<PAGE>
 
                                                                     EXHIBIT 2.1

                  CONTRIBUTION AND RECAPITALIZATION AGREEMENT
                  -------------------------------------------

          This Contribution and Recapitalization Agreement (this "Agreement") is
                                                                  ---------     
made as of September 30, 1997, by and among The Petersen Companies, Inc., a
Delaware corporation (the "Company"), Willis Stein & Partners, L.P. ("Willis
                           -------                                    ------
Stein"), Nassau Capital Partners II, L.P. ("Nassau") and NAS Partners I, L.L.C.
-----                                       ------                             
("NAS" and, together with Willis Stein and Nassau, the "PIC Investors"), and
  ---                                                   -------------       
each of the other Persons listed on the Schedule of Investors attached hereto
                                        ---------------------                
(each, a "Holdings Investor" and all of such Persons, collectively, the
          -----------------                                            
"Holdings Investors").  The PIC Investors and the Holdings Investors are
 ------------------                                                     
collectively referred to herein as the "Investors." Capitalized terms used
                                        ---------                         
herein and not otherwise defined herein have the meanings given to such terms in
Section 8 below.

          The Investors hold all of the outstanding capital stock of the Company
and, with the Company, hold directly or indirectly all of the membership
interests in Petersen Holdings, L.L.C., a Delaware limited liability company
("Holdings"), Petersen Publishing Company, L.L.C., a Delaware limited liability
  --------                                                                     
company ("Publishing"), and Petersen Investment Corp., a Delaware corporation
          ----------                                                         
("PIC").  The Company and the Investors desire to consummate the transactions
  ---                                                                        
contemplated by this Agreement in order to facilitate an initial public offering
and sale by the Company of shares of its common stock pursuant to an effective
registration statement filed with the U.S. Securities and Exchange Commission
(the "SEC") under the Securities Act (the "Company IPO").  The Company has
      ---                                  -----------                    
engaged Morgan Stanley Dean Witter, Donaldson, Lufkin & Jenrette Securities
Corporation, Alex. Brown & Sons Incorporated and Goldman Sachs & Co. to act as
representatives of the underwriters of such offering (the "Underwriters") and,
                                                           ------------       
in connection therewith, contemplates entering into an underwriting agreement
(the "Underwriting Agreement") with such persons.
      ----------------------                     

          Immediately prior to the effectiveness of the registration statement
filed with the SEC in connection with the Company IPO, the Company will file an
amendment to its certificate of incorporation substantially in the form of
Exhibit A hereto (the "Certificate of Amendment") with the Secretary of State of
---------              ------------------------                                 
the State of Delaware to increase the number of authorized shares of Class A
Common Stock, par value $.01 per share (the "Company Voting Stock"), and to
                                             --------------------          
increase the number of authorized shares of Class B Common Stock, par value $.01
per share (the "Company Non-Voting Stock" and, together with the Company Voting
                ------------------------                                       
Stock, the "Company Stock").  Upon filing the Certificate of Amendment, each
            -------------                                                   
share of Company Voting Stock outstanding prior thereto (the "Old Company Voting
                                                              ------------------
Stock") will be canceled and the Company will issue to the holder thereof shares
-----                                                                           
of Company Voting Stock on the terms set forth herein, and each share of Company
Non-Voting Stock outstanding prior thereto (the "Old Company Non-Voting Stock"
                                                 ---------------------------- 
and, together with the Old Company Voting Stock, the "Old Company Stock") will
                                                      -----------------       
be canceled and the Company will issue to the holder thereof shares of Company
Non-Voting Stock on the terms set forth herein. Such amendment to the Company's
certificate of incorporation, cancellation of the outstanding 
<PAGE>
 
shares of Old Company Stock and issuance of Company Stock to the holders of Old
Company Stock are referred to herein collectively as the "Recapitalization
                                                          ----------------  
Transactions."
------------

          The PIC Investors hold all of the outstanding shares of capital stock
of PIC and the Holdings Investors hold all of the outstanding membership
interests in Holdings, other than those membership interests in Holdings held by
the Company or PIC.  The PIC Investors desire to contribute to the Company all
of the outstanding shares of PIC's Common Stock, par value $.01 per share (the
"PIC Common Stock"), and all of the outstanding shares of PIC's Preferred Stock,
 ----------------                                                               
par value $.01 per share (the "PIC Preferred Stock" and, together with the PIC
                               -------------------                            
Common Stock, the "PIC Stock").  The Holdings Investors desire to contribute to
                   ---------                                                   
the Company all of their membership interests in Holdings, including all of
their Class A Common Units, Class D Common Units and Preferred Units of Holdings
(each as defined in the LLC Agreement and all referred to herein collectively as
the "Holdings Units").  In exchange, the Company shall issue to the PIC
     --------------                                                    
Investors and the Holdings Investors shares of the Company Voting Stock or
Company Non-Voting Stock, as provided herein.  The transactions described in
this paragraph and more particularly described below are referred to herein
collectively as the "Contribution Transactions".  The Contribution Transactions
                     -------------------------                                 
will be consummated immediately prior to the consummation of the Company IPO and
are intended to be tax-free pursuant to Section 351 of the Internal Revenue Code
of 1986, as amended.

          In consideration of the mutual covenants and agreements set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

          Section 1.  Recapitalization and Contribution.
                      --------------------------------- 

          1A.  Authorization of Company Stock.  Prior to the Closing, the
               ------------------------------                            
Company shall authorize the issuance to the Investors of shares of Company
Voting Stock and shares of Company Non-Voting Stock in the amounts required to
be issued to the Investors hereunder.

          1B.  Contribution Transactions.  Subject to the satisfaction or waiver
               -------------------------                                        
of the conditions set forth in Section 3 below, each of the Investors and the
Company agrees to and shall consummate, at the Closing, the following
Contribution Transactions:

          (i)  Each of the PIC Investors shall contribute, transfer and assign
to the Company the number of shares of PIC Common Stock and the number of shares
of PIC Preferred Stock set forth opposite its name on the Schedule of Investors,
                                                          ---------------------
each of the Holdings Investors shall contribute, transfer and assign to the
Company all of the Class A Common Units, and Preferred Units of Holdings held by
such Holdings Investor, as set forth opposite its name on the Schedule of
                                                              -----------
Investors, and each of the Class D Holders shall contribute, transfer and assign
---------                                                                       
to the Company all of the Class D1 Common Units, Class D2 Common Units, Class D3
Common Units, Class D4 Common Units, Class D5 Common Units held by such Class D
Holder.

                                      -2-
<PAGE>
 
          (ii) In exchange for the PIC Stock and the Holdings Units contributed
by the Investors, the Company shall issue a number of shares of Company Voting
Stock to each of the Voting Investors and Company Non-Voting Stock to each of
the Non-Voting Investors equal to:

               (a) in the case of PIC Preferred Stock and Preferred Units of
     Holdings, the quotient determined by dividing (x) the sum of the Accreted
     Value of the PIC Preferred Stock and Preferred Units of Holdings held by
     such Investor, by (y) the IPO Price; and

               (b) in the case of PIC Common Stock and Common Units of Holdings,
     the product determined by multiplying (x) the aggregate number of shares of
     PIC Common Stock, Class A Common Units and "Converted Class D Units" held
     by such Investor by (y) the Conversion Ratio.

          For purposes of the foregoing, each Class D Holder will be deemed to
hold the number of "Converted Class D Units" set forth opposite such Class D
Holder's name on the attached Schedule of Class D Units (which is equivalent to
                              -------------------------                        
the number of Class A Common Units which are equal in value to the Class D
Common Units held by such Class D Holder).  Class D Holders will receive no
other consideration in respect of their Class D Units.

          (iii)  At the written election of any Investor, the Company shall, in
lieu of issuing Company Voting Stock to such Investor, issue an equal number of
shares of Company Non-Voting Stock to such Investor.

          1C.  Recapitalization Transactions. Each of the Investors and the
               -----------------------------                               
Company understands and agrees that, effective upon filing of the Certificate of
Amendment, the shares of Old Company Voting Stock or Old Company Non-Voting
Stock held by such Investor shall be canceled and deemed to be no longer
outstanding, and the Company shall issue to each Investor:

          (i) the right to receive at the Closing a number of shares of Company
Voting Stock or Company Non-Voting Stock, respectively, equal to the quotient
determined by dividing (a) the Accreted Value of a number Preferred Units of
Holdings equal to (x) the number of shares of Old Company Stock held by such
Investor multiplied by (y) the Imputed Preferred Holdings Multiple by (b) the
IPO Price; plus
           ----

          (ii) a number of shares of Company Voting Stock or Company Non-Voting
Stock, respectively, equal to the product of (x) the number of shares of Old
Company Stock held by such Investor, multiplied by (y) the Imputed Common
Holdings Multiple, multiplied by (z) the Conversion Ratio.

          1D.  Holdings Options.  Each Investor hereby acknowledges and agrees
               ----------------                                               
that in accordance with the terms of the Holdings Options, contemporaneously
with the consummation of the Contribution Transactions, (i) each of the Holdings
Options shall cease to be exercisable to purchase Class A Common Units of
Holdings and, in lieu thereof, shall automatically become exercisable, subject
to the other terms and conditions set forth therein, to purchase up to a number

                                      -3-
<PAGE>
 
of shares of Company Stock equal to the Unit Exercise Number thereof multiplied
by the Conversion Ratio (provided that such maximum number of shares of Company
Stock issuable under any Holdings Option shall be rounded up or down to the
nearest whole share of Company Stock), and (ii) the exercise price per share of
Company Stock for each of the Holdings Options shall be automatically adjusted
to be equal to the Unit Exercise Price thereof divided by the Conversion Ratio.
For purposes hereof, the "Unit Exercise Number" means, in respect of any
                          --------------------
Holdings Option, the maximum number of Class A Common Units obtainable upon
exercise thereof immediately prior to consummation of the Contribution
Transactions, and the "Unit Exercise Price" means, in respect of any Holdings
                       -------------------
Option, the price payable per Class A Common Unit upon exercise thereof
immediately prior to consummation of the Contribution Transactions.

          1E.  No Fractional Shares.  If any fractional interest in a share of
               --------------------                                           
Company Stock would, except for the provisions of this Section 1E, be
deliverable to any Investor upon contribution of such Investor's PIC Stock or
Holdings Units or upon conversion of such Investor's Old Company Stock after
taking into account and consolidating all shares of Company Stock to be issued
to such Investor pursuant to the Recapitalization Transactions and the
Contribution Transactions, such fractional interest shall be rounded up or down
to the nearest whole share of Company Stock.

          1F.  Closing.  The closing of the Contribution Transactions (the
               -------                                                    
"Closing") shall take place at the offices of Kirkland & Ellis, 200 E. Randolph
 -------                                                                       
Drive, Chicago, Illinois, or at such other place as may be agreeable to Willis
Stein and the Company, immediately prior to the consummation of the Company IPO
(the "Closing Date").  Upon execution of this Agreement, each Investor shall
      ------------                                                          
deliver to the Company stock certificates evidencing all of such Investor's
outstanding shares of PIC Stock and Old Company Stock, duly endorsed in blank or
accompanied by duly executed stock powers, and each Holdings Investor shall
deliver to the Company such documentation as the Company may reasonably request
to indorse such Holdings Investor's delivery to the Company of such Investor's
Holdings Units.  At the Closing, the Company shall cancel all such certificates
and shall deliver to each Investor stock certificates evidencing the shares of
Company Stock to be issued as described in Paragraphs 1B and 1C and as set forth
on the Schedule of Investors, registered in such Investor's or its nominee's
       ---------------------                                                
name (it being understood that such amounts of shares of stock set forth in the
                                                                               
Schedule of Investors have been calculated assuming the IPO Price and a Closing
---------------------                                                          
Date as set forth therein, and that such amounts shall be adjusted in accordance
with the provisions hereof if the actual IPO Price or Closing Date are different
than as assumed).

          Section 2.  Securityholders Agreement Matters. Each of the Investors
                      ---------------------------------
hereby (a) acknowledges that it has received prompt written notice of the
Company's intention to effect the Company IPO contemplated by the Underwriting
Agreement pursuant to Section 5.2(a) of the Securityholders Agreement, (b)
irrevocably waives any rights that it has pursuant to Section 5.2 of the
Securityholders Agreement (the "Piggyback Rights") to have the Company include
                                ----------------
Registrable Securities (as defined in the Securityholders Agreement) in the
Company IPO contemplated by the Underwriting Agreement and (c) acknowledges that
the shares of Company Stock that are issued as described herein shall be
"Manager Common Stock" and "Registrable Securities" within the meaning of the
Securityholders Agreement.

                                      -4-
<PAGE>
 
          Section 3. Conditions to the Obligations of the Parties at the
                     ---------------------------------------------------
Closing.
-------
          3A.  Conditions to the Obligations of the Investors.  The obligations
               ----------------------------------------------                  
of each of the Investors hereunder are subject to the satisfaction or waiver of
the following conditions: (i) the representations and warranties of the Company
are true and correct in all material respects at and as of the Closing as though
then made, (ii) all conditions precedent to the consummation of the Company IPO
shall have been satisfied or waived (including the conditions to the obligations
of the parties to the Underwriting Agreement relating thereto between the
Company and the underwriters party thereto) and (iii) the Certificate of
Amendment shall have been duly filed with the Secretary of State of the State of
Delaware and shall be in full force and effect under the laws of the State of
Delaware.

          3B.  Conditions to the Obligations of the Company.  The obligations of
               --------------------------------------------                     
the Company hereunder are subject to the satisfaction or waiver of the following
conditions:  (i) the representations and warranties of the Investors are true
and correct in all respects at and as of the Closing as though then made, (ii)
all conditions precedent to the consummation of the Company IPO shall have been
satisfied or waived (including the conditions to the obligations of the parties
to the Underwriting Agreement relating thereto between the Company and the
underwriters party thereto), (iii) the Certificate of Amendment shall have been
duly filed with the Secretary of State of the State of Delaware and shall be in
full force and effect under the laws of the State of Delaware and (iv) the
amendment to the Securityholders Agreement in the form of Exhibit B attached
                                                          ---------         
hereto shall have been executed by certain Investors and shall be in full force
and effect.

          Section 4.  Representations and Warranties of the Investors.
                      ----------------------------------------------- 

          4A.  Ownership of PIC Stock and Holdings Units. Each Investor
               -----------------------------------------               
severally represents and warrants to the Company that such Investor (i) is the
beneficial and record owner of the amount of each class and type of PIC Stock,
Holdings Units and Old Company Stock set forth opposite its name on the Schedule
                                                                        --------
of Investors attached hereto, (ii) holds such PIC Stock, Holdings Units or Old
------------                                                                  
Company Stock, as applicable, free and clear of all liens, charges and other
encumbrances (subject only to liens, charges and other encumbrances pursuant to
agreements with the Company), and (iii) holds no capital stock of PIC or the
Company or membership interest in Holdings, other than the Class D Common Units
of Holdings.  Each of the Class D Holders represent and warrants to the Company
that he has not transferred any interest in any of the Class D1 Common Units,
Class D2 Common Units, Class D3 Common Units, Class D4 Common Units, Class D5
Common Units issued to him by Holdings and that he holds such interests free and
clear of all liens, charges and other encumbrances (subject only to liens,
charges and other encumbrances pursuant to agreements with the Company).

          4B.  Transfer.  Each Investor severally represents and warrants to the
               --------                                                         
Company that such Investor has full power, authority and legal right to execute
and deliver this Agreement and to perform the terms and provisions hereof.

                                      -5-
<PAGE>
 
          4C.  Registration Statement.  Each Investor severally represents and
               ----------------------                                         
warrants to the Company that such Investor has received and reviewed the
prospectus included in the Amendment No.1 to Registration Statement on Form S-1
prepared by the Company and filed with the Securities and Exchange Commission on
September 15, 1997 relating to the Company IPO (the "Registration Statement").
                                                     ----------------------   

          4D.  Capitalization of PIC.  Each PIC Investor severally represents
               ---------------------                                         
and warrants that as of the Closing, the authorized capital stock of PIC shall
consist of 200,000 shares of PIC Preferred Stock, of which 121,000 shares shall
be issued and outstanding, and 200,000 shares PIC Common Stock, of which 121,000
shares shall be issued and outstanding, and that PIC shall not have outstanding
any other stock or securities convertible or exchangeable for any shares of its
capital stock or containing any profit participation features, nor shall it have
outstanding any rights or options to subscribe for or to purchase its capital
stock or any stock or securities convertible into or exchangeable for its
capital stock or any stock appreciation rights or phantom stock plans.

          4E.  Investment Intent; Accredited Investor.  Each Investor severally
               --------------------------------------                          
represents and warrants that such Investor: (i) is acquiring the Restricted
Securities acquired hereunder for its own account with the present intention of
holding such securities for investment purposes and it has no intention of
selling such securities in a public distribution in violation of the federal
securities laws or any applicable state securities laws; provided that nothing
                                                         --------             
contained herein will prevent such Investor and the subsequent holders of
Restricted Securities from transferring such securities in compliance with the
provisions of Section 6 hereof and the Securityholders Agreement; (ii) possesses
knowledge and experience in financial and business matters such that it is
capable of evaluating the risks of the investment in the securities issued
pursuant to this Agreement; and (iii) is an "accredited investor" as defined in
Rule 501(a) under the Securities Act.

          Section 5.  Representations and Warranties of the Company.
                      --------------------------------------------- 

          5A.  Organization; Good Standing. The Company is a corporation duly
               ---------------------------                                   
organized, validly existing, and in good standing under the laws of the State of
Delaware, and has all requisite power and authority to own and operate its
properties and assets and to carry on its business as now conducted and as
proposed to be conducted, to execute, deliver and carry out the provisions of
this Agreement and to issue the Company Stock.

          5B.  Authorization.  As of the Closing, all action on the part of the
               -------------                                                   
Company necessary for the authorization, execution and delivery of this
Agreement, the performance of all obligations of the Company hereunder and the
authorization, issuance and delivery of the Company Stock will have been taken,
and will constitute a valid and legally binding obligations of the Company,
enforceable in accordance with its terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies, and (iii) to the extent the indemnification
provisions contained herein may be limited by applicable federal or state
securities law.

                                      -6-
<PAGE>
 
          5C.  Valid Issuance of Company Stock.  The shares of Company Stock
               -------------------------------                              
when issued and delivered in accordance with the terms of this Agreement for the
consideration expressed herein, will be duly and validly issued, fully paid, and
nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under the Securityholders Agreement and applicable
state and federal securities laws.

          5D.  Capitalization.  As of the Closing, after the filing of the
               --------------                                             
Certificate of Amendment and after giving effect to the Recapitalization
Transactions and the Contribution Transactions, the authorized capital stock of
the Company shall consist of (i) 5,000,000 shares of preferred stock, par value
$.01 per share, of which no shares shall be issued and outstanding, (ii)
75,000,000 shares of Company Voting Stock, of which only the shares issued
hereunder shall be issued and outstanding immediately prior to the issuance of
shares in the Company IPO, and (iii) 25,000,000 shares of Company Non-Voting
Stock, of which only the shares hereunder shall be issued and outstanding
immediately prior to the issuance of shares in the Company IPO.  Except for
Holdings Options exercisable in the aggregate for 8,866.53 Class A Common Units,
except for the obligations of the Company to issue Company Stock to the
Underwriters pursuant to the Underwriting Agreement in connection with the
Company IPO and except as otherwise described in the Registration Statement, the
Company shall not have outstanding any other stock or securities convertible or
exchangeable for any shares of its capital stock or containing any profit
participation features, nor shall it have outstanding any rights or options to
subscribe for or to purchase its capital stock or any stock or securities
convertible into or exchangeable for its capital stock or any stock appreciation
rights or phantom stock plans.

          Section  6.  Transfer.
                       -------- 

          6A.  Restrictions.  Restricted Securities are only transferable (i)
               ------------                                                  
pursuant to public offerings registered under the Securities Act, (ii) pursuant
to Rule 144 or Rule 144A if such rules are available and (iii) subject to the
conditions specified in Section 6B below, any other legally available means of
transfer pursuant to the Securities Act.

          6B.  Procedure for Transfer.  In connection with the transfer of any
               ----------------------                                         
Restricted Securities (other than a transfer referred to in clauses (i) or (ii)
of Section 6A above), the holder thereof will deliver written notice to the
Company describing in reasonable detail the transfer or proposed transfer,
together with an opinion of Kirkland & Ellis or other counsel which (to the
Company's reasonable satisfaction) is knowledgeable in securities law matters to
the effect that such transfer of Restricted Securities may be effected without
registration of such Restricted Securities under the Securities Act.  In
addition, if the holder of such Restricted Securities delivers to the Company an
opinion of such counsel that no subsequent transfer of such Restricted
Securities will require registration under the Securities Act.  The Company will
promptly upon such contemplated transfer deliver new certificates for such
Restricted Securities which do not bear the Securities Act legend set forth in
Section 6C below.  If the Company is not required to deliver new certificates
for such Restricted Securities not bearing such legend, the holder thereof will
not transfer the same until the prospective transferee has confirmed to the
Company in writing its agreement to be bound by the agreements related to
transfer of Restricted Securities contained in this Agreement.

                                      -7-
<PAGE>
 
          6C.  Legend.  Each certificate representing Restricted Securities
               ------                                                      
shall be endorsed with the legend in substantially the form set forth below.

     THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON
     __________, 1997 AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
     1933, AS AMENDED.  THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS
     CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE CONTRIBUTION
     AGREEMENT, DATED AS OF SEPTEMBER 30, 1997, AS AMENDED AND MODIFIED FROM
     TIME TO TIME, BY AND AMONG THE ISSUER (THE "COMPANY") AND CERTAIN
     INVESTORS, AND THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF
     SUCH SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO
     SUCH TRANSFER.  A COPY OF SUCH CONDITIONS SHALL BE FURNISHED BY THE COMPANY
     TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.

Whenever any of the Restricted Securities cease to be Restricted Securities, the
holder thereof will be entitled to receive from the Company, without expense,
upon surrender to the Company of the certificate representing such securities, a
new certificate representing such securities of like tenor but not bearing a
legend of the character set forth above.

          Section 7. Termination. Upon execution by Willis Stein and the Company
                     -----------
of any agreement to terminate this Agreement at any time prior to consummation
of the Company IPO, this Agreement shall immediately terminate. Upon any such
termination, no party hereunder shall have any liability hereunder to any other
party hereto, except for wilful breach hereof by such party prior to such
termination.

          Section 8.  Certain Definitions.
                      ------------------- 

          "Accreted Value" of any PIC Stock or Holdings Unit as of any date
           --------------                                                  
means:

              (i) in the case of any share of PIC Preferred Stock, the sum of
the Unreturned Preferred Capital and the Unpaid Preferred Yield of such share
(as defined in the Certificate of Incorporation of PIC); and

              (ii) in the case of any Preferred Unit of Holdings, the quotient
determined by dividing (x) the sum as of such date of the Unreturned Preferred
Capital and the Unpaid Preferred Yield (as defined in the LLC Agreement),
divided by (y) the aggregate number of Preferred Units outstanding as of the
determination thereof.

          "Board" means the Board of Directors of the Company.
           -----                                              

                                      -8-
<PAGE>
 
          "Class A Common Units" has the meaning given to such term in the LLC
           --------------------                                               
Agreement.

          "Class D Common Units" means the Class D1 Common Units, Class D2
           --------------------                                           
Common Units, Class D3 Common Units, Class D4 Common Units and Class D5 Common
Units, each as defined in the LLC Agreement.

          "Class D Holder" means each holder of Class D Common Units listed on
           --------------                                                     
the attached Schedule of Class D Units.
             ------------------------- 

          "Conversion Ratio" means 36.166847.
           ----------------                  

          "Holdings Options" means the options which were granted to employees
           ----------------                                                   
of the Company and its Subsidiaries as of July 31, 1997 to purchase the number
of Class A Common Units of Holdings.

          "Imputed Common Holdings Multiple" means 1.13265.
           --------------------------------                

          "Imputed Preferred Holdings Multiple" means 1.11111.
           -----------------------------------                

          "IPO Price" means the price per share at which the Company Stock is to
           ---------                                                            
be offered and sold to the public at the closing of the Company IPO.

          "LLC Agreement" means the Limited Liability Company Agreement of
           -------------                                                  
Holdings originally effective as of September 30, 1996, as amended and restated
as of July 31, 1997.

          "Non-Voting Investors" means, collectively, BankAmerica Investment
           --------------------                                             
Corporation, CIVC Partners II, Chase Equity Associates, L.P., FUI, Inc. and CIBC
WG Argosy Merchant Fund 2, L.L.C.

          "Restricted Securities" means the Company Stock and Company Class B
           ---------------------                                             
Stock issued hereunder and any securities issued with respect to such Company
Stock or Company Class B Stock by way of any stock dividend or stock split, or
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization.  As to any particular Restricted
Securities, such securities will cease to be Restricted Securities when (a) they
have been effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, (b) they have become
eligible for sale pursuant to Rule 144 or Rule 144A or (c) an opinion of
Kirkland & Ellis or other counsel which (to the Company's reasonable
satisfaction) is knowledgeable in securities law matters to the effect that the
transfer of such Restricted Securities may be effected without registration of
such Restricted Securities under the Securities Act and that no subsequent
transfer of such Restricted Securities will require registration under the
Securities Act has been delivered to the Company.

          "Securities Act" means the Securities Act of 1933, as amended, or any
           --------------                                                      
similar federal law then in force.

                                      -9-
<PAGE>
 
          "Securityholders Agreement" means the Securityholders Agreement dated
           -------------------------                                           
as of September 30, 1996 among PIC, Holdings, the Company and certain of the
Investors, as amended.

          "Voting Investors" means all Investors other than the Non-Voting
           ----------------                                               
Investors.

          Section 9.  Miscellaneous.
                      ------------- 

          9A.  Reasonable Best Efforts.  Each Investor shall use its reasonable
               -----------------------                                         
best efforts to cause the conditions to the obligations of the parties contained
in Section 3 hereof to be satisfied promptly, including without limitation by
voting such Investor's Old Voting Shares and Old Non-Voting Shares to approve
the Certificate of Amendment.

          9B.  Amendment and Waiver.  Any modification, amendment or waiver of
               --------------------                                           
any provision of this Agreement shall be effective against any Investor if such
modification, amendment or waiver is approved in writing by Willis Stein;
provided that any amendment, modification or waiver of any provision of this
--------                                                                    
Agreement which has a material adverse effect on any Investor in its capacity as
such, which would be borne disproportionately by such Investor relative to
Willis Stein (measured by the value of such Investor's holdings of PIC Stock,
Holdings Units and Old Company Stock), shall be effective against such Investor
only if consented to in writing by such Investor; provided further that if more
                                                  ----------------             
than one Investor is materially adversely affected in such a disproportionate
manner, such amendment, modification or waiver shall be effective against all
Investors who are similarly so affected if consented to in writing by Investors
holding a majority in value of the PIC Stock, Holdings Units and Old Company
Stock held by such holders.

          9C.  No Transfer.  Each of the Investors hereby agrees that it will
               -----------                                                   
not, directly or indirectly, transfer any interest in any of its PIC Stock,
Holdings Units or Old Company Stock except to the Company at the Closing, unless
this Agreement is terminated prior thereto in accordance with Section 7 above.

          9D.  Severability.  Whenever possible, each provision of this
               ------------                                            
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.

          9E.  Captions. The captions used in this Agreement are for the
               --------                                                 
convenience of reference only and do not constitute a part of this Agreement and
will not be deemed to limit, characterize or in any way affect any provision of
this Agreement, and all provisions of this Agreement will be enforced and
construed as if no caption had been used in this Agreement.

          9F.  Gender.  Reference herein to any gender, including the neutral
               ------                                                        
gender, includes each other gender.

                                      -10-
<PAGE>
 
          9G.  Entire Agreement.    This Agreement, together with all exhibits
               ----------------                                               
and schedules attached hereto, and the other agreements dated the date hereof,
contain the entire agreement between the parties with respect to the subject
matter hereof, and supersede any prior understandings, agreements or
representations by or between the parties, written or oral, which may have
related to the subject matter hereof in any way.

          9H.  Counterparts.  This Agreement may be executed in one or more
               ------------                                                
counterparts all of which taken together will constitute one and the same
instrument.

          9I.  Governing Law.  The corporate law of Delaware will govern all
               -------------                                                
issues concerning the relative rights of the Company and its stockholders.  All
other issues concerning this Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the law
of any jurisdiction other than the State of Delaware.

          9J.  No Third Party Beneficiary Rights.  This Agreement is intended
               ---------------------------------                             
solely for the benefit of the parties hereto.  Nothing herein shall be construed
or deemed to create any rights or benefits in any third parties or third party
beneficiaries.

          9K.  Several Obligations; Understanding Among Investors.  The
               --------------------------------------------------      
obligations hereunder of each of the Investors shall be several and not joint.
The liabilities of each PIC Investor in respect of the representations and
warranties included in Section 4D above shall be several, in proportion to each
such Investor's holdings of PIC Stock.  The determination of each Investor to
execute this Agreement, to contribute PIC Stock and Holdings Units pursuant
hereto and to consent to the cancellation of its Old Common Stock and the
issuance therefor of Company Stock has been made by such Investor independent of
any other Investor and independent of any statements or opinions as to the
advisability of such transaction which may have been made or given by any other
Investor or by any agent or employee of any other Investor.  In addition, it is
acknowledged by each of the other Investors that Willis Stein has not acted as
an agent of such Investor in connection with making its investment hereunder and
that Willis Stein shall not be acting as an agent of such Investor in connection
with monitoring its investment hereunder or in any other respect.

                           *     *     *     *     *

                                      -11-
<PAGE>
 
    IN WITNESS WHEREOF, the parties hereto have executed this Contribution and
Recapitalization Agreement as of the date first written above.
                                        
                              THE PETERSEN COMPANIES, INC.


                              By:    /s/ Richard S Willis
                                     -------------------------------------------
                              Title:     Executive Vice President and Chief
                                         Financial Officer

                              WILLIS STEIN & PARTNERS, L.P.
                              By:  Willis Stein & Partners, L.L.C.
                              Its: General Partner
 
                              By:    /s/ Daniel H. Blumenthal
                                     -------------------------------------------
                              Name       Daniel H. Blumenthal
                              Title:     Managing Director
 
                              NASSAU CAPITAL PARTNERS II, L.P.
                              By:     Nassau Capital, L.L.C.
                              Title:  General Partner
 
                              By:    /s/ John G. Quigley
                                     -------------------------------------------
                              Name:      John G. Quigley
                              Title:     Member

                              NAS PARTNERS I, L.L.C.

                              By:    /s/ John G. Quigley
                                     -------------------------------------------
                              Name:      John G. Quigley
                              Title:     Member

                              PETERSEN PROPERTIES

                              By:    /s/  Robert E. Petersen
                                     -------------------------------------------
                              Name:       Robert E. Petersen
                              Title:      Chairman of the Board

                              BANKAMERICA INVESTMENT CORPORATION


                              By:    /s/  Christopher J. Perry
                                     -------------------------------------------
                              Name:       Christopher J. Perry
                              Title:      Managing Director



<PAGE>

[Signature Page to Contribution and Recapitalization Agreement]
 
                              CHASE EQUITY ASSOCIATES, L.P.
                              By:   Chase Capitals Partners
                              Its:  General Partner

                              By:    /s/ Brian J. Richmond
                                     -------------------------------------------
                              Name:      Brian J. Richmond
                              Title:     General Partner

                              ALLSTATE INSURANCE COMPANY

                              By:     /s/  John M. Goesne
                                     -------------------------------------------
                              Name:        John M. Goesne
 
                              By:    /s/  Corey S. Golde
                                     -------------------------------------------
                              Name:       Corey S. Golde
                              Title:      Authorized Signatories

                              FUI, INC.

                              By:    /s/  Scott B. Perpe
                                     -------------------------------------------
                              Name:       Scott B. Perper
                              Title:      Senior Vice President

                              CIBC WG ARGOSY MERCHANT FUND 2, L.L.C.

                              By:    /s/  Jay Levine
                                     -------------------------------------------
                              Name:       Jay Levine
                              Title:      Managing Director

                              NORWEST EQUITY CAPITAL, L.L.C.
                              By:   Itasca NEC, L.L.C.
                              Its:  Managing Member

                              By:    /s/  J.E. Lindahl
                                     -------------------------------------------
                              Name:       J.E. Lindahl
                              Title:      Managing Member
 
                                     /s/  James D. Dunning, Jr.
                                     -------------------------------------------
                                          James D. Dunning, Jr.


<PAGE>

[Signature Page to Contribution and Recapitalization Agreement]
 
                              JAMES D. DUNNING III TRUST
                              By:    /s/  James D. Dunning, Jr.
                                     -------------------------------------------
                              Name:       James D. Dunning, Jr.
                              Title:      Trustee

                              DAVID F. DUNNING TRUST


                              By:    /s/ James D. Dunning, Jr.
                                     -------------------------------------------
                              Name:      James D. Dunning, Jr.
                              Title:     Trustee
 
                              CIVC PARTNERS II


                              By:    /s/ Christopher J. Perry
                                     -------------------------------------------
                              Name:      Christopher J. Perry
                              Title:     A General Partner

                              THE LAURENCE H. BLOCH AND CINDY BLOCH
                              TRUST

                              By:    /s/ Laurence H. Bloch
                                     -------------------------------------------
                              Name:      Laurence H. Bloch
                              Title:     Trustee


                                     /s/ Stuart Karu
                                     -------------------------------------------
                                         Stuart Karu


                                     /s/ Thomas J. Strauss
                                     -------------------------------------------
                                         Thomas J. Strauss


                                     /s/ Irwin Bard
                                     -------------------------------------------
                                         Irwin Bard
  

                                     /s/ Bernard Shavitz
                                     -------------------------------------------
                                         Bernard Shavitz


                                     /s/  D. Claeys Bahrenburg
                                     -------------------------------------------
                                          D. Claeys Bahrenburg


<PAGE>

[Signature Page to Contribution and Recapitalization Agreement]

 
                                     /s/  Neal Vitale
                                     -------------------------------------------
                                          Neal Vitale


                                    /s/   Richard S. Willis
                                    --------------------------------------------
                                          Richard S Willis


                                    /s/   John Dianna
                                    --------------------------------------------
                                          John Dianna 


                                    /s/   Richard P. Lague
                                    --------------------------------------------
                                          Richard P. Lague


                                    /s/   Paul Tzimoulis
                                    --------------------------------------------
                                          Paul Tzimoulis


                                    /s/   David Myers
                                    --------------------------------------------
                                          David Myers


                                    /s/  Ken Elliot
                                    --------------------------------------------
                                         Ken Elliot


                                    /s/  Lee Kelley
                                    --------------------------------------------
                                         Lee Kelley


                                    /s/  Michael Borchetta
                                    --------------------------------------------
                                         Michael Borchetta


                                    /s/  Justin McCormack
                                    --------------------------------------------
                                         Justin McCormack


<PAGE>

[Signature Page to Contribution and Recapitalization Agreement]
 
                                    DEAN WITTER REYNOLDS, Custodian for Justin
                                    McCormack IRA Rollover


                                    By:  /s/  Timothy J. Walsh
                                    --------------------------------------------
                                    Name:     Timothy J. Walsh
                                    Title:    Branch Manager


                                    MLPF&S, Custodian FPO James Guthrie IRA FBO
                                    James Guthrie


                                    By:  /s/  Frank P. Trapani
                                    --------------------------------------------
                                    Name:     Frank P. Trapani
                                    Title:    Assistant Vice President

                                    /s/  Charlotte Perkins
                                    --------------------------------------------
                                         Charlotte Perkins


                                    /s/  Amy Wilkins
                                    --------------------------------------------
                                         Amy Wilkins