii) reviewed certain internal financial statements and other financial and
operating data concerning PRIMEDIA prepared by the management of
PRIMEDIA;
(iii) analyzed certain financial projections prepared by the management of
PRIMEDIA;
(iv) discussed the past and current operations and financial condition and
the prospects (including information related to certain strategic and
financial benefits anticipated from the Sale) of PRIMEDIA with senior
executives of PRIMEDIA;
(v) analyzed the pro forma financial impact of the Sale, including the
impact on PRIMEDIA's after tax cash flow per share and consolidated
capitalization and financial ratios;
(vi) reviewed the reported prices and trading activity for the Common Stock;
(vii) compared the financial performance of PRIMEDIA and the prices and
trading activity of the Common Stock with that of certain other
comparable publicly-traded companies and their securities;
(viii) reviewed the financial terms, to the extent publicly available, of
certain transactions that we considered relevant;
MORGAN STANLEY
(ix) participated in discussions and negotiations among representatives of
PRIMEDIA and KKR 1996 and their financial and legal advisors;
(x) reviewed the draft Securities Purchase Agreement and certain related
documents; and
(xi) performed such other analyses and considered such other factors as we
have deemed appropriate.
We have assumed and relied upon, without independent verification, the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial projections (including information
related to certain strategic and financial benefits anticipated from the Sale),
we have assumed that they have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the future financial
performance of PRIMEDIA. We have not made any independent valuation or appraisal
of the assets or liabilities of the Company, nor have we been furnished with any
such appraisals. In addition, we have assumed that the Sale will be consummated
in accordance with the terms set forth in the draft Securities Purchase
Agreement. Our opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to us as of, the
date hereof.
As you are aware, we were not authorized to solicit, and did not solicit,
interest from any party with respect to the purchase of the shares of Common
Stock to be sold pursuant to the Securities Purchase Agreement.
We have acted as financial advisor to the Special Committee of the Board of
Directors of PRIMEDIA in connection with this transaction and will receive a fee
for our services. In the past, Morgan Stanley & Co. Incorporated and its
affiliates have provided financing and advisory services for PRIMEDIA and for
affiliates of KKR 1996 and have received fees for the rendering of these
services. In addition, as you are aware, affiliates of Morgan Stanley,
specifically Morgan Stanley Asset Management and its affiliates, currently own
approximately 1.8% of the equity of PRIMEDIA on a fully-diluted basis.
It is understood that this letter is for the information of the Special
Committee of the Board of Directors of PRIMEDIA and may not be used for any
other purpose without our prior written consent, except that this letter may be
included in its entirety in any filing made by PRIMEDIA with the Securities and
Exchange Commission in connection with the Sale. In addition, this opinion does
not in any manner address the prices at which the Common Stock will trade, and
we express no opinion or recommendation as to how the holders of Common Stock
should vote.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the consideration to be received by the Company pursuant to the
Securities Purchase Agreement is fair from a financial point of view to the
Company.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ JEFFREY N. HOGAN
--------------------------------------
Jeffrey N. Hogan
Principal
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PRIMEDIA INC.
CONSENT FORM
The undersigned stockholder votes
FOR / / AGAINST / / ABSTAIN / /
the sale of 16,666,667 shares of PRIMEDIA Inc.'s common stock, par value $.01
per share, to 1996 KKR Fund L.P. at a net purchase price to PRIMEDIA Inc. of
$12.00 per share in cash to PRIMEDIA Inc. or an aggregate purchase price of
$200,000,004.
--------------------------------------
Signature
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Print Name
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Address
Please return to The Bank of New York by the attached return envelope.