UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.               )

 

 

PRIMEDIA Inc.
745 Fifth Avenue
New York, New York 10151

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To be held Wednesday, May 23, 2007

To the Stockholders of
PRIMEDIA Inc.:

The annual meeting of stockholders of PRIMEDIA Inc. will be held on Wednesday, May 23, 2007, at The Peninsula, 700 Fifth Avenue, New York, New York 10019 at 10:00 a.m. to:

(1)   Elect nine directors;

(2)   Act upon the selection of auditors for the fiscal year ending December 31, 2007; and

(3)   Transact such other business as may properly come before the meeting.

Only holders of record of common stock of PRIMEDIA Inc., $.01 par value, at the close of business on April 9, 2007, will be entitled to vote at the meeting.

Jason S. Thaler
Senior Vice President, General Counsel and Secretary

April 25, 2007

PROXY STATEMENT

Solicitation of Proxies

This proxy statement is furnished by the Board of Directors (the “Board”) of PRIMEDIA Inc. (the “Company” or “PRIMEDIA” and, where appropriate, together with its subsidiaries), in connection with its solicitation of proxies for use at the annual meeting of stockholders to be held on Wednesday, May 23, 2007, at 10:00 a.m., at The Peninsula, 700 Fifth Avenue, New York, NY 10019 and at any and all adjournments thereof. Mailing of this proxy statement and form of proxy will commence on or about April 26, 2007.

Holders of record of common stock of the Company, $.01 par value (the “Common Stock”), at the close of business on April 9, 2007, will be entitled to one vote for each share held on all matters to come before the meeting. On April 9, 2007, there were outstanding 264,898,002 shares of Common Stock. Stockholders are requested to complete, date and sign the enclosed proxy card and promptly return it in the enclosed envelope. Alternatively, stockholders may vote via the Internet or by telephone as indicated on the enclosed materials.

The proxy on the enclosed form may be revoked at any time before it has been exercised. Unless the proxy is revoked or there is a direction to abstain on one or more proposals, it will be voted on each proposal and, if a choice is made with respect to any matter to be acted upon, in accordance with such choice. If no choice is specified, the proxy will be voted as recommended by the Board.

The cost of the preparation of proxy materials and the solicitation of proxies will be borne by the Company.

Voting at the Meeting

A majority of the votes entitled to vote on matters at the meeting constitutes a quorum. If a share is represented for any purpose at the meeting, it is present for all other matters. Abstentions and shares held of record by a broker or its nominee (“Broker Shares”) that are voted on any matter are included in determining the number of votes present. Broker Shares that are not voted on any matter at the meeting will not be included in determining whether a quorum is present.

Each matter to be voted on requires a majority of the votes cast. Abstentions and Broker Shares that are not voted on the matter will not be included in determining the number of votes cast.

Stockholders’ proxies are received by the Company’s independent proxy processing agent and the vote is certified by independent inspectors of election. Proxies will be kept confidential, except as necessary to meet legal requirements. During the proxy solicitation period, the Company will receive vote tallies from time to time from the inspectors, but such tallies will provide aggregate figures rather than names of stockholders. The independent inspectors will notify the Company if a stockholder has failed to vote so that he or she may be reminded and requested to do so.

CORPORATE GOVERNANCE

Governance Principles

The Board is committed to establishing and maintaining corporate governance practices which reflect the highest standards of ethics and integrity. Toward that end, the Company has established a Nominating and Corporate Governance Committee and adopted Corporate Governance Guidelines which set forth the practices of the Board, including guidelines for determining qualifications for directors, director independence and business conduct and ethics for the Board. The Corporate Governance Guidelines are consistent with the listing standards of the New York Stock Exchange (the “NYSE”) and the rules of the Securities and Exchange Commission (the “SEC”). The Nominating and Corporate Governance Committee charter is available, along with the Company’s Corporate

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Governance Guidelines, in the Governance section of the Company’s website located at www.primedia.com. They are also available in print by writing to PRIMEDIA Inc., Corporate Secretary, 745 Fifth Avenue, New York, NY 10151. All modifications to the Corporate Governance Guidelines will be reflected on the Company’s website.

NYSE Certification.   The Company is required to comply with the NYSE listing standards applicable to corporate governance. On June 5, 2006, the Company timely submitted to the NYSE the Annual CEO Certification, pursuant to Section 303A.12 of the NYSE’s listing standards, whereby the Chief Executive Officer of the Company certified that he was not aware of any violation by the Company of the NYSE’s corporate governance listing standards as of the date of the certification.

Director Independence

Director Independence.   The Board is comprised of a majority of independent directors. In order for a director to be considered “independent,” the Board must affirmatively determine that the director has no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company). The Board has established guidelines to assist it in making this determination and those guidelines are set forth in Annex A of our Corporate Governance Guidelines. In each case, the Board considers all relevant facts and circumstances. The mere ownership of a significant amount of stock is not in and of itself a bar to independence, but one factor to consider. Applying these guidelines and the rules of the NYSE and other applicable laws, the Board has determined that the following directors, comprising a majority of the Company’s directors, are independent members of its Board: David A. Bell, Dan Ciporin, Meyer Feldberg, Perry Golkin, H. John Greeniaus, Kevin Smith and Thomas C. Uger. The remaining directors, Dean B. Nelson,  the Company’s Chairman of the Board, President and Chief Executive Officer (“CEO”) and Beverly C. Chell, the Company’s former Vice Chairman and General Counsel, do not qualify as independent under established guidelines.

Board Committee Independence.   Under the applicable NYSE rules and the Sarbanes-Oxley Act of 2002, the Company must have an audit committee comprised solely of independent directors. In addition to the requirements for independent directors in the preceding paragraph, members of the audit committee must meet separate requirements that they receive no compensation from the Company, other than compensation for serving as a director and that they are not “affiliated persons” of the Company. The Company is in compliance with all the independence requirements relating to the Audit Committee. Please refer to “Committees of the Board” below for more information on the Board committees.

Code of Business Conduct and Ethics

The Company strongly believes that its business practices should reflect the highest standards of honesty, fair dealing and ethics. Toward that end, the Board has adopted a Code of Business Conduct and Ethics (the “Ethics Code”) which applies to all directors, officers and employees of the Company. The Ethics Code is available in the Governance section of the Company’s website located at www.primedia.com. It is also available in print by writing to PRIMEDIA Inc., Corporate Secretary, 745 Fifth Avenue, New York, NY 10151. Any modifications to the Ethics Code will be reflected on the Company’s website. The Company also has an Ethics Committee which investigates allegations of unethical or inappropriate behavior as well as a toll-free Audit Alertline which employees may use on a confidential basis to notify the Audit Committee if they become aware of any questionable accounting practices.

Stockholder Communications with the Board

Stockholders who wish to communicate with a member or members of the Board may do so by addressing their correspondence to such member or members c/o Corporate Secretary, PRIMEDIA Inc., 745 Fifth Avenue, New York, NY 10151.

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BOARD OF DIRECTORS

Board of Directors

Our Board currently consists of nine members. The Board has responsibility for establishing broad corporate policies and for the overall performance of the Company. Members of the Board are kept informed of the Company’s businesses by various reports and documents sent to them each month as well as by operating and financial reports made at Board and committee meetings by the Chairman of the Board, President and CEO and other officers and management executives.

Regular meetings of the Board are held throughout the year. In 2006, the Board held six regular meetings, three special meetings and also acted by unanimous written consent. Each director standing for election attended at least 80% of the total number of meetings of the Board and Board committees of which he or she was a member in 2006.

It is the Company’s policy that directors are encouraged to attend the annual meeting of stockholders. Seven directors attended the annual meeting in 2006 either in person or by telephone.

Executive Sessions

Directors who are not officers or employees of the Company hold regular executive sessions at which management directors, including the CEO, are not present. Unless the Board determines otherwise, these sessions shall occur, at a minimum, two times a year. In addition, those directors who are not management or affiliated with the Company’s majority shareholder, investment partnerships controlled by Kohlberg Kravis Roberts & Co. L.P. (“KKR”), hold an executive session at least once a year at which only these directors are present. The director with the most seniority in attendance at an executive session presides over such executive session. Since the last annual meeting of stockholders, three executive sessions were held without management directors and one without the management directors and directors affiliated with KKR.

Committees of the Board

The Board has established the following committees to assist it in discharging its responsibilities: Audit, Compensation, Nominating and Corporate Governance and Executive. Under the applicable NYSE rules, the Company is considered a “controlled company” because more than 50% of the stockholder voting power of the Company is held by KKR. As a result, the Company is not required to have a compensation, nominating or corporate governance committee; however, the Board has elected to establish these committees anyway. The Board has determined that all the members of each of the Board’s committees meet the criteria for independence as established by the NYSE and under the Sarbanes-Oxley Act of 2002, except that Beverly C. Chell, a member of the Compensation Committee, and Dean B. Nelson, a member of the Executive Committee, are not considered independent. Each of the committees is described in greater detail below. The Board has established written charters for the Compensation Committee, Audit Committee and Nominating and Corporate Governance Committee. Each of the charters can be found in the Governance section on the Company’s website located at www.primedia.com or can be obtained in print by writing to PRIMEDIA Inc., Corporate Secretary, 745 Fifth Avenue, New York, NY 10151. Any changes to the charters will be reflected on the Company’s website.

Audit Committee.   The purpose of the Audit Committee is to assist the Board in overseeing the accounting, reporting and financial practices of the Company. Its duties include selecting and overseeing the Company’s independent auditor, reviewing the scope of the audit to be conducted by the independent auditor, including the results of such audit, reviewing the Company’s internal audit function and its disclosure and internal controls procedures, approving audit and other services to be provided by the Company’s independent auditor and overseeing the Company’s financial reports, including our annual report, and the accounting policies and practices followed by the Company in preparing such reports.

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The charter of the Audit Committee requires that the Audit Committee be comprised of at least three directors, all of whom must be independent under the NYSE rules and the Sarbanes-Oxley Act of 2002. In addition, each member of the Audit Committee must be financially literate within the meaning of the NYSE listing standards, and at least one member must have accounting or related financial expertise as determined by the Board. The members of the Audit Committee are Meyer Feldberg (Chairman), David A. Bell, Dan Ciporin, H. John Greeniaus and Kevin Smith. The Board has determined that each of the Audit Committee members is independent and financially literate and that Messrs. Bell, Ciporin, Greeniaus and Smith each qualify as an “audit committee financial expert,” as defined by the SEC, and as a result have accounting and related financial management expertise within the meaning of the NYSE listing standards. The Audit Committee met nine times in 2006 and also acted by unanimous written consent. The Audit Committee’s Report appears on page 37.

Compensation Committee.   The purpose of the Compensation Committee is to review and administer the Company’s compensation programs, including remuneration arrangements for its senior executives, including the CEO. The current members of the Compensation Committee are Perry Golkin (Chairman), Beverly C. Chell, H. John Greeniaus and Thomas C. Uger. The Compensation Committee met five times in 2006 and also acted by unanimous written consent. Additional information about the Compensation Committee’s responsibilities is included in the Compensation Discussion and Analysis beginning on page 13. The Compensation Committee’s Report appears on page 21.

Nominating and Corporate Governance Committee.   The purpose of the Nominating and Corporate Governance Committee is to (i) develop and recommend to the Board a set of corporate governance principles and to perform a leadership role in shaping the Company’s corporate governance and (ii) identify qualified candidates to serve on the Board and recommend director nominees to be submitted to the stockholders for election at an annual meeting. The Committee’s duties include regularly reviewing and recommending changes to the Company’s corporate governance principles, including retirement and other tenure policies for directors, assessing channels through which the Board receives information, overseeing evaluation of the Board and management and annually evaluating the Committee’s performance and charter. The members of the Nominating and Corporate Governance Committee are David A. Bell (Chairman), Meyer Feldberg and H. John Greeniaus. The Board has determined that each of the Nominating and Corporate Governance Committee members is independent. The Nominating and Corporate Governance Committee met four times in 2006.

Executive Committee.   The Executive Committee has authority to act for the Board on all matters during intervals between Board meetings. The Executive Committee consists of David A. Bell, Dean B. Nelson, Perry Golkin and Thomas C. Uger. During 2006, the Executive Committee acted by unanimous written consent.

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Self Evaluations

In accordance with its Corporate Governance Guidelines, the full Board, the Audit Committee and the Nominating and Corporate Governance Committee each completed a self evaluation since the last Annual Meeting of Stockholders.

Director Nominations

As part of its nominating responsibilities, the Nominating and Corporate Governance Committee of the Board will consider stockholder recommendations for candidates for the Board. Stockholders should send their recommendations to PRIMEDIA Inc., Corporate Secretary, 745 Fifth Avenue, New York, NY 10151. Such nominations must conform to the procedures set forth in the Company’s By-Laws, a copy of which is available by writing to the Corporate Secretary at the above address. The Nominating and Corporate Governance Committee also considers candidates recommended by current directors, Company officers, employees and other third parties. Candidates should be individuals with high standards of ethics and integrity, good judgment and who are committed to representing the interests of the stockholders. They should have broad business, governmental, non-profit or professional experience that indicates the candidate will be able to make significant and immediate contributions to the Board’s discussions and decisions. They should be able to devote sufficient time and energy to the performance of the duties of a director. The Board’s review of a candidate is typically based on any written materials provided with respect to the potential candidate, personal references and interviews. In the future, the Nominating and Corporate Governance Committee will use these and other materials approved by the Board and the Nominating and Corporate Governance Committee to evaluate potential candidates. In 2006, the Company did not pay a fee to any third party to identify candidates.

PROPOSAL 1—ELECTION OF DIRECTORS

The Company currently has nine directors, all of whom are standing for reelection at this year’s annual meeting. It is proposed that all nine directors be elected to hold office until the next annual meeting of stockholders and until their successors have been elected. Unless otherwise marked or indicated, a proxy will be voted for these individuals. Although management does not anticipate that any of the persons named below will be unable or unwilling to stand for election, a proxy, in the event of such an occurrence, may be voted for a substitute designated by the Board. However, in lieu of designating a substitute, the Board may reduce the number of directors.

The Board of Directors recommends that you vote FOR the nominees described below.

 

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NON-EMPLOYEE DIRECTOR COMPENSATION AND BENEFITS

Only directors who are not full-time employees of the Company receive additional compensation for services as a director. The Company uses a combination of cash and stock-based compensation to attract and retain highly-qualified, independent individuals to serve on our Board. Compensation for non-employee directors during 2006 consisted of the following:

 

(1)            Includes all service on the Board and committees other than those specified above, including attendance at meetings. Annual fees (including any additional fees for committee service) are payable quarterly. For 2007, the annual retainer will remain at $55,000 and additional committee fees will remain unchanged.

(2)            Board members affiliated with KKR do not receive additional fees for serving on the Compensation Committee.

(3)            Issued upon being elected to the Board. Kevin Smith and Dan Ciporin joined the Board in July 2006 and each was issued 50,000 stock options. No other options were issued to non-employee directors in 2006.

Stock Option Awards.   Each non-employee director receives a grant of options upon being elected a director. Options received by directors vest over three years in equal installments and expire after five years. The Company does not grant annual stock option awards to its directors but has in the past periodically granted options to directors in addition to those granted upon being elected as a director.

Business Expenses.   Directors are reimbursed for the business expenses related to attendance at Board meetings, including room, meals and transportation to and from Board meetings.

Directors’ Deferred Compensation Plan.   Under the Directors’ Deferred Compensation Plan, a non-employee director may elect to defer all or part of the annual fees payable to the director. Deferred amounts are “credited” to an unfunded cash account or Common Stock equivalent account, as selected by the director. Interest, at PRIMEDIA’s average borrowing rate, is credited quarterly for bookkeeping purposes to a director’s cash account. Subject to certain restrictions, a director is permitted to take distributions in cash from a cash account or in shares of Common Stock or cash equivalent equal to the value of credited shares at the time of distribution, at the Company’s option, in whole or in part, from her or his account following retirement or termination of service. Only one director, Mr. Golkin, currently participates in the Plan under which he has elected to defer his fees in Common Stock equivalents.

Director and Officer Liability Insurance.   The Company obtains Director and Officer Liability Insurance to insure our directors and officers against certain losses they may be required to pay as a result of performing their duties on behalf of the Company as directors and officers. The Company pays one premium for this insurance for the whole Company and therefore does not allocate a specific dollar amount to any individual director or the directors as a whole.

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NON-EMPLOYEE DIRECTOR COMPENSATION FOR 2006

The table below summarizes the compensation paid by the Company to non-employee directors for the fiscal year ended December 31, 2006:

 

(1)             Dollar amounts in this column reflect the compensation expense recognized by the Company for financial statement reporting purposes with respect to outstanding stock options under FAS 123(R). These values have been determined based on the assumptions set forth in Note 15 to our consolidated financial statements for the fiscal year ended December 31, 2006.

(2)             Mr. Bell’s fees consisted of the $55,000 annual fee, $25,000 for serving on the Audit Committee and $13,750 for serving on the Nominating and Corporate Governance Committee. Mr. Bell was appointed chairman of the Nominating and Corporate Governance Committee on March 22, 2006.

(3)             Ms. Chell ceased to be an employee of the Company as of June 30, 2006. Ms. Chell’s fees consisted of $27,500, a prorated portion of the annual fee and $5,000, a prorated portion of the annual fee for serving on the Compensation Committee. Of Ms. Chell’s fees, $16,250, representing fees for the fourth quarter 2006, was paid in January 2007. Ms. Chell was appointed to the Compensation Committee on July 12, 2006. See footnote 8 to the Summary Compensation Table for additional compensation unrelated to Ms. Chell’s service as a Board member.

(4)             Mr. Ciporin joined the Board on July 25, 2006. Mr. Ciporin’s fees consisted of $23,913, a prorated portion of the annual fee and $6,937, a prorated portion of the annual fee for serving on the Audit Committee. Mr. Ciporin was appointed to the Audit Committee on September 21, 2006. Of Mr. Ciporin’s fees, $20,000, representing fees for the fourth quarter 2006, was paid in January 2007.

(5)             Mr. Dattels resigned from the Board as of March 2, 2006. Mr. Dattels’ fees consisted of $13,750, a prorated portion of the annual fee, $7,500, a prorated portion of the annual fee for serving on the Audit Committee and $2,500, a prorated portion of the annual fee for serving on the Nominating and Corporate Governance Committee.

(6)             Mr. Feldberg’s fees consisted of the $55,000 annual fee, $28,750 for serving on the Audit Committee and $11,250 for serving on the Nominating and Corporate Governance Committee. Mr. Feldberg was appointed Chairman of the Audit Committee on March 22, 2006.

(7)             Mr. Golkin participates in the Directors’ Deferred Compensation Plan and as a result did not receive any cash compensation during 2006. In lieu of cash compensation, at the end of each calendar quarter during 2006, Mr. Golkin received credits for PRIMEDIA Common Stock in an amount determined by dividing the quarterly fee payable, $13,750, by the share price on the last trading date of the calendar quarter. During 2006, Mr. Golkin received credits in PRIMEDIA Common Stock in the following amounts:

 

As of April 1, 2007, Mr. Golkin has accumulated an aggregate of 157,112 shares of PRIMEDIA Common Stock through the Directors’ Deferred Compensation Plan.

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          (8) Mr. Greeniaus’ fees consisted of the $55,000 annual fee, $25,000 for serving on the Audit Committee, $10,000 for serving on the Nominating and Corporate Governance Committee and $10,000 for serving on the Compensation Committee.

          (9) Mr. Kravis’ fees consisted of $20,900, a prorated portion of the annual fee. Mr. Kravis did not stand for reelection at the 2006 Annual Meeting and left the board effective May 17, 2006.

    (10) Mr. Smith joined the Board on July 25, 2006. Mr. Smith’s fees consisted of $23,913, a prorated portion of the annual fee and $6,937, a prorated portion of the annual fee for serving on the Audit Committee. Mr. Smith was appointed to the Audit Committee on September 21, 2006. Of Mr. Smith’s fees, $20,000, representing fees for the fourth quarter 2006, was paid in January 2007.

    (11) Mr. Uger’s fees consisted of $55,000 annual fee for 2006 and $13,750 which represented the quarterly fee for the fourth quarter 2005 that was paid in January 2006.

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EXECUTIVE OFFICERS

The following are the executive officers of the Company other than Mr. Nelson:

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COMPENSATION DISCUSSION AND ANALYSIS

Overview

This Compensation Discussion and Analysis describes the Company’s compensation philosophy, objectives and methodologies, including the determination of compensation for our named executive officers in 2006 (see page 22 for a list of our named executive officers and additional information concerning their compensation for 2006).

Overall Compensation Philosophy

PRIMEDIA’s executive compensation program is designed to attract, retain and motivate top executive talent while aligning the interests and compensation of such executives with the interests of our stockholders. To that end, compensation packages provided by our Company include both cash and stock-based compensation that recognize and reward individual contributions to the Company as measured against established financial and operational goals of the Company. Our executive compensation packages are intended to reward achievement of both short and long-term business goals and are made up of salary and annual bonuses, equity incentive compensation consisting of stock options or, in rare cases, restricted stock and other specifically-tailored cash incentive programs.

Role of Compensation Committee, Management and Third Parties in the Executive Compensation Process

Role of Compensation Committee

Under applicable NYSE rules, the Company is considered a “controlled company” because more than 50% of the stockholder voting power of the Company is held by KKR. As a result, the Company is not required to have a compensation committee. However, the Board has elected to establish a Compensation Committee to assist it in reviewing and administering the Company’s compensation program.

The Compensation Committee is responsible for establishing and overseeing the Company’s executive compensation program. In connection with its duties, the Compensation Committee periodically reviews the executive compensation program and evaluates the relationship between the program and the Company’s performance. The Compensation Committee considers, among other things, the following factors in making decisions regarding executive compensation:

·       The Company’s compensation philosophy;

·       The Company’s financial and operational performance relative to peers and industry standards;

·       Aligning of executive interests with stockholder interests;

·       Total compensation and the combination of compensation elements; and

·       Ability to attract, retain and motivate executives.

The Compensation Committee also develops the individual and corporate goals and objectives relevant to the compensation of the Company’s CEO. Furthermore, to ensure consistency throughout the compensation process, the Compensation Committee together with our CEO reviews the compensation components for the Company’s other named executive officers.

Role of Management

Management of the Company assists the Compensation Committee in making compensation determinations in various ways. Our CEO assesses the performance of the other named executive officers and recommends their compensation to the Compensation Committee. In addition, our CEO and Executive Vice President, Human Resources develop proposals regarding changes in compensation for review and approval by the Compensation Committee and assist the Compensation

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Committee in making compensation decisions by providing data necessary to evaluate and implement compensation proposals and programs. Our Executive Vice President, Human Resources often attends Compensation Committee meetings to provide recommendations and insight regarding executive compensation.

In addition, the Compensation Committee has established a pool consisting of 150,000 options and has delegated to our CEO the authority and discretion to make grants from such pool not exceeding 15,000 options per grant. Our CEO is required to periodically report these grants to the Compensation Committee.

Role of Compensation Consultant and other Advisors

Neither the Company nor the Compensation Committee has any contractual relationship with any compensation consultant. Periodically, however, the Company, through its Human Resources department, has engaged Hewitt Associates to assist with specific requests regarding equity compensation packages. In particular, in 2006, the Company engaged Hewitt Associates to provide advice relating to the treatment of stock options in connection with the potential spin-off of CSI and to provide relevant market data in connection with the compensation relating to the promotion of one of our named executive officers. In addition, the Company from time to time seeks advice from legal counsel regarding current developments in laws and regulations relating to compensation matters.

2006 Executive Compensation Components

During 2006, the Company’s compensation program consisted of the following components:

·       Base Salary

·       Annual Incentive

·       Long-Term Incentive Program/Equity Awards

·       Other Executive Incentive Programs

·       Retirement Benefits

·       Personal Benefits and Perquisites

Base Salary

Base salaries for our named executive officers depend on the level of responsibility of the position, experience of the executive, performance of the executive and objectives of the Company. In addition, the Company evaluates salaries paid in the competitive marketplace for executive talent and compares base salaries for comparable positions at other companies.

The Company regularly monitors base salaries and adjustments are made based upon the performance of the Company and the executive. Both financial and non-financial performance measures are considered when determining if any adjustment is warranted. If a named executive officer has responsibility for a particular business unit, the financial results of that unit are also considered. In addition, certain of our named executive officers have employment agreements which set forth the executive’s base salary (see page 26 for a more detailed description of such agreements).

During 2006, the following base salary adjustments were made for named executive officers:

·       Kevin Neary:  Upon Mr. Neary’s promotion to Chief Financial Officer, his base salary increased as of May 17, 2006 from $330,000 to $400,000.

·       Steven Parr:  Upon Mr. Parr’s promotion to President, PEM, his base salary increased as of August 1, 2006 from $525,000 to $600,000.

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·       Robert Metz:  CEO, CSI, base salary increased as of January 1, 2006 from $475,000 to $500,000. This increase was based on merit.

Annual Incentive Program

During 2006, each of the named executive officers participated in the Company’s Executive Incentive Compensation Plan (“EICP”). The EICP is an annual cash incentive program that provides cash awards that are contingent and based on pre-established financial targets. Awards are based on a percentage of the executive’s earned base salary during the calendar year in which they participate in the EICP.

In December of each year, as part of the Company’s annual budget process, the Compensation Committee determines the components of the financial objectives portion of the EICP and sets the threshhold, target and maximum levels for each component as well as the weighting of each component respective to the total award. The Compensation Committee considers specific circumstances relating to the Company’s current operations when determining the threshold, target and maximum levels.

For 2006, for named executive officers other than those employed by CSI, 80% of the named executive officer’s EICP award was based on achievement of financial objectives relating to consolidated net revenues, EBITDA and net free cash flow (each as defined below) of their respective business units, with each component accounting for 20%, 40% and 20%, respectively, of the total financial objectives. The remaining 20% is a discretionary portion.

For named executive officers at CSI (Messers. Metz and Crawford), 90% of the EICP award was based on achievement of financial objectives relating to consolidated net revenues, EBITDA and net free cash flow of CSI, with each component accounting for 25%, 40% and 25%, respectively, of the total financial objectives. The remaining 10% is a discretionary portion. The financial objectives for Messers. Metz and Crawford are based solely on CSI financial results.

The Company defines the financial objectives under the EICP as follows:

·       Net Revenue:  the total product and services revenues as set forth in the Company’s annual audited financial statements, excluding barter revenues, intercompany revenues and cross-promotion revenues.

·       EBITDA:  segment EBITDA, which represents a Company business segment’s earnings before interest, taxes, depreciation, amortization and other charges.

·       Net Free Cash Flow:  total segment EBITDA, plus/minus changes in working capital, non-cash EBITDA items and acquisition reserve payments.

Bonus payments range from 50% to 150% of an executive’s target bonus and are contingent upon meeting the pre-established objectives as follows:

·       No payment for a particular financial objective of the EICP award unless the Company achieves the threshold performance level for that objective;

·       Payment of at least 50% but less than 100% of the target bonus for the financial objective of the EICP award determined on a pro rata basis if the Company achieves or exceeds the threshold performance level for that objective but does not meet the target performance level;

·       Payment of at least 100% but less than 150% of the target bonus for the financial objective of the EICP award determined on a pro rata basis if the Company achieves or exceeds the target performance level for that objective but does not meet the maximum performance level; and

·       Payment of 150% of the target bonus for the financial objective of the EICP award if the Company achieves or exceeds the maximum performance level for that objective.

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Following the completion of the audit of the Company’s financial statements for the prior fiscal year, the Compensation Committee, with the assistance of the Human Resources department, reviews the actual performance of the Company in relation to each of the pre-determined financial objectives to determine financial achievement. Discretionary awards for named executive officers in most cases are determined by applying the weighted average financial award percentage to the discretionary award target amounts.  Payment of EICP bonuses is generally made in April of the fiscal year following the plan year.

The total target awards under the EICP for each of the named executive officers for 2006 and 2007 are:

 

Each of our named executive officers received the following EICP payments in May 2006 related to the fiscal year ended December 31, 2005:

 

EICP awards made to the named executive officers for the fiscal year ended December 31, 2006, which were paid in April 2007, are reflected in columns (d) and (g) of the Summary Compensation Table.

Long-Term Equity-Based Incentive Programs

Our named executive officers are eligible to receive either stock options or restricted stock under the PRIMEDIA 1992 Stock Purchase and Option Plan, as amended. The value and size of any equity awards granted are based on the market price of our common stock, Company’s performance and executive’s performance.

Stock Options

Stock options provide an effective means to align the interests of executives with our stockholders and the vesting schedule of option grants encourages executive retention. The Compensation Committee considers a number of factors when considering a grant of stock options, including the executive’s base salary, performance and value of the options as well as recommendations from management. In addition, the Compensation Committee (or CEO, as described earlier) also grants stock options to newly hired or promoted executives other than the named executive officers. The Compensation Committee approves all grants of stock options or restricted stock, except for the pool established for our CEO.

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All awards of stock options are made at the market price of our Common Stock on the business day preceding the date of grant. Currently, option grants vest one-third each on the first, second and third anniversaries of the grant and expire after five years.

The last broad-based grant of stock options occurred in December 2003. The Company was evaluating the possibility of making another grant prior to the end of the 2005 fiscal year, but in October 2005, the Company began exploring the possible spin-off of CSI and delayed any new grants pending the outcome of any decision relating to the spin. As a result, during 2006, the Company did not grant any stock options to any named executive officers. In February 2007, the Company announced that it was exploring the sale of PEM and thus there are no current plans to grant any options to any named executive officers in 2007 until a final decision is made with regard to such sale.

Restricted Stock

The Compensation Committee, in certain circumstances, will award restricted stock to executives as a special incentive award; however, it is not a regular practice of the Company to grant restricted stock awards. The Compensation Committee considers a number of factors when considering a grant of restricted stock, including the executive’s performance and recommendations from Company management. Restricted stock awards vest in tranches on designated anniversary dates of the grant date and tranches vest only if the recipient remains employed by the Company on the vesting dates.

Two of our named executive officers were granted restricted stock in December 2003, part of which vested in 2006 as set forth in the following table:

 

During 2006, the Company did not grant any restricted stock to any named executive officers.

Other Executive Incentive Programs

From time to time, the Company will create special cash-based incentive programs for senior executive officers specifically tailored to the business units such executives operate and the financial and operational performance of such units. The purpose of these programs is to provide incentives for long-term earnings growth and organic operational growth in such businesses.

The Company currently has two special incentive programs in place, both of which relate to CSI.

CSI 2005-2007 Long-Term Plan (the “Long-Term Plan”)

The Long-Term Plan is a cash incentive program that provides for annual awards to certain executives of CSI. The Compensation Committee administers the Long-Term Plan and determines each year which executives will participate in the Long-Term Plan for that year.

Awards under the Long-Term Plan are contingent on achieving pre-established financial targets based on the EBITDA, as defined, of CSI. Calculation of CSI EBITDA under the Long-Term Plan utilizes the same method as the calculation of EBITDA under the EICP. For awards to be made in any plan year, EBITDA for that year must equal at least 90% of the target for that year. If that minimum threshold is reached, 50% of the award is paid. If EBITDA equals or exceeds the target for that year by 110%, then 150% of the award is paid. If EBITDA is above 90% but below 110%, then award payments are scaled ratably.

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The following named executive officers received Long-Term Plan payments in April 2006 for performance related to the fiscal year ended December 31, 2005:

 

Long-Term Plan Awards made to the named executive officers for performance for the fiscal year ended December 31, 2006, which were paid in April 2007, are reflected in column (g) of the Summary Compensation Table.

CSI Auto and New Home Guide Launch Incentive Plan (the “Launch Plan”)

The Launch Plan is another cash incentive program that provides for annual awards for certain executives of CSI. The Compensation Committee administers the Launch Plan and determines each year which executives will participate in the Launch Plan for that year.

Under the Launch Plan, a pool of funds is set aside to be paid out in connection with the launch of each new Auto Guide and New Home Guide launched during the plan year. There are two types of awards under the Launch Plan:

·  Launch Awards—$10,000 for each New Home Guide launched and $40,000 for each new Auto Guide launched; and

·  Profitability Awards—for each of the three years following the launch of a publication, participants are eligible for payments of $10,000 for each New Home Guide and $40,000 for each new Auto Guide launched, based on achievement of certain contribution and profitability goals.

Under the Launch Plan, Launch Awards are limited to $1,140,000 in the aggregate and Profitability Awards are limited to $1,800,000 in the aggregate.

The following named executive officers received Launch Plan payments in April 2006 for performance related to the fiscal year ended December 31, 2005:

 

Launch Plan Awards made to the named executive officers for performance for the fiscal year ended December 31, 2006, which were paid in April 2007, are reflected in column (g) of the Summary Compensation Table.

Retirement Benefits

All employees of the Company are eligible to participate in the PRIMEDIA Thrift & Retirement Plan (the “Retirement Plan”) following completion of one year of service at the Company. The Retirement Plan is a defined contribution, tax-qualified retirement savings plan pursuant to which all eligible highly compensated employees (as defined in the Retirement Plan), including the named executive officers, are able to contribute, on a before-tax or after-tax basis, the lesser of up to 7% of their annual base salary or the limit prescribed by the Internal Revenue Service (“IRS”). All other eligible employees are able to contribute the lesser of 20% of their annual base salary or the limit prescribed by the IRS. The Company matches 50% of the first 6% of pay that is contributed to the Retirement Plan by employees at certain of our operating units and 25% at our other operating units. In addition, for employees at certain operating units, the Company will contribute to the Retirement Plan 1.5% of an employee’s base pay even if the employee does not contribute to the Retirement Plan. All employee contributions to the Retirement Plan are 100% vested upon contribution and Company contributions (including the 1.5% Company contributions) vest in 20% increments equally over a period of five years commencing on the employee’s hire date.

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In 1995, the Company created a Restoration Plan (the “Restoration Plan”) for certain employees. The Restoration Plan was a deferred, unfunded program that restored to certain employees of the Company amounts that the Company was not permitted to contribute to the Retirement Plan on behalf of the employee as a result of IRS limitations on Company contributions to the Retirement Plan. The Company ceased contributing to the Restoration Plan as of January 1, 2001, although the participants, including certain named executive officers, continued to receive interest on their balances in the Restoration Plan.  In 2006, the Restoration Plan was terminated and balances were distributed to employees in February 2007. The table below sets forth the distributions made to named executive officers in February 2007 as a result of the termination of the Restoration Plan:

 

Other than the Retirement Plan and the Chell Annuity (described on page 25), the Company does not operate any pension or retirement plan that receive contributions or provide any additional retirement benefits specifically to our named executive officers. The Company has two additional dormant retirement plans under which employees are no longer eligible to contribute and intends to merge these plans into the Retirement Plan.

Personal Benefits and Perquisites

Although the Company does not have an extensive personal benefits and perquisite program, the Company does provide named executive officers with perquisites and other personal benefits that the Company believes provide economic value to the executive and assist the Company in attracting, retaining and motivating key executives. Personal benefits and perquisites are designed to be reasonable, competitive and consistent with the Company’s overall compensation philosophy. The Compensation Committee, with input and recommendations from our Human Resources department, periodically reviews the level of perquisites and personal benefits provided to named executive officers.

Personal benefits and perquisites constitute only a small percentage of each named executive officer’s compensation and include, or have included in the past, monthly automobile allowances or direct payment of automobile leases, use of car services, payment of club memberships, reimbursement of travel expenses, use of corporate apartments and tax gross-up payments. Other than these personal benefits and perquisites, our named executive officers have the same benefits as provided to other employees.

We report the costs of personal benefits and perquisites for the named executive officers for 2006 in the Summary Compensation Table.

Tax and Accounting Implications

Deductibility of Executive Compensation

In overseeing the Company’s executive compensation program, the Compensation Committee reviews and considers the effect of Section 162(m) of the Internal Revenue Code, which provides that the Company may not deduct compensation of more than $1 million that is paid to certain individuals. The Compensation Committee seeks to preserve the tax deductibility of compensation, however, it has authorized, and will continue to retain the right to authorize, compensation that may not meet deductibility requirements if it determines that such compensation is in the best interests of the stockholders. The Compensation Committee believes it must retain flexibility to exercise its judgment

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in assessing executive performance and that compensation for executive officers should be governed by the Company’s overall executive compensation philosophy and the interests of our stockholders, notwithstanding the effect of such compensation on deductibility in any given year.

Accounting for Stock-Based Compensation

Effective January 1, 2006, the Company began accounting for stock-based compensation in accordance with the Statement of Financial Accounting Standard No. 123(R), “Share-Based Payment.”

Stock Ownership Guidelines

The Company does not currently have a formal stock ownership requirement for executives but each of our named executive officers owns shares of our Common Stock or options to purchase our Common Stock.

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COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

Submitted by the Compensation Committee of the Board of Directors

Perry Golkin, Chairman

Beverly C. Chell

H. John Greeniaus

Thomas C. Uger

The foregoing Compensation Committee Report shall not be deemed to be soliciting material or to be filed with the Securities and Exchange Commission and should not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates this information by reference and shall not otherwise be deemed filed under such acts.

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SUMMARY COMPENSATION TABLE FOR 2006

The following table summarizes the total compensation paid to or earned by each of the named executive officers for the fiscal year ended December 31, 2006.

             (1)  This column reflects amounts earned for 2006 under the discretionary portion of the EICP. See the related discussion in the “Compensation Discussion and Analysis” section on page 15.

             (2)  Dollar amounts in this column reflect the compensation expense recognized by the Company for financial statement reporting purposes with respect to restricted stock under FAS123(R). These values have been determined based on the assumptions set forth in Note 15 to our consolidated financial statements for the fiscal year ended December 31, 2006.

             (3)  Dollar amounts in this column reflect the compensation expense recognized by the Company for financial statement reporting purposes with respect to outstanding stock options under FAS123(R). These values have been determined based on the assumptions set forth in Note 15 to our consolidated financial statements for the fiscal year ended December 31, 2006.

             (4)  This column reflects amounts earned for 2006 under the financial portion of the EICP, the Long-Term Plan and Launch Plan. See the related discussion in the “Compensation Discussion and Analysis” section on page 15.

             (5)  Reflects $6,600 in matching funds contributed by the Company to the Retirement Plan, $3,300 in unmatched contributions by the Company to the Retirement Plan, and a $7,200 annual car allowance.

             (6)  Reflects $6,600 in matching funds contributed by the Company to the Retirement Plan, $3,300 in unmatched contributions by the Company to the Retirement Plan, a $10,000 annual car allowance and $235 in interest on amounts previously accrued in the Restoration Plan.

             (7)  Upon her retirement on June 30, 2006, Ms. Chell was paid 50% of her target bonus under the EICP.

             (8)  Reflects $6,600 in matching funds contributed by the Company to the Retirement Plan, $3,300 in unmatched contributions by the Company to the Retirement Plan, $6,043 for automobile lease payments, $32,500 in fees for serving as a director of the Company, $84,063 paid pursuant to Ms. Chell’s consulting agreement with the Company, $13,436 in interest on amounts previously accrued in the Restoration Plan and $62,873 in payments under the Chell Annuity.

             (9)  Reflects payments of $267,268 under the EICP (financial portion), $205,210 under the Long-Term Plan and $19,000 under the Launch Plan.

        (10)  Reflects $4,400 in matching funds contributed by the Company to the Retirement Plan and $367 in interest on amounts previously accrued in the Restoration Plan.

        (11)  Reflects $6,600 in matching funds contributed by the Company to the Retirement Plan, $3,300 in unmatched contributions by the Company to the Retirement Plan and $44,775 related to the use of a corporate apartment.

        (12)  Reflects payments of $209,702 under the EICP (financial portion), $169,522 under the Long-Term Plan and $18,000 under the Launch Plan.

        (13)  Reflects $6,600 in matching funds contributed by the Company to the Retirement Plan, $164 in interest on amounts previously accrued in the Restoration Plan and $1,500 paid as a referral fee related to the employment of an individual at CSI.

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GRANTS OF PLAN-BASED AWARDS FOR 2006

The following table summarizes the grants of plan-based awards to each of the named executive officers for the fiscal year ended December 31, 2006:

(1)                Amounts represent the potential threshhold, target and maximum EICP awards that could have been achieved for the 2006 performance year. Actual payments made are set forth in columns (d) and (g) of the Summary Compensation Table.

(2)                Amounts represent the potential threshhold, target and maximum Long-Term Plan awards that could have been achieved for the 2006 performance year.  Actual payments made to Messers. Metz and Crawford under the Long-Term Plan for fiscal year 2006 are set forth in column (g) of the Summary Compensation Table.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END FOR 2006

The following table summarizes the equity awards granted to our named executive officers that were outstanding as of December 31, 2006:

 

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(1)                Stock options become exercisable in accordance with the vesting schedule below.

(2)                Represents 1,800,000 options to purchase common stock issued to Capstone, a consulting firm to the Company. Mr. Nelson, the Company’s Chairman, President and CEO, is CEO of Capstone and possesses sole voting and investment power with respect to such options.

(3)                The market value of restricted stock as of December 31, 2006 was determined using the closing price of our Common Stock of $1.69 on December 29, 2006 (last trading day of the year).

(4)                Shares are scheduled to vest on November 30, 2007.

(a)                Pursuant to an option extension agreement entered into with Ms. Chell in August 2005, Ms. Chell’s 1,542,484 outstanding $5.00 options granted on May 13, 1992 will expire on November 30, 2008.

(b)                Pursuant to an option agreement entered into with Ms. Chell in April 2002, Ms. Chell’s 330,000 outstanding $4.00 “time vest” options will expire on April 16, 2012 and her 770,000 outstanding $5.00 and $6.00 “performance vest” options will vest 100% on April 16, 2010 (the 8th anniversary of the grant date) and expire on April 16, 2012.

OPTION EXERCISES AND STOCK VESTED FOR 2006

The following table shows (1) the stock options exercised by named executive officers during 2006 and (2) each named executive officer’s restricted stock awards that vested during 2006:

(1)            Represents the number of shares acquired upon vesting of restricted stock and the value realized, each before payment of any applicable withholding taxes.

(2)            Mr. Metz’s ownership interest vested in 112,500 shares with a market price of $1.56 per share on November 30, 2006.

(3)            Mr. Crawford’s ownership interest vested in 81,250 shares with a market price of $1.56 per share on November 30, 2006.

PENSION BENEFITS FOR 2006

The Company does not have in place any plans that provide for specified retirement payments and benefits or payments and benefits to be paid in connection with the retirement of a named executive

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officer. As further described in the Compensation Discussion and Analysis, all employees of the Company, including named executive officers, are eligible to participate in the Retirement Plan, which is a tax-qualified, defined contribution retirement savings plan. Amounts contributed by the Company to the Retirement Plan in 2006 on behalf of named executives officers are set forth in the Summary Compensation Table above.

In 1995, the Company created the Restoration Plan. The Restoration Plan was a deferred, unfunded program that restored to certain employees of the Company amounts that the Company was not permitted to contribute to the Retirement Plan on behalf of the employee as a result of IRS limitations on Company contributions to the Retirement Plan. The Company ceased contributing to the Restoration Plan as of January 1, 2001, although certain named executive officers continued to receive interest on their balances in the Restoration Plan.  Interest credited to the accounts of the named executive officers during 2006 is set forth in the Summary Compensation Table. In 2006, the Company terminated the Restoration Plan and distributed the balances to employees in February 2007. The table below sets forth the distributions made to named executive officers in February 2007 as a result of the termination of the Restoration Plan:

 

Pursuant to an employment agreement entered into with Beverly Chell in April 2001, the Company was obligated to provide retirement benefits to Ms. Chell upon her retirement at age 65 in the amount of $200,000 annually (which would be reduced for each year that payments commenced before age 65). In 2006, following Ms. Chell’s retirement, the Company purchased an annuity (the “Chell Annuity”) for the benefit of Ms. Chell. The Company paid the premium for the Chell Annuity in a lump-sum on a discounted basis in the amount of $2,299,498. Under the terms of the Chell Annuity, Ms. Chell receives an annual payment of $188,620 in monthly installments of $15,718.34 each. Benefits are payable during Ms. Chell’s life only. Ms. Chell began receiving payments in September 2006 and during 2006 she received a total of $62,873.36 under the Chell Annuity.

NON-QUALIFIED DEFERRED COMPENSATION PLAN

The Company does not have in place any non-qualified deferred compensation plans other than the Directors’ Deferred Compensation Plan described on page 8.

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

The Company does not have any agreements with any named executive officers that would result in payments to them upon any change in control of the Company. In addition, the Company has not entered into any agreement with Dean Nelson, its Chairman, President and CEO that would entitle Mr. Nelson to any payments upon termination of his employment. However, under the employment and severance agreements discussed below, other named executive officers would be entitled to payments upon termination of employment for certain reasons.

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