|
|
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 10-K
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
|
|
For
the fiscal year ended June 30, 2009
|
Commission
file number 1-5128
|
|
|
MEREDITH
CORPORATION
|
|
(Exact
name of registrant as specified in its charter)
|
|
Iowa
|
|
42-0410230
|
|
(State
or other jurisdiction of incorporation or organization)
|
|
(I.R.S.
Employer Identification No.)
|
|
|
|
|
|
1716
Locust Street, Des Moines, Iowa
|
|
50309-3023
|
|
(Address
of principal executive offices)
|
|
(ZIP
Code)
|
|
|
|
|
|
Registrant's
telephone number, including area code: (
515)
284-3000
|
|
Securities
registered pursuant to Section 12 (b) of the Act:
|
|
|
Title
of each class
|
|
Name
of each exchange on which registered
|
|
|
|
Common
Stock, par value $1
|
|
New
York Stock Exchange
|
|
|
|
|
|
|
|
|
Securities
registered pursuant to Section 12 (g) of the Act:
|
|
|
|
Title
of class
|
|
|
|
|
|
Class B
Common Stock, par value $1
|
|
|
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
Yes
x
No
o
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes
o
No
x
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes
x
No
o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).
Yes
o
No
o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
x
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act:
Large
accelerated filer
x
Accelerated
filer
o
Non-accelerated
filer
o
Smaller
reporting company
o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes
o
No
x
The
registrant estimates that the aggregate market value of voting and non-voting
common equity held by non-affiliates of the registrant at December 31,
2008, was $591,000,000 based upon the closing price on the New York Stock
Exchange at that date.
|
Shares
of stock outstanding at July 31, 2009
|
|
Common
shares
|
35,794,997
|
|
Class B
shares
|
9,160,735
|
|
Total
common and Class B shares
|
44,955,732
|
|
|
|
|
|
|
|
|
DOCUMENT
INCORPORATED BY REFERENCE
|
|
|
Certain
portions of the Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held on
November 4,
2009, are incorporated by reference in Part III to the extent described
therein.
|
|
|
|
TABLE
OF CONTENTS
|
|
|
|
|
|
Page
|
|
|
|
Part
I
|
|
|
|
|
Business
|
1
|
|
|
|
Description
of Business
|
|
|
|
|
P
u
blis
h
ing
|
2
|
|
|
|
Br
o
adc
a
sting
|
6
|
|
|
|
Executive
Officers
of the
Company
|
10
|
|
|
|
Employees
|
10
|
|
|
|
Other
|
10
|
|
|
|
Available
Information
|
10
|
|
|
|
Forward
Looking Statements
|
11
|
|
|
|
Risk
Factors
|
11
|
|
|
|
Unresolved
Staff Comments
|
13
|
|
|
|
Properties
|
13
|
|
|
|
Legal
Proceedings
|
13
|
|
|
|
Submission
of Matters to a Vote of Security Holders
|
13
|
|
|
|
|
|
|
|
|
Part
II
|
|
|
|
|
Market
for Registrant's Common Equity, Related Shareholder
|
|
|
Matters,
and Issuer Purchases of Equity Securities
|
14
|
|
|
|
Selected
Financial
Data
|
16
|
|
|
|
Management's
Discussion and Analysis of Financial
|
|
|
Condition
and Results of
Operations
|
16
|
|
|
|
Quantitative
and Qualitative Disclosures About Market Risk
|
42
|
|
|
|
Financial
Statements and Supplementary
Data
|
43
|
|
|
|
Changes
in and Disagreements with Accountants on
|
|
|
Accounting
and Financial Disclosure
|
89
|
|
|
|
Controls
and Procedures
|
89
|
|
|
|
Controls
and Procedures
|
90
|
|
|
|
Other
Information
|
90
|
|
|
|
|
|
|
|
|
Part
III
|
|
|
|
|
Directors,
Executive Officers, and Corporate Governance
|
91
|
|
|
|
Executive
Compensation
|
91
|
|
|
|
Security
Ownership of Certain Beneficial Owners and
|
|
|
Management
and Related Stockholder Matters
|
91
|
|
|
|
Certain
Relationships and Related Transactions and
|
|
|
Director
Independence
|
92
|
|
|
|
Principal
Accounting Fees and Services
|
92
|
|
|
|
|
|
|
|
|
Part
IV
|
|
|
|
|
Exhibits
and Financial Statement Schedules
|
93
|
|
|
|
|
|
|
|
97
|
|
|
|
|
|
|
|
E-1
|
|
|
|
|
|
Meredith
Corporation and its consolidated subsidiaries are referred to in this
Annual Report on Form 10-K
(Form 10-K)
as
Meredith, the
Company, we, our,
and
us
.
|
GENERAL
Meredith
Corporation is one of the nation's leading media and marketing companies.
Meredith began in 1902 as an agricultural publisher. The Company entered the
television broadcasting business in 1948. Today Meredith is engaged in magazine
and book publishing, television broadcasting, integrated marketing, and
interactive media. The Company is incorporated under the laws of the State of
Iowa. Our common stock is listed on the New York Stock Exchange under the ticker
symbol MDP.
The
Company has two operating segments: publishing and broadcasting. Financial
information about industry segments can be found in
Item 7–Management's Discussion
and Analysis of Financial Condition and Results of Operations
and in
Item 8–Financial
Statements and Supplementary Data
under Note 14.
The
publishing segment focuses on the home and family market. It is a leading
publisher of magazines serving women. More than twenty-five subscription
magazines, including
Better
Homes and Gardens
,
Family Circle
,
Ladies'
Home Journal
,
Parents
,
American Baby
,
Fitness
, and
More
and approximately 135
special interest publications were published in fiscal 2009. The publishing
segment also includes book publishing, which has over 200 books in print;
integrated marketing, which has relationships with some of America's leading
companies; a large consumer database; an extensive Internet presence that
consists of more than 30 websites and strategic alliances with leading Internet
destinations; brand licensing activities; and other related
operations.
The
broadcasting segment includes 12 network-affiliated television stations located
across the United States (U.S.) and one AM radio station. The television
stations consist of six CBS affiliates, three FOX affiliates, two MyNetworkTV
affiliates, and one NBC affiliate. The broadcasting segment also includes 20
websites, eight mobile websites, eight iPhone applications, and video related
operations.
The
Company's largest revenue source is advertising. National and local economic
conditions affect the magnitude of our advertising revenues. Television
advertising is seasonal and cyclical to some extent, traditionally generating
higher revenues in the second and fourth fiscal quarters and during key
political contests, major sporting events, etc. Both publishing and broadcasting
revenues and operating results can be affected by changes in the demand for
advertising and consumer demand for our products. Magazine circulation revenues
are generally affected by national and regional economic conditions and
competition from other forms of media.
BUSINESS
DEVELOPMENTS
In
November 2008, Meredith acquired a minority investment in Real Girls Media
Network (RGM), a group of social communities connecting millions of women
online. This investment enhances the depth and breadth of Meredith Interactive
Media's offerings and capabilities, chiefly in the area of social networking. As
part of this strategic investment, Meredith and RGM combine their inventory and
sales forces to deliver premium branded content. The relationship also allows
Meredith to take advantage of RGM's proprietary technology platform to enhance
existing sites. Specifically, the agreement adds RGM traffic to Meredith's
network of sites thus helping to increase Meredith's average unique visitors to
15 million per month in fiscal 2009, a 25 percent increase from fiscal
2008.
Following
this investment, in January 2009, Meredith announced the launch of Meredith
Women’s Network, a branded network comprised of premium websites geared toward
the topics that matter most to women. The Meredith Women’s Network includes The
Better Homes and Gardens Network (made up of over 20 websites including Better
Homes and Gardens and Better Recipes), The Parents Network (Parents and Top Baby
Name) and The Real Girls Network (including RGM’s DivineCaroline and Meredith’s
Fitness, More, and Ladies’ Home Journal). Also in January 2009 as part of the
The Better Homes and Gardens Network, Meredith launched
MixingBowl.com
, a social
network built entirely around food, recipes, and entertaining. In June 2009, the
Company announced the launch of
Mixing Bowl
magazine as an
extension of
MixingBowl.com
.
In
October 2008, Meredith announced multiple magazine licensing agreements to
extend Parents, More, and Diabetic Living brands to seven international
partners, collectively. With these new alliances, Meredith's global reach has
been expanded to approximately 25 agreements in 40 countries.
In
December 2008, Meredith announced a licensing agreement granting John Wiley
& Sons, Inc. (Wiley) exclusive global rights to publish and distribute books
based on Meredith’s consumer-leading brands, including the powerful Better Homes
and Gardens imprint. Under the agreement, effective March 1, 2009, Meredith
continues to create book content and retains all approval and content rights.
Wiley is responsible for book layout and design, printing, sales and marketing,
distribution, and inventory management.
In
December 2008, management committed to a performance improvement plan that
included the closing of
Country Home
magazine
following the publication of the March 2009 issue. Previous to this, in March
2007, management discontinued the print operations of
Child
magazine following the
publication of the June/July 2007 issue.
During
fiscal 2008, the Company continued to enhance the capabilities of Meredith
Integrated Marketing with the acquisitions of Directive Corporation, a
specialized customer intelligence firm, and Big Communications, a leading
healthcare marketing communications firm. These acquisitions followed the fiscal
2007 acquisitions of two online businesses: Genex, an interactive
marketing services firm that specializes in online customer relationship
marketing, and New Media Strategies, an interactive word-of-mouth marketing
company.
In April
2008, the Company completed the sale of WFLI, a CW affiliate serving the
Chattanooga, Tennessee market. Meredith also completed the sale of KFXO, a
low-power FOX affiliate serving the Bend, Oregon market in May
2007.
Publishing
represented approximately 80 percent of Meredith's consolidated revenues in
fiscal 2009.
Better Homes and
Gardens
, our flagship brand, continues to account for a significant
percentage of revenues and operating profit of the publishing segment and the
Company.
Magazines
Information
for major subscription magazine titles as of June 30, 2009,
follows:
|
Title
|
Description
|
Frequency
per
Year
|
Year-end
Rate
Base
|
(1)
|
|
|
|
|
|
|
|
Better
Homes and Gardens
|
Shelter
and women's service
|
12
|
7,600,000
|
|
|
Family
Circle
|
Women's
service
|
15
|
3,800,000
|
|
|
Ladies'
Home Journal
|
Women's
service
|
12
|
3,800,000
|
|
|
Parents
|
Parenthood
|
12
|
2,200,000
|
|
|
American
Baby
|
Parenthood
|
12
|
2,000,000
|
|
|
Fitness
|
Women's
lifestyle
|
11
|
1,500,000
|
|
|
More
|
Women's
lifestyle (age 40+)
|
10
|
1,300,000
|
|
|
Midwest
Living
|
Travel
and lifestyle
|
6
|
950,000
|
|
|
Traditional
Home
|
Home
decorating
|
8
|
950,000
|
|
|
Ser
Padres
|
Hispanic
parenthood
|
8
|
700,000
|
|
|
Wood
|
Woodworking
|
7
|
500,000
|
|
|
Siempre
Mujer
|
Hispanic
women's lifestyle
|
6
|
450,000
|
|
|
Successful
Farming
|
Farming
business
|
12
|
440,000
|
|
|
ReadyMade
|
Do-it-yourself
lifestyle
|
6
|
325,000
|
|
|
(1)
|
Rate
base is the circulation guaranteed to advertisers. Actual circulation
generally exceeds rate base and for most of the Company's titles is
tracked by the Audit Bureau of Circulations, which issues periodic
statements for audited magazines.
|
We
publish approximately 135 special interest publications under approximately 80
titles, primarily under the
Better Homes and
Gardens brand. The titles are issued from one to eight times annually and sold
primarily on newsstands. A limited number of subscriptions are also sold to
certain special interest publications. The following titles are published
quarterly or more frequently:
100 Decorating Ideas Under
$100
;
American
Patchwork & Quilting
;
Beautiful Homes
;
Before & After
;
Country Gardens
;
Creative Home
;
Decorating
;
Diabetic Living
;
Do It Yourself
;
Garden Ideas & Outdoor
Living
;
Garden, Deck
& Landscape
;
Heart
Healthy Living
;
Kitchen
and Bath Ideas
;
Remodel
;
Renovation Style
; and
Scrapbooks etc.
Magazine
Advertising
—Advertising revenues are generated primarily from sales to
clients engaged in consumer marketing. Many of Meredith's larger magazines offer
regional and demographic editions that contain similar editorial content but
allow advertisers to customize messages to specific markets or audiences. The
Company sells two primary types of magazine advertising: display and
direct-response. Advertisements are either run-of-press (printed along with the
editorial portions of the magazine) or inserts (preprinted pages). Most of the
publishing segment's advertising revenues are derived from run-of-press display
advertising. Meredith 360° is our strategic marketing unit providing clients and
their agencies with access to the full range of media products and services
Meredith has to offer, including many media platforms. Our team of creative and
marketing experts delivers innovative solutions across multiple media channels
that meet each client's unique advertising and promotional
requirements.
Magazine
Circulation
—Subscriptions obtained through direct-mail solicitation,
agencies, insert cards, the Internet, and other means are Meredith's largest
sources of circulation revenues. All of our subscription magazines except
American Baby, Ser Padres,
and
Successful Farming
also are sold by single copy. Single copies sold on newsstands are distributed
primarily through magazine wholesalers, who have the right to receive credit
from the Company for magazines returned to them by retailers.
Meredith
Interactive Media
Combined
with RGM, Meredith’s 30-plus websites provide ideas and inspiration to an
average of 15 million unique visitors each month, an increase of 25 percent from
the prior-year period. These branded websites focus on the topics that women
care about most, food, home, and entertaining and meeting the needs of moms; and
on delivering powerful content geared toward lifestyle topics such as health,
beauty, style, and wellness.
In
January 2009, Meredith launched the Meredith Women’s Network, which combines the
Company’s largest sites, including Better Homes and Gardens, Parents, and the
Real Girls Network, into a single entity that is marketed to advertisers. Page
views across this network grew more than 20 percent to 170 million in fiscal
2009 from the prior year and the total number of videos viewed per month rose to
1.1 million. Meredith generated 3 million online subscriptions in fiscal 2009,
up slightly from fiscal 2008. Online subscriptions represent a cost savings over
traditional direct mail sources.
Other
Sources of Revenues
Other
revenues are derived from integrated marketing, other custom publishing
projects, brand licensing agreements, ancillary products and services, and book
sales.
Meredith Integrated
Marketing
—Meredith Integrated Marketing is the business-to-business arm
of the Company and sells a range of customer relationship marketing services
including direct, database, custom publishing, digital, and word-of-mouth
marketing to corporate customers, providing a revenue source that is independent
of advertising and circulation. Sometimes these services are sold in conjunction
with Meredith's 85 million-name database of consumers to help clients better
target marketing messages according to consumers needs and interests. Prior year
acquisitions, including Big Communications and Directive in fiscal 2008, and
Genex and New Media Strategies in fiscal 2007, added complementary skills to
further enhance the Company’s ability to service clients' growing needs. Fiscal
2009 clients included Kraft, DIRECTV, Nestlé, Kia Motors America, Publix, Honda,
State Farm, and Sony.
Brand Licensing
—During fiscal
2009, Meredith expanded work with leading companies to significantly extend the
reach of the Better Homes and Gardens brand.
In
October 2007, Meredith announced a multi-year licensing agreement with Wal-Mart
Stores, Inc. (Wal-Mart) for the design, marketing, and retailing of a wide range
of home products based on the Better Homes and Gardens brand. This was in
addition to an existing line of outdoor and garden products. This new line of
home products became available exclusively in Wal-Mart stores in the fall of
2008 and includes items in popular home categories such as bedding and throws,
bath accessories, dinnerware and kitchen textiles, and decorative pillows. Late
in fiscal 2008, the Company reached an agreement with Wal-Mart for an expansion
of the line deeper into bath, bedding, and outdoor categories. These additional
products will be available in the fall of 2009. During fiscal 2009, agreement
was reached to double the number of branded SKUs to 1,000 and extend the program
to Canada. Wal-Mart continues to support the line with a multi-media platform
national advertising campaign that is reaching millions of American
consumers.
In fiscal
2008, the Company entered into a long-term agreement to license the Better Homes
and Gardens brand to Realogy Corporation. Realogy, owner of brands such as
CENTURY 21®, Coldwell Banker® and ERA®, is building a new residential real
estate franchise system based on the Better Homes and Gardens brand. It launched
in July 2008. Meredith receives ongoing royalty payments from Realogy based on a
percentage of sales from the Better Homes and Gardens Real Estate franchise
system. In addition, Realogy has agreed to purchase advertising in Meredith
titles and to market Meredith magazine subscriptions through the Better Homes
and Garden Real Estate franchise system.
In fiscal
2007, Meredith reached a licensing agreement with Universal Furniture
International to create a full line of wooden and upholstered furniture for
living rooms, bedrooms, and dining rooms. This agreement was expanded in fiscal
2008.
The
Company continues to pursue brand extensions that will serve consumers and
advertisers alike and extend the reach and vitality of our brands.
Meredith Books
—Prior to
March 1, 2009, Meredith published books under the Better Homes and
Gardens trademark and other licensed trademarks that were directed primarily at
the home and family markets. During fiscal 2009, we published 31 new or revised
titles. Meredith announced a licensing agreement effective March 1,
2009, granting Wiley exclusive global rights to publish and distribute books
based on Meredith’s consumer-leading brands, including the powerful Better Homes
and Gardens imprint. Under the agreement, Meredith continues to create book
content and retain all approval and content rights. Wiley is responsible for
book layout and design, printing, sales and marketing, distribution, and
inventory management. Wiley pays Meredith royalties based on net sales subject
to a guaranteed minimum. Separate from Wiley, Meredith continues to publish and
promote books under licensed trademarks such as The Home Depot®
books.
Production
and Delivery
Paper,
printing, and postage costs accounted for 41 percent of the publishing segment's
fiscal 2009 operating expenses.
The major
raw materials essential to the publishing segment are coated publication and
book-grade papers. Meredith directly purchases all of the paper for its magazine
production and its custom publishing business and a majority of the paper for
its book production. After several quarters of sharply increasing prices, paper
prices declined in the second half of fiscal 2009. Even with these declines,
average paper prices increased 10 percent in fiscal 2009. The price of paper is
driven by overall market conditions and is therefore difficult to predict.
Management anticipates paper prices will be fairly stable and fiscal 2010
average paper prices will be approximately 10 percent lower than fiscal 2009
average prices. The Company has contractual agreements with major paper
manufacturers to ensure adequate supplies for planned publishing
requirements.
Meredith
has printing contracts with several major domestic printers for all of its
magazine titles. The Company has a contract with a major U.S. printer for the
majority of its book titles.
Because
of the large volume of magazine and subscription promotion mailings, postage is
a significant expense of the publishing segment. We continually seek the most
economical and effective methods for mail delivery including cost-saving
strategies that leverage worksharing opportunities offered within the postal
rate structure. Postage on periodicals accounts for approximately 75 percent of
Meredith's postage costs, while other mail items—direct mail, replies, and
bills— accounts for approximately 25 percent. The Governors of the United States
Postal Service (USPS) review prices for mailing services annually and adjust
postage rates each May. Rate increases have been implemented by the USPS in each
of Meredith’s last four fiscal years. Under the Postal Accountability and
Enhancement Act, USPS increases for each class of mail are capped to the U.S.
Bureau of Labor Statistics' reported increase in the annual CPI-U Index
(Consumer Price Index for Urban consumers) for the previous calendar year. This
CPI-U increase for 2008 was 3.8 percent. The new postal law, however, contains a
special "banking provision" that allows the USPS to defer a portion of an
increase not used in a given year to apply in a subsequent year. While fiscal
2009 postage expense decreased 3 percent from fiscal 2008 costs, the latest
increase in May 2009 will increase Meredith’s annual postage costs by
approximately 3 percent. Meredith continues to work with others in the industry
and through trade organizations to encourage the USPS to implement efficiencies
and contain rate increases. We cannot, however, predict future changes in the
efficiency of the USPS and postal rates or the impact they will have on our
publishing business.
Fulfillment
services for Meredith's publishing segment are provided by third parties.
National magazine newsstand distribution services are provided by a third party
through multi-year agreements.
Competition
Publishing
is a highly competitive business. The Company's magazines, books, and related
publishing products and services compete with other mass media, including the
Internet, and with many other leisure-time activities. Competition for
advertising dollars is based primarily on advertising rates, circulation levels,
reader demographics, advertiser results, and sales team effectiveness.
Competition for readers is based principally on editorial content, marketing
skills, price, and customer service. While competition is strong for established
titles, gaining readership for newer magazines and specialty publications is
especially competitive.
Broadcasting
Broadcasting
represented approximately 20 percent of Meredith's consolidated revenues in
fiscal 2009. Certain information about the Company's television stations at
June 30, 2009, follows:
|
Station,
Market
|
DMA
National
Rank
(1)
|
Network
Affiliation
|
Channel
|
Expiration
Date
of FCC
License
|
Average
Audience
Share
(2)
|
|
|
|
|
|
|
|
|
WGCL-TV
|
8
|
CBS
|
46
|
4-1-2005
(3)
|
6.0 %
|
|
Atlanta,
GA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KPHO-TV
|
12
|
CBS
|
5
|
10-1-2006
(3)
|
7.0 %
|
|
Phoenix,
AZ
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KPTV
|
22
|
FOX
|
12
|
2-1-2007
(3)
|
7.0 %
|
|
Portland,
OR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KPDX-TV
|
22
|
MyNetworkTV
|
49
|
2-1-2007
(3)
|
2.3 %
|
|
Portland,
OR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WSMV-TV
|
29
|
NBC
|
4
|
8-1-2005
(3)
|
11.0 %
|
|
Nashville,
TN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WFSB-TV
|
30
|
CBS
|
3
|
4-1-2007
(3)
|
12.7 %
|
|
Hartford,
CT
|
|
|
|
|
|
|
New
Haven, CT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KCTV
|
31
|
CBS
|
5
|
2-1-2006
(3)
|
13.7 %
|
|
Kansas
City, MO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KSMO-TV
|
31
|
MyNetworkTV
|
62
|
2-1-2006
(3)
|
2.0 %
|
|
Kansas
City, MO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WHNS-TV
|
36
|
FOX
|
21
|
12-1-2004
(3)
|
6.3 %
|
|
Greenville,
SC
|
|
|
|
|
|
|
Spartanburg,
SC
|
|
|
|
|
|
|
Asheville,
NC
|
|
|
|
|
|
|
Anderson,
SC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KVVU-TV
|
42
|
FOX
|
5
|
10-1-2006
(3)
|
4.7 %
|
|
Las
Vegas, NV
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WNEM-TV
|
66
|
CBS
|
5
|
10-1-2005
(3)
|
14.0 %
|
|
Flint,
MI
|
|
|
|
|
|
|
Saginaw,
MI
|
|
|
|
|
|
|
Bay
City, MI
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WSHM-LP
|
111
|
CBS
|
3
|
4-1-2007
(3)
|
9.3 %
|
|
Springfield,
MA
|
|
|
|
|
|
|
Holyoke,
MA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Designated
Market Area (DMA) is a registered trademark of, and is defined by, Nielsen
Media Research. The national rank is from the 2008–2009 DMA
ranking.
|
|
|
|
|
(2)
|
Average
audience share represents the estimated percentage of households using
television tuned to the station in the DMA. The percentages shown reflect
the average total day shares (9:00 a.m. to midnight) for the November
2008, March 2009, and May 2009 measurement periods.
|
|
|
|
|
(3)
|
Renewal application pending.
Under FCC rules, a license is automatically extended pending FCC
processing and granting of the renewal application.
We have no reason to believe
that these licenses will not be renewed by the
FCC.
|
|
|
|
Operations
The
principal sources of the broadcasting segment’s revenues are: 1) local
advertising focusing on the immediate geographic area of the stations; 2)
national advertising; 3) retransmission of our television signal to satellite
and cable systems; 4) advertising on the stations’ websites; and 5) payments by
advertisers for other services, such as the production of advertising materials.
The advertising revenues derived from a station’s local news programs make up a
significant part of its total revenues.
The
stations sell commercial time to both local/regional and national advertisers.
Rates for spot advertising are influenced primarily by the market size, number
of in-market broadcasters, audience share, and audience demographics. The larger
a station's share in any particular daypart, the more leverage a station has in
setting advertising rates. As the market fluctuates with supply and demand, so
does a station's rates. Most national advertising is sold by independent
representative firms. The sales staff at each station generates local/regional
advertising revenues.
Typically
30 to 40 percent of a market's television advertising revenue is generated by
local newscasts. Station personnel are continually working to grow their news
ratings, which in turn will augment revenues. Effective June 12, 2009, the
Company broadcasts on its digital channels only, except for WSHM, our low-power
station. The Company broadcasts local newscasts in high definition (HD) at two
of our 12 stations. These telecasts have been well received given the dramatic
increase in sales of HD televisions.
The
national network affiliations of Meredith's 12 television stations influence
advertising rates. Generally, a network affiliation agreement provides a station
the exclusive right to broadcast network programming in its local service area.
In return, the network has the right to sell most of the commercial advertising
aired during network programs. Network-affiliated stations generally pay
networks for certain programming such as professional football. The Company's
FOX affiliates also pay the FOX network for additional advertising spots in
prime-time programming.
The
Company's affiliation agreements for its six CBS affiliates have expiration
dates that range from November 2010 to April 2016. Affiliation agreements for
our two MyNetworkTV affiliates expire at the end of the 2011-2012 broadcast
season; the FOX affiliation agreements expire at the end of the 2011-2012
broadcast season; and the agreement for our NBC affiliate expires in December
2013. While Meredith's relations with the networks historically have been
excellent, the Company can make no assurances they will remain so over
time.
The
Federal Communications Commission (FCC) has permitted broadcast television
station licensees to use their digital spectrum for a wide variety of services
such as high-definition television programming, audio, data, and other types of
communication, subject to the requirement that each broadcaster provide at least
one free video channel equal in quality to the current technical standards.
Several of our stations are broadcasting a second programming stream on their
digital channel. Our Las Vegas, Phoenix, and Hartford stations currently
broadcast a weather channel, our Nashville station broadcasts Telemundo network
programming, and Flint-Saginaw has a MyNetworkTV affiliate.
The costs
of locally produced programming and purchased syndicated programming are
significant. Syndicated programming costs are based largely on demand from
stations in the market and can fluctuate significantly. The Company continues to
increase its locally produced news and entertainment programming to control
content and costs and to attract advertisers.
During
fiscal 2009, Meredith announced an initiative to consolidate back-office station
functions such as traffic, master control, and research into centralized hubs in
Atlanta and Phoenix. The centralization is expected to be fully completed in
early calendar 2010.
Meredith
has been successful in creating nontraditional revenue streams in the
broadcasting segment. Our unique Cornerstone programs differentiate Meredith
from other local television broadcasters. These programs leverage our publishing
brands by packaging content from our magazines with print and on-air advertising
from local advertisers.
We
continue to see increasing revenues from retransmission fees. Meredith has
successfully negotiated new retransmission terms with all cable operators in its
markets. Revenues from retransmission fees more than doubled in fiscal 2009 to
reach $16.6 million. We expect retransmission fees to be more than $20 million
in fiscal 2010.
Meredith
Video Solutions (MVS) produces broadcast-quality video for use by Meredith's
television stations and our broadcasting and publishing websites, and is
producing custom video for clients as well. MVS's video sites,
Better.tv
and
Parents.tv
, offer more ways
for users to interact with our content.
Better.tv
features over 20
channels of video information on topics including food, family, home, style,
entertainment, fitness, and health.
Parents.tv
provides
all-original parenting content based on the editorial backbone of
Parents
,
American Baby
, and
Family Circle
magazines.
Sponsorship opportunities include video billboards, product integration, channel
sponsorships, and custom videos.
The
Better
show, our hour-long
daily lifestyle television show produced by MVS, continues to expand its reach.
The show now has syndication agreements in more than 50 markets, including half
of the nation’s top 10. This is up from 35 markets in the fall of 2008. Content
from the
Better
show is
also repurposed online at
Better.tv
and
Parents.tv
.
Meredith
parenthood video content is distributed on Comcast Corp.'s cable systems on a
video on demand (VOD) channel branded Parents TV that reaches more than 14
million households. In its first full year, approximately 1.7 million videos
were downloaded through the VOD channel. Comcast has more VOD homes than any
other cable operator. Meredith and Comcast share the advertising
revenues.
Competition
Meredith's
television stations and radio station compete directly for advertising dollars
and programming in their respective markets with other local television
stations, radio stations, and cable television providers. Other mass media
providers such as newspapers and their websites are also competitors.
Advertisers compare market share, audience demographics, and advertising rates
and take into account audience acceptance of a station's programming, whether
local, network, or syndicated.
Regulation
The
ownership, operation, and sale of broadcast television stations, including those
licensed to the Company, are subject to the jurisdiction of the FCC, which
engages in extensive regulation of the broadcasting industry under authority
granted by the Communications Act of 1934, as amended (Communications Act),
including authority to promulgate rules and regulations governing broadcasting.
The Communications Act requires broadcasters to serve the public interest. Among
other things, the FCC assigns frequency bands; determines stations’ locations
and operating parameters; issues, renews, revokes, and modifies station
licenses; regulates and limits changes in ownership or control of station
licenses; regulates equipment used by stations; regulates station employment
practices; regulates certain program content and commercial matters in
children’s programming; has the authority to impose penalties for violations of
its rules or the Communications Act; and impose annual fees on stations.
Reference should be made to the Communications Act, as well as to the FCC’s
rules, public notices, and rulings for further information concerning the nature
and extent of federal regulation of broadcast television stations.
Television
broadcast licenses are granted for eight-year periods. The Communications Act
directs the FCC to renew a broadcast license if the station has served the
public interest and is in substantial compliance with the provisions of the
Communications Act and FCC rules and policies. Management believes the Company
is in substantial compliance with all applicable provisions of the
Communications Act and FCC rules and policies and knows of no reason why
Meredith's broadcast station licenses will not be renewed.
On
December 18, 2007, the FCC adopted a decision that revised its
newspaper/broadcast cross-ownership rule to permit a degree of same-market
newspaper/broadcast ownership based on certain presumptions, criteria, and
limitations. The FCC at that time made no changes to the currently effective
local radio ownership rules (as modified by its 2003 ownership decision) or the
radio/television cross-ownership rule (as modified in 1999). Also in December
2007, the FCC adopted rules to promote diversification of broadcast ownership,
including revisions to its ownership attribution rules. The FCC’s media
ownership rules, including the modifications adopted in December 2007, are
subject to further court appeals, various petitions for reconsideration before
the FCC, and possible actions by Congress. We cannot predict the impact of any
of these developments on our business. In particular, we cannot predict the
ultimate outcome of the FCC’s media ownership proceedings or their effects on
our ability to acquire broadcast stations in the future or to continue to freely
transfer stations that we currently own. Moreover, we cannot predict the impact
of future reviews or any other agency or legislative initiatives upon the FCC’s
broadcast rules.
The
Communications Act and the FCC also regulate relationships between television
broadcasters and cable and satellite television providers. Under these
provisions, most cable systems must devote a specified portion of their channel
capacity to the carriage of the signals of local television stations that elect
to exercise this right to mandatory carriage. Alternatively, television stations
may elect to restrict cable systems from carrying their signals without their
written permission, referred to as retransmission consent. Congress and the FCC
have established and implemented generally similar market-specific requirements
for mandatory carriage of local television stations by satellite television
providers when those providers choose to provide a market’s local television
signals.
In
February 2006, Congress passed the Digital Television Transition and Public
Safety Act (DTV Act), and set February 17, 2009, as the end of free,
over-the-air, analog broadcast service from full power television stations. In
February 2009, Congress passed legislation that required all full-power stations
to convert to all-digital operation by June 12, 2009. This new transition
date was intended to permit additional time for consumers to obtain converter
boxes and otherwise prepare for the transition. On June 12, 2009, the
Company turned off its full power analog channels and now broadcasts on its
digital channels only.
In 2006,
Sprint Nextel Corporation (Nextel) was granted the right from the FCC to claim
from broadcasters in each market across the country the 1.9 GHz spectrum to use
for an emergency communications system. In order to claim this signal, Nextel
must replace all analog equipment currently using this spectrum with digital
equipment. All broadcasters have agreed to use the digital substitute that
Nextel will provide. The transition is being completed on a market-by-market
basis. We recorded pre-tax gains of $2.5 million and $1.8 million during fiscal
2009 and fiscal 2008, respectively, that represent the difference between the
fair value of the digital equipment we received and the book value of the analog
equipment we exchanged. As the equipment is exchanged in other markets, we
expect to record additional gains in fiscal 2010.
Congress
and the FCC have under consideration, and in the future may adopt, new laws,
regulations, and policies regarding a wide variety of matters that could affect,
directly or indirectly, the operation, ownership transferability, and
profitability of the Company’s broadcast television stations and affect the
ability of the Company to acquire additional stations. In addition to the
matters noted above, these include, for example, spectrum use fees, regulation
of political advertising rates, potential restrictions on the advertising of
certain products (such as alcoholic beverages), program content restrictions,
increased fines for rule violations, and ownership rule changes. Other matters
that could potentially affect the Company’s broadcast properties including
technological innovations and developments generally affecting competition in
the mass communications industry for viewers or advertisers, such as home video
recorders and players, satellite radio and television services, cable television
systems, newspapers, outdoor advertising, and Internet delivered video
programming services.
The
information provided in this section is not intended to be inclusive of all
regulatory provisions currently in effect. Statutory provisions and FCC
regulations are subject to change, and any such changes could affect future
operations and profitability of the Company's broadcasting segment. Management
cannot predict what regulations or legislation may be adopted, nor can
management estimate the effect any such changes would have on the Company's
television and radio broadcasting operations.
EXECUTIVE
OFFICERS OF THE COMPANY
Executive
officers are elected to one year terms each November. The current executive
officers of the Company are:
Stephen M. Lacy
—President and
Chief Executive Officer (2006–present) and a director of the Company since 2004.
Formerly President and Chief Operating Officer (2004–2006) and
President–Publishing Group (2000–2004). Age 55.
John H. (Jack) Griffin,
Jr.
—President–Publishing Group (2004–present). Formerly
President–Magazine Group (2003–2004). Age 49.
Paul A.
Karpowicz
—President–Broadcasting Group (2005–present). Prior to joining
Meredith, Mr. Karpowicz spent 16 years with LIN Television Corporation (LIN) and
in 1994 was named Vice President-Television for LIN's 23 properties in 14
markets. Mr. Karpowicz served on LIN's Board of Directors from 1999 to 2005. Age
56.
Joseph H. Ceryanec
—Vice
President–Chief Financial Officer (effective October 2008). Prior to joining
Meredith, Mr. Ceryanec served as President, Central Region for PAETEC
Corporation from February 2008. Prior to PAETEC’s acquisition of McLeodUSA, Mr.
Ceryanec served as McLeodUSA’s Group Vice President, Chief Financial Officer
from 2005 to 2008 and Controller/Treasurer from 1996 to 2005. Age
48.
John S. Zieser
—Chief
Development Officer/General Counsel and Secretary (2006–present). Formerly Vice
President–Corporate Development/General Counsel and Secretary (2004–2006) and
Vice President–Corporate and Employee Services/General Counsel and Secretary
(2002–2004). Age 50.
EMPLOYEES
As of
June 30, 2009, the Company had approximately 3,160 full-time and 120
part-time employees. Only a small percentage of our workforce is unionized. We
consider relations with our employees to be good.
OTHER
Name
recognition and the public image of the Company's trademarks (e.g.,
Better Homes and Gardens
and
Parents
) and television
station call letters are vital to the success of our ongoing operations and to
the introduction of new business. The Company protects its brands by
aggressively defending its trademarks and call letters.
The
Company had no material expenses for research and development during the past
three fiscal years.
Revenues
from individual customers and revenues, operating profits, and identifiable
assets of foreign operations were not significant. Compliance with federal,
state, and local provisions relating to the discharge of materials into the
environment and to the protection of the environment had no material effect on
capital expenditures, earnings, or the Company's competitive
position.
AVAILABLE
INFORMATION
The
Company's corporate website is
M
eredith.com
. The content of
our website is not incorporated by reference into this Form 10-K. Meredith
makes available free of charge through its website its Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to
those reports filed or furnished to the Securities and Exchange Commission (SEC)
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as
soon as reasonably practical after such documents are electronically filed with
or furnished to the SEC. Meredith also makes available on its website its
corporate governance information including charters of all of its Board
Committees, its Corporate Governance Guidelines, its Code of Business Conduct
and Ethics, its Code of Ethics for CEO and Senior Financial Officers, and its
Bylaws. Copies of such documents are also available free of charge upon written
request.
This
Form 10-K, including the sections titled
Item 1–Business
,
Item 1A–Risk Factors
,
and
Item 7–Management's
Discussion and Analysis of Financial Condition and Results of Operations
,
contains forward-looking statements that relate to future events or our future
financial performance. We may also make written and oral forward-looking
statements in our SEC filings and elsewhere. By their nature, forward-looking
statements involve risks, trends, and uncertainties that could cause actual
results to differ materially from those anticipated in any forward-looking
statements. Such factors include, but are not limited to, those items described
in
Item 1A–Risk
Factors
below, those identified elsewhere in this document, and other
risks and factors identified from time to time in our SEC filings. We have
tried, where possible, to identify such statements by using words such as
believe
,
expect
,
intend
,
estimate
,
anticipate
,
will
,
likely
,
project
,
plan
, and similar expressions
in connection with any discussion of future operating or financial performance.
Any forward-looking statements are and will be based upon our then-current
expectations, estimates, and assumptions regarding future events and are
applicable only as of the dates of such statements. Readers are cautioned not to
place undue reliance on such forward-looking statements that are part of this
filing; actual results may differ materially from those currently anticipated.
The Company undertakes no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events, or
otherwise.
In
addition to the other information contained or incorporated by reference into
this Form 10-K, investors should consider carefully the following risk
factors when investing in our securities. In addition to the risks described
below, there may be additional risks that we have not yet perceived or that we
currently believe are immaterial.
Advertising represents the largest
portion of our revenues.
Approximately 55 percent of our
revenues are derived from advertising. Advertising constitutes about half of our
publishing segment revenues and almost all of our broadcasting segment revenues.
Demand for advertising is highly dependent upon the strength of the U.S.
economy. During an economic downturn, demand for advertising may decrease. The
growth in alternative forms of media, for example the Internet, has increased
the competition for advertising dollars, which could in turn reduce expenditures
for magazine and television advertising or suppress advertising
rates.
Circulation revenues represent a
significant portion of our revenues.
Magazine circulation is
another significant source of revenue, representing 20 percent of total revenues
and 25 percent of publishing segment revenues. Preserving circulation is
critical for maintaining advertising sales. Magazines face increasing
competition from alternative forms of media and entertainment. As a result,
sales of magazines through subscriptions and at the newsstand could decline. As
publishers compete for subscribers, subscription prices could decrease and
marketing expenditures may increase.
Client relationships are important to
our integrated marketing businesses.
Our ability to maintain
existing client relationships and generate new clients depends significantly on
the quality of our services, our reputation, and the continuity of Company and
client personnel. Dissatisfaction with our services, damage to our reputation,
or changes in key personnel could result in a loss of business.
Paper and postage prices may be
difficult to predict or control.
Paper and postage represent
significant components of our total cost to produce, distribute, and market our
printed products. In fiscal 2009, these expenses accounted for 28 percent of the
publishing segment's operating costs. Paper is a commodity and its price has
been subject to significant volatility. All of our paper supply contracts
currently provide for price adjustments based on prevailing market prices;
however, we historically have been able to realize favorable paper pricing
through volume discounts and multi-year contracts. The USPS distributes
substantially all of our magazines and many of our marketing materials. Postal
rates are dependent on the operating efficiency of the USPS and on legislative
mandates imposed upon the USPS. Although we work with others in the industry and
through trade organizations to encourage the USPS to implement efficiencies that
will minimize rate increases, we cannot predict with certainty the magnitude of
future price changes for paper and postage. Further, we may not be able to pass
such increases on to our customers.
World events may result in unexpected
adverse operating results for our broadcasting segment.
Our
broadcasting results could be affected adversely by world events such as wars,
political unrest, acts of terrorism, and natural disasters. Such events can
result in significant declines in advertising revenues as the stations will not
broadcast or will limit broadcasting of commercials during times of crisis. In
addition, our stations may have higher newsgathering costs related to coverage
of the events.
Our broadcasting operations are
subject to FCC regulation.
Our broadcasting stations operate
under licenses granted by the FCC. The FCC regulates many aspects of television
station operations including employment practices, political advertising,
indecency and obscenity, programming, signal carriage, and various technical
matters. Violations of these regulations could result in penalties and fines.
Changes in these regulations could impact the results of our operations. The FCC
also regulates the ownership of television stations. Changes in the ownership
rules could affect our ability to consummate future transactions. Details
regarding regulation and its impact on our broadcasting operations are provided
in
Item 1–Business
beginning on page 6.
Loss of affiliation agreements could
adversely affect operating results for our broadcasting
segment
. Our broadcast television station business owns and
operates 12 television stations. Six are affiliated with CBS, three with FOX,
two with MyNetworkTV, and one with NBC. These television networks produce and
distribute programming in exchange for each of our stations' commitment to air
the programming at specified times and for commercial announcement time during
the programming. The non-renewal or termination of any of our network
affiliation agreements would prevent us from being able to carry programming of
the affiliate network. This loss of programming would require us to obtain
replacement programming, which may involve higher costs and which may not be as
attractive to our audiences, resulting in reduced revenues.
We have two classes of stock with
different voting rights
. We have two classes of stock: common
stock and Class B stock. Holders of common stock are entitled to one vote
per share and account for approximately 30 percent of the voting power. Holders
of Class B stock are entitled to ten votes per share and account for the
remaining 70 percent of the voting power. There are restrictions on who can own
Class B stock. The majority of Class B shares are held by members of
Meredith's founding family. Control by a limited number of individuals may make
the Company a less attractive takeover target, which could adversely affect the
market price of our common stock. This voting control also prevents other
shareholders from exercising significant influence over certain of the Company's
business decisions.
Further non-cash impairment of
goodwill and intangible assets is possible, depending upon future operating
results and the value of the Company’s stock.
Although the
Company has written down its intangible assets (including goodwill) by $294.5
million in fiscal 2009, further impairment charges are possible. We test our
goodwill and intangible assets, including FCC licenses, for impairment during
the fourth quarter of every fiscal year and on an interim basis if indicators of
impairment exist. Factors which influence the evaluation include the Company’s
stock price and expected future operating results. If the carrying value of a
reporting unit or an intangible asset is no longer deemed to be recoverable, a
potentially material impairment charge could be incurred. Although these charges
would be non-cash in nature and would not affect the Company’s operations or
cash flow, they would adversely affect stockholders’ equity and reported results
of operations in the period charged.
Acquisitions pose inherent financial
and other risks and challenges.
On occasion, Meredith will
acquire another business as part of our strategic plan. These transactions
involve challenges and risks in negotiation, valuation, execution, and
integration. Moreover, competition for certain types of acquisitions is
significant, particularly in the field of interactive media. Even if
successfully negotiated, closed, and integrated, certain acquisitions may not
advance our business strategy and may fall short of expected return on
investment targets.
|
|
|
|
|
The
preceding risk factors should not be construed as a complete list of
factors that
may
affect our future operations and financial results.
|
|
|
|
|
Not
applicable.
Meredith
is headquartered in Des Moines, IA. The Company owns buildings at 1716 and 1615
Locust Street and is the sole occupant of these buildings. These facilities are
adequate for their intended use.
The
publishing segment operates mainly from the Des Moines offices and from leased
facilities at 125 Park Avenue and 375 Lexington Avenue in New York, NY. The New
York facilities are used primarily as advertising sales offices for all Meredith
magazines and as headquarters for
Ladies' Home Journal
,
Family Circle
,
Parents
,
Fitness
,
More
,
Siempre Mujer
, and the
American Baby Group properties. We have also entered into leases for integrated
marketing operations and publishing sales offices located in the states of
California, Illinois, Michigan, Texas, and Virginia. The Company believes the
capacity of these locations is sufficient to meet our current and expected
future requirements.
The
broadcasting segment operates from facilities in the following locations:
Atlanta, GA; Phoenix, AZ; Beaverton, OR; Rocky Hill, CT; Nashville, TN; Fairway,
KS; Greenville, SC; Henderson, NV; Springfield, MA; and Saginaw, MI. All of
these properties are adequate for their intended use. The property in
Springfield is leased, while the other properties are owned by the Company. Each
of the broadcast stations also maintains one or more owned or leased transmitter
sites.
There are
various legal proceedings pending against the Company arising from the ordinary
course of business. In the opinion of management, liabilities, if any, arising
from existing litigation and claims will not have a material effect on the
Company's earnings, financial position, or liquidity.
No
matters have been submitted to a vote of shareholders since the Company's last
annual meeting held on November 5, 2008.
MARKET
INFORMATION, DIVIDENDS, AND HOLDERS
The
principal market for trading Meredith's common stock is the New York Stock
Exchange (trading symbol MDP). There is no separate public trading market for
Meredith's Class B stock, which is convertible share for share at any time
into common stock. Holders of both classes of stock receive equal dividends per
share.
The range
of trading prices for the Company's common stock and the dividends paid during
each quarter of the past two fiscal years are presented below.
|
|
High
|
Low
|
Dividends
|
|
Fiscal
2009
|
|
|
|
|
First
Quarter
|
$31.31
|
$23.02
|
$0.215
|
|
Second
Quarter
|
28.30
|
12.06
|
0.215
|
|
Third
Quarter
|
19.49
|
10.60
|
0.225
|
|
Fourth
Quarter
|
30.10
|
16.40
|
0.225
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
Low
|
Dividends
|
|
Fiscal
2008
|
|
|
|
|
First
Quarter
|
$62.50
|
$48.15
|
$0.185
|
|
Second
Quarter
|
62.39
|
53.71
|
0.185
|
|
Third
Quarter
|
55.08
|
37.10
|
0.215
|
|
Fourth
Quarter
|
39.83
|
28.01
|
0.215
|
Meredith
stock became publicly traded in 1946, and quarterly dividends have been paid
continuously since 1947. Meredith has increased its dividend in each of the last
16 years. It is anticipated that comparable dividends will continue to be paid
in the future.
On
July 31, 2009, there were approximately 1,390 holders of record of the
Company's common stock and 740 holders of record of Class B
stock.
COMPARISON
OF SHAREHOLDER RETURN
The
following graph compares the performance of the Company’s common stock during
the period July 1, 2004, to June 30, 2009, with the Standard and
Poor’s (S&P) 500 Index and with a Peer Group of six companies engaged in
multimedia businesses primarily with publishing and/or television broadcasting
in common with the Company.
The
S&P 500 Index is comprised of 500 U.S. companies in the industrial,
transportation, utilities, and financial industries and is weighted by market
capitalization. The Peer Group selected by the Company for comparison, which is
also weighted by market capitalization, is comprised of Belo Corp.; Gannett Co.,
Inc.; The McGraw-Hill Companies, Inc.; Media General, Inc.; The E.W. Scripps
Company; and The Washington Post Company. Heart-Argyle Television, Inc., which
had been included in the Peer Group in prior years, is no longer a publicly
traded company and has been removed from the Peer Group. The Company also
removed The New York Times from the Peer Group since they sold their broadcast
media group and no longer are in any of the same lines of business as the
Company.
The graph
depicts the results for investing $100 in the Company’s common stock, the
S&P 500 Index, and the Peer Group at closing prices on June 30, 2004,
assuming dividends were reinvested.
ISSUER
PURCHASES OF EQUITY SECURITIES
The
following table sets forth information with respect to the Company's repurchases
of common stock during the quarter ended June 30, 2009.
|
Period
|
(a)
Total
number of
shares
purchased
|
(b)
Average
price
paid
per
share
|
(c)
Total
number of shares
purchased as part of
publicly announced
programs
|
(d)
Maximum
number of
shares that may yet be
purchased under the
programs
|
|
April
1 to
April
30, 2009
|
1,399
|
|
$ 17.63
|
|
1,399
|
|
1,496,429
|
|
May
1 to
May
31, 2009
|
485
|
|
27.02
|
|
485
|
|
1,495,944
|
|
June
1 to
June 30,
2009
|
–
|
|
–
|
|
–
|
|
1,495,944
|
|
Total
|
1,884
|
|
20.05
|
|
1,844
|
|
1,495,944
|
No Class
B shares were purchased during the quarter ended June 30, 2009.
In May
2008, Meredith announced the Board of Directors had authorized the repurchases
of up to 2.0 million additional shares of the Company's stock through public and
private transactions.
For more
information on the Company's share repurchase program, see
Item 7–Management's Discussion
and Analysis of Financial Condition and Results of Operations
, under the
heading "Share Repurchase Program" on page 35.
Selected
financial data for the years 2005 through 2009 is contained under the heading
"Eleven-Year Financial History with Selected Financial Data" beginning on
page 86 and is derived from consolidated financial statements for those
years. Information contained in that table is not necessarily indicative of
results of operations in future years and should be read in conjunction with
Item 7–Management's
Discussion and Analysis of Financial Condition and Results of Operations
and
Item 8–Financial Statements and Supplementary Data
of this
Form 10-K.
Management's
Discussion and Analysis of Financial Condition and Results of Operations
(MD&A) consists of the following sections:
MD&A
should be read in conjunction with the other sections of this Form 10-K,
including
Item 1–Business
,
Item 6–Selected Financial
Data
, and
Item 8–Financial Statements and
Supplementary Data
. MD&A contains a number of forward-looking
statements, all of which are based on our current expectations and could be
affected by the uncertainties and risk factors described throughout this filing
and particularly in
Item 1A–Risk
Factors
.
Meredith
is one of the nation's leading media and marketing companies, one of the leading
magazine publishers serving women, and a broadcaster with television stations in
top markets such as Atlanta, Phoenix, and Portland. Each month we reach more
than 85 million American consumers through our magazines, websites, books,
custom publications, and television stations. Our businesses serve well-defined
readers and viewers, deliver the messages of advertisers, and extend our brand
franchises and expertise to related markets. Our products and services
distinguish themselves on the basis of quality, customer service, and value that
can be trusted.
Meredith
operates two business segments. Publishing consists of magazine and book
publishing, integrated marketing, interactive media, brand licensing,
database-related activities, and other related operations. Broadcasting consists
of 12 network-affiliated television stations, one radio station, related
interactive media operations, and video related operations. Both segments
operate primarily in the U.S. and compete against similar media and other types
of media on both a local and national basis. In fiscal 2009, publishing
accounted for approximately 80 percent of the Company's $1.4 billion in revenues
while broadcasting revenues contributed approximately 20 percent.
While
signs of a weakening economy were noticeable toward the end of fiscal 2008,
fiscal 2009 brought further economic turmoil. Most companies, and particularly
those in the media industry, were directly impacted by the adverse effects on
consumer confidence and consequential lower advertiser spending. Meredith was no
exception. Total advertising revenues declined 15 percent in fiscal
2009.
In the
face of these challenging times, the Company responded quickly to meet the
demands of consumers and advertisers and to optimize opportunities in our
publishing and broadcasting operations. Meredith implemented a three-pronged
performance improvement plan to build value for its shareholders. First, we
focused on gaining market share. In fiscal 2009, we increased market share to
10.5 percent of industry advertising revenue from 9.5 percent in fiscal 2008,
according to data from Publishers Information Bureau (PIB). In the fourth fiscal
quarter, our share grew to 12.8 percent from 10.1 percent. Many of our
television stations posted stronger ratings during the recently completed May
sweeps. In morning news, our stations in Portland, Hartford, and Las Vegas
continued their number one positions, while Atlanta and Greenville each doubled
viewership and Kansas City increased viewership 24 percent. We also gained
additional viewers during the late news, where ad rates are the highest.
Phoenix’s viewership for late news rose 38 percent while Greenville rose 11
percent. Hartford maintained its leadership position in every local newscast
time period.
The
second element of our performance improvement plan centers on growing new
revenue streams, many not dependent on traditional advertising. Meredith
Integrated Marketing revenues grew 13 percent in fiscal 2009, driven primarily
by our custom publishing and digital service offerings. Over the last couple of
years, we have transformed this business from purely a custom publisher into a
full-scale custom marketing agency with expansive digital skills. In the
process, we are now able to propose on a much broader range of business than
ever before. Meredith’s brand licensing activities grew revenues 15 percent in
fiscal 2009, largely due to our relationship with Wal-Mart. During the fiscal
year, we reached an agreement with Wal-Mart to double the number of branded SKUs
to 1,000 and extend the program to Canada. Revenues at MVS, a division of our
Broadcasting Group focused on video content creation and syndication, rose more
than 50 percent in fiscal 2009. Finally, fees paid to our television stations by
cable, satellite, and phone companies that retransmit their broadcast signals,
known in the industry as retransmission fees, doubled in fiscal 2009. We expect
they will total more than $20 million in fiscal 2010.
Finally,
our third performance improvement strategy is disciplined expense control and
aggressive cash management. Though we recorded a non-cash impairment charge of
$294.5 million in fiscal 2009, excluding the effects of that charge, total
operating costs declined 11 percent in the fourth quarter, and 5 percent for the
year – even with a 10 percent increase in paper prices over the prior-year
period. Additionally, we raised our dividend 5 percent during fiscal 2009,
unlike many of our peers that froze or reduced their dividends. We also
eliminated approximately $105 million – or 22 percent – of our debt during the
year. We continue to be well-positioned to make further investments in our
business as strategic opportunities arise.
PUBLISHING
Advertising
revenues made up 47 percent of fiscal 2009 publishing revenues. These revenues
were generated from the sale of advertising space in our magazines and on our
websites to clients interested in promoting their brands, products, and services
to consumers. Changes in advertising revenues tend to correlate with changes in
the level of economic activity in the U.S. Indicators of economic activity
include changes in the level of gross domestic product, consumer spending,
housing starts, unemployment rates, auto sales, and interest rates. Circulation
levels of Meredith's magazines, reader demographic data, and the advertising
rates charged relative to other comparable available advertising opportunities
also affect the level of advertising revenues.
Circulation
revenues accounted for 25 percent of fiscal 2009 publishing revenues.
Circulation revenues result from the sale of magazines to consumers through
subscriptions and by single copy sales on newsstands, primarily at major
retailers and grocery/drug stores. In the short term, subscription revenues,
which accounted for 75 percent of circulation revenues, are less susceptible to
economic changes because subscriptions are generally sold for terms of one to
three years. The same economic factors that affect advertising revenues also can
influence consumers' response to subscription offers and result in lower
revenues and/or higher costs to maintain subscriber levels over time. A key
factor in Meredith's subscription success is our industry-leading database. It
contains approximately 85 million entries that include information on about
three-quarters of American homeowners, providing an average of 700 data points
for each name. The size and depth of our database is a key to our circulation
model and allows more precise consumer targeting. Newsstand revenues are more
volatile than subscription revenues and can vary significantly month to month
depending on economic and other factors.
The
remaining 28 percent of publishing revenues came from a variety of activities
that included the sale of integrated marketing services and books as well as
brand licensing, product sales, and other related activities. Meredith
Integrated Marketing offers integrated promotional, database management,
relationship, and direct marketing capabilities for corporate customers, both in
printed and digital forms. These revenues generally are affected by changes in
the level of economic activity in the U.S. including changes in the level of
gross domestic product, consumer spending, unemployment rates, and interest
rates.
Publishing's
major expense categories are production and delivery of publications and
promotional mailings and employee compensation costs. Paper, postage, and
production charges represented 41 percent of the segment's operating expenses in
fiscal 2009. The price of paper can vary significantly on the basis of worldwide
demand and supply for paper in general and for specific types of paper used by
Meredith. The production of our publications is outsourced to printers. We
typically have multi-year contracts for the production of our magazines, a
practice which reduces price fluctuations over the contract term. Postal rates
are dependent on the operating efficiency of the USPS and on legislative
mandates imposed on the USPS. The USPS increased rates most recently in May
2009. This came after increases in each of Meredith’s prior three fiscal years.
Meredith works with others in the industry and through trade organizations to
encourage the USPS to implement efficiencies and contain rate
increases.
Employee
compensation, which includes benefits expense, represented 23 percent of
publishing's operating expenses in fiscal 2009. Compensation expense is affected
by salary and incentive levels, the number of employees, the costs of our
various employee benefit plans, and other factors. The remaining 36 percent of
fiscal 2009 publishing expenses included costs for magazine newsstand and book
distribution, advertising and promotional efforts, and overhead costs for
facilities and technology services.
BROADCASTING
Broadcasting
derives almost all of its revenues–94 percent in fiscal 2009–from the sale of
advertising both over the air and on our stations' websites. The remainder comes
from television retransmission fees, television production services, and other
services.
The
stations sell advertising to both local/regional and national accounts.
Political advertising revenues are cyclical in that they are significantly
greater during biennial election campaigns (which take place primarily in
odd-numbered fiscal years) than at other times. MVS produces video content for
Meredith stations, non-Meredith stations, and online distribution. Meredith
continues to expand its Cornerstone program to leverage our publishing brands.
The program packages material from our national magazines with local advertising
to create customized mini-magazines delivered to targeted customers in the
markets our television stations serve. We have generated additional revenues
from Internet activities and programs focused on local interests such as
community events and college and professional sports.
Changes
in advertising revenues tend to correlate with changes in the level of economic
activity in the U.S. and in the local markets in which we operate stations, and
with the cyclical changes in political advertising discussed previously.
Programming content, audience share, audience demographics, and the advertising
rates charged relative to other available advertising opportunities also affect
advertising revenues. On occasion, unusual events necessitate uninterrupted
television coverage and will adversely affect spot advertising
revenues.
In
conjunction with our annual impairment testing, we concluded in the fourth
quarter of fiscal 2009 that there was impairment with respect to the carrying
value of our Broadcasting FCC licenses and goodwill. As a result, in the fourth
quarter of fiscal 2009 we recorded non-cash charge of $211.9 million to reduce
the carrying value of our FCC licenses and of $82.6 million to write-off
broadcasting’s goodwill.
On an
ongoing basis, Broadcasting's major expense categories are employee compensation
and programming costs. Excluding the impairment charge, employee compensation
represented 50 percent of broadcasting's operating expenses in fiscal 2009, and
is affected by the same factors noted for publishing. Programming rights
amortization expense represented 11 percent of this segment's fiscal 2009
expenses, absent the impairment charge. Programming expense is affected by the
cost of programs available for purchase and the selection of programs aired by
our television stations. Sales and promotional activities, costs to produce
local news programming, and general overhead costs for facilities and technical
resources accounted for most of the remaining 39 percent of broadcasting's
fiscal 2009 operating expenses excluding the impairment charge.
FISCAL
2009 FINANCIAL OVERVIEW
|
·
|
The
Company reported a net loss for fiscal 2009 of $107.1 million or $2.38 per
share reflecting the non-cash impairment charge of $294.5 million ($185.1
million after-tax.) Absent the impairment charge, the Company would have
had fiscal 2009 net earnings of $78.0 million or $1.73 per share
representing a 42 percent decline from fiscal
2008.
|
|
·
|
As
part of the Company’s annual impairment testing, the Company recorded a
pre-tax non-cash impairment charge of $211.9 million to reduce the
carrying value of broadcast FCC licenses and $82.6 million to write-off
the broadcasting segment’s goodwill in the fourth quarter of fiscal
2009.
|
|
·
|
Both
magazine and broadcasting advertising revenues were affected by a
nationwide slowdown in the demand for advertising. As a result, publishing
revenues and operating profit decreased 8 percent and 20 percent,
respectively. Broadcasting revenues and operating profit declined 14
percent and 431 percent, respectively and a loss from operations of $257.8
million was incurred as a result of the impairment charge. Absent the
impairment charge discussed above, fiscal 2009 broadcasting operation
profit would have been $36.8 million, a decline of 53 percent from fiscal
2008.
|
|
·
|
In
the fourth quarter of fiscal 2009, management committed to additional
steps against its performance improvement plan that included plans to
centralize certain functions across Meredith’s television stations and
limited workforce reductions in the publishing segment. In connection with
these steps, the Company recorded a pre-tax restructuring charge in the
fourth quarter of fiscal 2009 of $5.5 million including severance and
benefit costs of $5.1 million and the write-down of certain fixed assets
at the television stations of $0.4
million.
|
|
·
|
In
December 2008, management committed to a performance improvement plan that
included a companywide workforce reduction and the closing of
Country Home
magazine.
In connection with this plan, the Company recorded a pre-tax restructuring
charge in the second quarter of fiscal 2009 of $15.8 million including
severance and benefit costs of $10.0 million, a write-down of various
assets of
Country Home
magazine of $5.6 million, and other accruals of $0.2 million. Of
the $15.8 million charge, $6.8 million is recorded in discontinued
operations on the Consolidated Statement of Earnings
(Loss.)
|
|
·
|
In
fiscal 2009, we generated $180.9 million in operating cash flows, invested
$23.5 million in capital improvements, and eliminated $105.0 million of
our debt. The quarterly dividend was increased 5 percent from 21.5 cents
per share to 22.5 cents per share effective with the March 2009
payment.
|
|
Years
ended June 30,
|
|
2009
|
|
Change
|
|
2008
|
Change
|
|
2007
|
|
(In
millions except per share data)
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
$
|
1,408.8
|
|
(9)%
|
$
|
1,552.4
|
(2)%
|
$
|
1,579.7
|
|
Costs
and expenses
|
|
1,206.8
|
|
(4)%
|
|
1,263.6
|
1 %
|
|
1,251.1
|
|
Depreciation
and
amortization
|
|
42.6
|
|
(13)%
|
|
49.2
|
9 %
|
|
45.0
|
|
Impairment
charge
|
|
294.5
|
|
–
|
|
–
|
–
|
|
–
|
|
Total
operating expenses
|
|
1,543.9
|
|
18 %
|
|
1,312.8
|
1 %
|
|
1,296.1
|
|
Income
(loss) from operations
|
$
|
(135.1
|
)
|
NM
|
$
|
239.6
|
(16)%
|
$
|
283.6
|
|
Earnings
(loss) from continuing operations
|
$
|
(102.5
|
)
|
NM
|
$
|
133.0
|
(20)%
|
$
|
166.0
|
|
Net
earnings (loss)
|
|
(107.1
|
)
|
NM
|
|
134.7
|
(17)%
|
|
162.3
|
|
Diluted
earnings (loss) per share from continuing operations
|
|
(2.28
|
)
|
NM
|
|
2.79
|
(17)%
|
|
3.38
|
|
Diluted
earnings (loss) per share
|
|
(2.38
|
)
|
NM
|
|
2.83
|
(15)%
|
|
3.31
|
|
NM
– not meaningful
|
|
|
|
|
|
|
|
|
|
OVERVIEW
Following
are a brief description of discontinued operations and a discussion of our
rationale for the use of financial measures that are not in accordance with
accounting principles generally accepted in the United States of America (GAAP),
or non-GAAP financial measures, and a discussion of the trends and uncertainties
that affected our businesses. Following the Overview is an analysis of the
results of operations for the publishing and broadcasting segments and an
analysis of our consolidated results of operations for the last three fiscal
years.
Discontinued
Operations
Unless
stated otherwise, as in the section titled Discontinued Operations, all of the
information contained in MD&A relates to continuing operations. Therefore,
results of
Country Home
magazine,
Child
magazine, WFLI, and KXFO are excluded for all periods covered by this
report.
Use
of Non-GAAP Financial Measures
Certain
Consolidated Statement of Earnings (Loss) and broadcasting segment operating
profit (loss) line items excluding the impact of the broadcasting impairment
charge are non-GAAP financial measures. We are providing this information to
facilitate a meaningful comparison of results for the last three fiscal years
and because we believe it is useful to investors in evaluating our ongoing
operations. Non-GAAP financial measures are intended to provide insight into
selected financial information and should be evaluated in the context in which
they are presented. These measures are of limited usefulness in evaluating our
overall financial results presented in accordance with GAAP and should be
considered in conjunction with the consolidated financial statements, including
the related notes included elsewhere in this report.
A
reconciliation of results excluding the broadcasting impairment charge
(non-GAAP) to reported results (GAAP) follows.
|
Twelve
Months ended June 30, 2009
|
|
Excluding
Impairment
Charge
|
|
|
Impairment
Charge
|
|
|
As
Reported
|
|
|
(In
thousands except per share data)
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
$
|
1,249,396
|
|
$
|
294,529
|
|
$
|
1,543,925
|
|
|
Income
(loss) from operations
|
|
159,401
|
|
|
(294,529
|
)
|
|
(135,128
|
)
|
|
Income
taxes
|
|
(56,658
|
)
|
|
109,400
|
|
|
52,742
|
|
|
Earnings
(loss) from continuing operations
|
|
82,622
|
|
|
(185,129
|
)
|
|
(102,507
|
)
|
|
Net
earnings (loss)
|
|
78,045
|
|
|
(185,129
|
)
|
|
(107,084
|
)
|
|
Diluted
earnings (loss) from continuing operations
|
|
1.83
|
|
|
4.11
|
|
|
(2.28
|
)
|
|
Diluted
earnings (loss) per share
|
|
1.73
|
|
|
4.11
|
|
|
(2.38
|
)
|
|
Broadcasting
operating profit (loss)
|
|
36,755
|
|
|
(294,529
|
)
|
|
(257,774
|
)
|
Our
analysis of broadcasting segment results includes references to earnings from
continuing operations before interest, taxes, depreciation, and amortization
(EBITDA) and adjusted EBITDA, which is defined as EBITDA before impairment
charge. Fiscal 2008 and fiscal 2007 do not include an adjustment to EBITDA for
impairment. EBITDA, adjusted EBITDA, and EBITDA margin are non-GAAP measures. We
use EBITDA and adjusted EBITDA along with operating profit and other GAAP
measures to evaluate the financial performance of our broadcasting segment.
EBITDA is a common alternative measure of performance in the broadcasting
industry and is used by investors and financial analysts, but its calculation
may vary among companies. Adjusted EBITDA is used to facilitate a meaningful
comparison of results for the last three years. Broadcasting segment EBITDA and
adjusted EBITDA are not used as measures of liquidity, nor are they necessarily
indicative of funds available for our discretionary use.
We
believe the non-GAAP measures used in MD&A contribute to an understanding of
our financial performance and provide an additional analytic tool to understand
our results from core operations and to reveal underlying trends. These measures
should not, however, be considered in isolation or as a substitute for measures
of performance prepared in accordance with GAAP.
Trends
and Uncertainties
Advertising
demand is the Company's key uncertainty, and its fluctuation from period to
period can have a material effect on operating results. Advertising revenues
accounted for 56 percent of total revenues in fiscal 2009. Other significant
uncertainties that can affect operating results include fluctuations in the cost
of paper, postage rates and, over time, television programming rights. The
Company's cash flows from operating activities, its primary source of liquidity,
is adversely affected when the advertising market is weak or when costs rise.
One of our priorities is to manage our businesses prudently during expanding and
contracting economic cycles to maximize shareholder return over time. To manage
the uncertainties inherent in our businesses, we prepare monthly internal
forecasts of anticipated results of operations and monitor the economic
indicators mentioned in the Executive Overview. See
Item 1A–Risk Factors
in
this Form 10-K for further discussion.
PUBLISHING
The
following discussion reviews operating results for our publishing segment, which
includes magazine and book publishing, integrated marketing, interactive media,
brand licensing, database-related activities, and other related operations. The
publishing segment contributed approximately 80 percent of Meredith's revenues
in fiscal 2009.
In fiscal
2009, publishing revenues declined 8 percent while segment operating profit
decreased 20 percent. In fiscal 2008, publishing revenues were flat and segment
operating profit declined 11 percent. Publishing operating results for the last
three fiscal years were as follows:
|
Years
ended June 30,
|
|
2009
|
Change
|
|
2008
|
Change
|
|
2007
|
|
(In
millions)
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
1,134.2
|
(8)%
|
$
|
1,233.8
|
–
|
$
|
1,231.9
|
|
Operating
expenses
|
|
(983.2)
|
(6)%
|
|
(1,045.5)
|
2 %
|
|
(1,020.2)
|
|
Operating
profit
|
$
|
151.0
|
(20)%
|
$
|
188.3
|
(11)%
|
$
|
211.7
|
Publishing
Revenues
The table
below presents the components of revenues for the last three fiscal
years.
|
Years
ended June 30,
|
|
2009
|
Change
|
|
2008
|
Change
|
|
2007
|
|
(In
millions)
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
Advertising
|
$
|
530.2
|
(15)%
|
$
|
620.2
|
1 %
|
$
|
616.5
|
|
Circulation
|
|
280.8
|
(7)%
|
|
300.6
|
(7)%
|
|
322.6
|
|
Other
|
|
323.3
|
3 %
|
|
313.0
|
7 %
|
|
292.8
|
|
Total
revenues
|
$
|
1,134.3
|
(8)%
|
$
|
1,233.8
|
–
|
$
|
1,231.9
|
Advertising
Revenue
The
following table presents advertising page information according to PIB for our
major subscription-based magazines for the last three fiscal years:
|
Years
ended June 30,
|
|
2009
|
Change
|
|
2008
|
Change
|
|
2007
|
|
Family
Circle
|
|
1,645
|
(1)%
|
|
1,670
|
(6)%
|
|
1,775
|
|
Better
Homes and Gardens
|
|
1,618
|
(15)%
|
|
1,898
|
(5)%
|
|
2,000
|
|
Parents
|
|
1,413
|
(10)%
|
|
1,567
|
12 %
|
|
1,395
|
|
Ladies'
Home Journal
|
|
1,217
|
(12)%
|
|
1,391
|
(9)%
|
|
1,524
|
|
More
|
|
895
|
(18)%
|
|
1,089
|
(10)%
|
|
1,203
|
|
Fitness
|
|
762
|
3 %
|
|
737
|
(8)%
|
|
799
|
|
Traditional
Home
|
|
610
|
(20)%
|
|
762
|
(15)%
|
|
895
|
|
American
Baby
|
|
544
|
(18)%
|
|
660
|
5 %
|
|
631
|
|
Midwest
Living
|
|
524
|
(28)%
|
|
726
|
(8)%
|
|
792
|
Magazine advertising pages
and revenues showed double-digit declines on a percentage basis at nearly all
our titles.
Both magazine advertising pages and revenues were down
approximately 15 percent in fiscal 2009 as average net revenue per page was
approximately flat. Among our advertising categories, toiletries and cosmetics
and consumer electronics showed strength, while demand continued to be weaker
for most other categories. In fiscal 2009, online advertising revenues decreased
5 percent.
Magazine
advertising revenue was flat in fiscal 2008. Though magazine advertising
revenues increased 10 percent in the first half of the fiscal year, they
declined 9 percent in the second half. For the fiscal year, total advertising
pages were down in the low-single digits on a percentage basis, with most titles
showing declines. The exceptions to this were our parenthood, Hispanic, and
special interest titles, which showed gains. Among core advertising categories,
food and beverage, retail, and financial and government services showed strength
while demand was weaker for prescription and non-prescription drugs, home, and
direct response.
Similar
to magazine advertising, online advertising revenues were up significantly (more
than 30 percent) in the first half of fiscal 2008, but showed weakness in the
second half of fiscal 2008 (down 6 percent). Overall online advertising
increased 14 percent for the fiscal year.
Circulation
Revenues
Magazine
circulation revenues decreased 7 percent in fiscal 2009, reflecting declines in
both newsstand and subscription revenues. Subscription revenues were down in the
low-single digits on a percentage basis while newsstand revenues were down
approximately 20 percent. While subscription revenues were down, subscription
contribution was up 12 percent. The decrease in newsstand revenues was primarily
due to a weaker retail market that affected most of our magazines’ newsstand
revenues and a change in the mix of and a reduction in the number of special
interest publications and craft titles.
Magazine
circulation revenues were down 7 percent in fiscal 2008, reflecting declines in
both newsstand and subscription revenues. Subscription revenues were down in the
mid-single digits on a percentage basis while newsstand revenues were down
approximately 10 percent. The continued decrease in subscription revenues was
anticipated due to a series of previously announced strategic initiatives taken
to improve long-term subscription contribution including the Company selling
fewer subscriptions to
Ladies'
Home Journal
due to the reduction in its rate base in January 2007 and
the Company's ongoing initiative to move the readers of
Family Circle
,
Parents
, and
Fitness
to our
direct-to-publisher circulation model. The decrease in newsstand revenues is
primarily due to a change in the mix of and a reduction in the number of special
interest publications published in fiscal 2008 as compared to the prior
year.
Other
Revenues
Integrated
marketing revenues increased 13 percent in fiscal 2009. The acquisition of Big
Communications in June 2008 more than offset a reduction in revenues in
integrated marketing’s traditional and certain of its on-line businesses, which
was primarily due to certain non-recurring programs in the prior-year and due to
the timing of delivery of certain projects.
Revenues
from magazine royalties and licensing were up 14 percent in fiscal 2009. The
introduction of the Better Homes and Gardens line of home products, available
now exclusively at Wal-Mart, primarily fueled this growth.
Book
revenues declined 9 percent in fiscal 2009, primarily due to a significant
reduction in the number of new book releases. In December 2008, Meredith
announced a licensing agreement granting Wiley exclusive global rights to
publish and distribute books based on Meredith’s consumer-leading brands,
including the powerful Better Homes and Gardens imprint. Under the agreement,
which was effective March 1, 2009, Meredith continues to create book
content and retain all approval and content rights. Wiley is responsible for
book layout and design, printing, sales and marketing, distribution, and
inventory management. Wiley pays Meredith royalties based on net sales subject
to a guaranteed minimum.
The
aggregate effect of the changes in integrated marketing, brand licensing, and
book operations was that other publishing revenues increased 3 percent in fiscal
2009.
Integrated
marketing revenues increased almost 50 percent in fiscal 2008 due to the
addition of revenues from the online marketing companies acquired in the last
half of fiscal 2007, as well as continued growth in the traditional integrated
marketing operations from expanding certain relationships. Meredith Integrated
Marketing won the custom publishing work for Kraft's Food & Family program
including publishing a custom magazine for delivery five times a year and
development of the content for a weekly email blast. Since winning this
important account, Meredith has grown its relationship with Kraft by adding new
elements such as video production, database consulting, brand insert
development, and circulation consulting. Meredith Integrated Marketing's online
marketing companies also renewed business with Nestlé's Good Start line of
infant nutrition products, were awarded new customer relationship management
business for Gerber, and performed additional database marketing and analytics
business for Suzuki.
Revenues
from other sources such as magazine related custom projects and licensing also
increased in fiscal 2008. New and enhanced licensing agreements consummated in
fiscal 2008 include a multi-year licensing agreement with Wal-Mart for the
design, marketing, and retailing of a wide range of home products based on the
Better Homes and Gardens brand. In addition, our Better Homes and
Gardens-branded line of home furniture with Universal Furniture launched in
April 2007 and has proven to be successful.
These
increases were partially offset by decreases in revenues in book operations.
Book revenues declined approximately 50 percent as compared to the prior fiscal
year due to both lower gross revenues of approximately 30 percent and increased
sales returns of approximately 50 percent. Most of this increase in sales
returns was recorded in the fourth quarter of fiscal 2008.
As a
result of the changes in integrated marketing, brand licensing, and book
operations, other publishing revenues increased 7 percent in fiscal
2008.
Publishing
Operating Expenses
Publishing
operating costs decreased 6 percent in fiscal 2009. In the fourth quarter of
fiscal 2009, severance and related benefit costs of $1.7 million were recorded
in the publishing segment related to a limited reduction in workforce. In the
second quarter, severance and related benefit costs of $6.0 million were
recorded related to a companywide reduction in workforce. With regard to
on-going operating expenses, processing, other delivery expenses, amortization
expense, advertising and promotion, and travel and entertainment expenses
declined. Book manufacturing, art, and separations expense decreased due to the
changes made in the book business. Circulation expenses also declined. While
performance-based incentive expense declined, employee compensation costs
increased slightly. Paper expense rose as increases in paper costs of
approximately 10 percent more than offset decreases in paper consumption due to
the decline in advertising pages sold.
Publishing
operating costs increased 2 percent in fiscal 2008. Employee compensation costs
were up as a result of higher staff levels, due primarily to the integrated
marketing acquisitions. While share-based compensation expense declined in the
fiscal year, incentive-based expense was higher due to the strong advertising
growth in the first half of the fiscal year. Expenses in the integrated
marketing operations also increased, due to new and expanded customer
relationships and current- and prior-year acquisitions. Postage expense
increased due to rate increases in May 2008 and in May and July 2007. Also
contributing to the increase in publishing operating costs were expenses
recorded in the fourth quarter of fiscal 2008, related to the further
restructuring of the book operations and other publishing reductions in
workforce of $13.2 million. These charges included the write-down of book
inventory, book royalties, and editorial prepaid expenses of $9.7 million and
severance and benefit costs for book and other publishing personnel of $3.5
million. These increases were partially offset by lower paper and production
expenses, subscription acquisition costs, and book manufacturing costs. Declines
in paper consumption due to smaller magazine sizes more than offset an increase
in weighted average paper prices of approximately 3 percent.
Publishing
Operating Profit
Fiscal
2009 publishing operating profit decreased 20 percent. The decline primarily
reflected the weak demand for advertising and higher paper prices partially
offset by increased operating profits in our book, integrated marketing, and
brand licensing operations.
Publishing
operating profit declined 11 percent in fiscal 2008. Strong operating profit
growth of more than 70 percent in our integrated marketing operations from
traditional business growth and online acquisitions was more than offset by a
net loss in our book operations (including restructuring charges), a decline in
operating profit from our interactive media operations, and a slight decrease in
magazine circulation contribution. The decline in gross book sales, the increase
in the book sales return allowance, and the restructuring charges discussed
above contributed to the net loss in the book operations.
BROADCASTING
The
following discussion reviews operating results for the Company's broadcasting
segment, which currently consists of 12 network-affiliated television stations,
one radio station, related interactive media operations, and video related
operations. The broadcasting segment contributed approximately 20 percent of
Meredith's revenues in fiscal 2009.
The
television industry is experiencing one of the most difficult advertising
environments in its history. Broadcasting revenues declined 14 percent in fiscal
2009, as $23.5 million in political advertising was not enough to offset lower
non-political advertising, particularly in automotive. Costs and expenses
declined 1 percent and an impairment charge of $294.5 million was recorded in
the broadcasting segment. Due to the impairment charge, the broadcasting
operations reported an operating loss of $257.8 million.
Revenues
declined 8 percent in fiscal 2008, leading to a 27 percent decrease in operating
profit. The revenue decrease reflected a $27.7 million decline in net political
advertising. Costs and expenses were flat as compared to the prior fiscal year.
Broadcasting operating results for the last three fiscal years were as
follows:
|
Years
ended June 30,
|
|
2009
|
|
Change
|
|
2008
|
Change
|
|
2007
|
|
(In
millions)
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
274.5
|
|
(14)%
|
$
|
318.6
|
(8)%
|
$
|
347.8
|
|
Costs
and expenses
|
|
(237.8)
|
|
(1)%
|
|
(240.7)
|
–
|
|
(241.0)
|
|
Impairment
of goodwill and other
intangible
assets
|
|
(294.5)
|
|
–
|
|
–
|
–
|
|
–
|
|
Operating
profit (loss)
|
$
|
(257.8)
|
|
NM
|
$
|
77.9
|
(27)%
|
$
|
106.8
|
|
NM
– not meaningful
|
|
|
|
|
|
|
|
|
|
Broadcasting
Revenues
The table
below presents the components of revenues for the last three fiscal
years.
|
Years
ended June 30,
|
|
2009
|
Change
|
|
2008
|
Change
|
|
2007
|
|
(In
millions)
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
Non-political
advertising
|
$
|
233.5
|
(23)%
|
$
|
304.9
|
(1)%
|
$
|
309.3
|
|
Political
advertising
|
|
23.5
|
332 %
|
|
5.4
|
(84)%
|
|
33.2
|
|
Other
|
|
17.5
|
112 %
|
|
8.3
|
57 %
|
|
5.3
|
|
Total
revenues
|
$
|
274.5
|
(14)%
|
$
|
318.6
|
(8)%
|
$
|
347.8
|
Broadcasting
revenues decreased 14 percent in fiscal 2009. Net political advertising revenues
related primarily to the November 2008 elections totaled $23.5 million compared
with $5.4 million in the prior year. The fluctuations in political advertising
revenues at our stations, and in the broadcasting industry, generally follow the
biennial cycle of election campaigns (which take place primarily in our
odd-numbered fiscal years). Political advertising may displace a certain amount
of non-political advertising; therefore, the revenues may not be entirely
incremental. The recession continues to impact non-political broadcasting
advertising. Non-political advertising revenues decreased 23 percent in fiscal
2009. Local non-political advertising revenues declined 24 percent while
national non-political advertising revenues decreased 23 percent. Automobile
advertising revenues declined nearly 45 percent in fiscal 2009, accounting for
approximately half of non-political advertising declines. Online advertising
declined 14 percent compared to the prior-year period.
Other
revenue, which is primarily retransmission fees, more than doubled in fiscal
2009. This increase is primarily due to new retransmission agreements Meredith
has with the major cable operators in our markets.
Fiscal
2008 net political advertising revenues declined 84 percent, or $27.8 million.
Non-political advertising revenues decreased 1 percent, reflecting declines of 1
percent in the local market and of 8 percent in national advertising sales.
These decreases were offset by a 40 percent increase in online advertising,
which is a small but growing percentage of broadcasting non-political
advertising revenues. While non-political advertising revenues increased 4
percent in the first half of the year, a decline in automotive advertising
combined with the economic slowdown that impacted categories such as retail and
telecommunications led to a 7 percent decline in non-political advertising in
the second half of the year. The increase in other revenues of 57 percent was
due primarily to increases in retransmission fees.
Broadcasting
Costs and Expenses
Broadcasting
costs and expenses decreased 1 percent in fiscal 2009 as compared to the
prior-year period. In the fourth quarter of fiscal 2009, severance and related
benefit costs of $3.4 million and the write-down of certain fixed assets at the
television stations of $0.4 million were recorded in the broadcasting segment
related plans to centralize certain functions across Meredith’s television
stations. In the second quarter, severance and related benefit costs of $2.0
million were recorded related to a companywide reduction in workforce.
Performance-based incentive accruals, employee compensation costs, depreciation,
advertising and promotion expenses, and film amortization declined. Bad debt and
legal service expenses increased. A credit of $2.5 million to expenses for a
gain on the Sprint Nextel Corporation equipment exchange contributed to the
decline. This gain represents the difference between the fair value of the
digital equipment we received and the book value of the analog equipment we
exchanged.
Broadcasting
costs and expenses were flat in fiscal 2008. Employee compensation costs and
related benefits increased primarily due to continued investments in local news
and video production. Broadcasting costs and expenses also include higher bad
debt expenses, a 10 percent increase in depreciation expense, and an impairment
charge of $0.6 million on the Hartford building that we vacated in fiscal 2007
when we relocated to our newly constructed facility. As a result of the deadline
for DTV transition, the Company accelerated the depreciation of certain
equipment that is expected to have a shorter useful life as a result of the
digital conversion. In the fourth quarter of fiscal 2008, Broadcasting recorded
a charge of $1.4 million for severance and benefits costs. These increases and
charges were offset by reductions in legal expenses, radio advertising and
promotion expenses, share-based and incentive-based compensation, and program
rights amortization.
Broadcasting
Impairment of Goodwill and Other Intangible Assets
The
Company performed its annual impairment testing as of May 31, 2009. The
recession’s ongoing impact on local advertising lowered future cash flow
projections during the fourth quarter of fiscal 2009. The evaluation resulted in
the carrying values of our broadcast stations’ goodwill and certain of their FCC
licenses having carrying values that exceeded their estimated fair values. As a
result, the Company recorded a pre-tax non-cash charge of $211.9 million to
reduce the carrying value of its FCC licenses and $82.6 million to write-off
goodwill in the fourth quarter of fiscal 2009.
Broadcasting
Operating Profit (Loss)
Broadcasting
operations resulted in a $257.8 million loss in fiscal 2009 reflecting the
$294.5 million non-cash impairment charge to reduce the carrying value of our
FCC licenses and write-off the segment’s goodwill. Absent the impairment charge,
broadcasting operating profit would have been $36.8 million, a decrease of 53
percent from fiscal 2008. The decline reflected weakened economic conditions and
their effect on non-political advertising revenues, which more than offset the
strength of political advertising revenues.
In fiscal
2008, revenues and operating profit declined by 8 percent and 27 percent
respectively, reflecting the 84 percent reduction in political revenues, while
operating costs remained flat.
Supplemental
Disclosure of Broadcasting EBITDA and Adjusted EBITDA
Meredith's
broadcasting EBITDA is defined as broadcasting segment operating profit (loss)
plus depreciation and amortization expense. Adjusted EBITDA is defined as
broadcasting EBITDA before impairment charge. EBITDA and adjusted EBITDA are
non-GAAP financial measures and should not be considered in isolation or as a
substitute for GAAP financial measures. See the discussion of management's
rationale for the use of EBITDA and adjusted EBITDA in the Overview of this
section. Broadcasting EBITDA, adjusted EBITDA, EBITDA margin, and adjusted
EBITDA margin were as follows:
|
Years
ended June 30,
|
|
2009
|
|
Change
|
|
2008
|
Change
|
|
2007
|
|
|
(In
millions)
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
274.5
|
|
(14)%
|
$
|
318.6
|
(8)%
|
$
|
347.8
|
|
|
Operating
profit (loss)
|
$
|
(257.8
|
)
|
NM
|
$
|
77.9
|
(27)%
|
$
|
106.8
|
|
|
Depreciation
and amortization
|
|
25.2
|
|
(6)%
|
|
26.6
|
10 %
|
|
24.2
|
|
|
EBITDA
|
|
(232.6
|
)
|
NM
|
|
104.5
|
(20)%
|
|
131.0
|
|
|
Impairment
of goodwill and other
intangible
assets
|
|
294.5
|
|
–
|
|
–
|
–
|
|
–
|
|
|
Adjusted
EBITDA
|
$
|
61.9
|
|
(41)%
|
$
|
104.5
|
(20)%
|
$
|
131.0
|
|
|
EBITDA
margin
|
|
(84.7)
|
%
|
|
|
32.8
|
%
|
|
37.7
|
%
|
|
Adjusted
EBITDA margin
|
|
22.6
|
%
|
|
|
32.8
|
%
|
|
37.7
|
%
|
|
NM
– not meaningful
|
|
|
|
|
|
|
|
|
|
|
UNALLOCATED
CORPORATE EXPENSES
Unallocated
corporate expenses are general corporate overhead expenses not attributable to
the operating groups. These expenses for the last three years were as
follows:
|
Years
ended June 30,
|
|
2009
|
Change
|
|
2008
|
Change
|
|
2007
|
|
(In
millions)
|
|
|
|
|
|
|
|
|
|
Unallocated
corporate expenses
|
$
|
28.4
|
7 %
|
$
|
26.5
|
(24)%
|
$
|
34.9
|
Unallocated
corporate expenses increased 7 percent in fiscal 2009. In the second quarter of
fiscal 2009, severance and related benefit costs of $1.0 million were recorded
in unallocated corporate expenses related to the companywide reduction in
workforce. Increases in pension costs, share-based compensation, consulting
fees, Meredith Foundation contributions, and legal services expenses partially
offset decreases in performance-based incentive expenses, travel and
entertainment, and depreciation expense. The increase in share-based
compensation is due to certain employees becoming retirement eligible in the
current fiscal year and thus their share-based compensation expense was fully
expensed during the current fiscal year.
Unallocated
corporate expenses decreased 24 percent in fiscal 2008. Excluding a pension
settlement charge recorded in fiscal 2007, unallocated corporate expenses
declined 8 percent, reflecting decreases in incentive-based and share-based
compensation partially offset by higher employee compensation costs due to
annual salary merit adjustments.
CONSOLIDATED
Consolidated
Operating Expenses
Consolidated
operating expenses for the last three fiscal years were as follows:
|
Years
ended June 30,
|
|
2009
|
Change
|
|
2008
|
Change
|
|
2007
|
|
(In
millions)
|
|
|
|
|
|
|
|
|
|
Production,
distribution, and editorial
|
$
|
646.6
|
(4)%
|
$
|
673.6
|
4 %
|
$
|
648.0
|
|
Selling,
general, and administrative
|
|
560.2
|
(5)%
|
|
590.0
|
(2)%
|
|
603.1
|
|
Depreciation
and amortization
|
|
42.6
|
(13)%
|
|
49.2
|
9 %
|
|
45.0
|
|
Impairment
of goodwill and other
intangible
assets
|
|
294.5
|
–
|
|
–
|
–
|
|
–
|
|
Operating
expenses
|
$
|
1,543.9
|
18 %
|
$
|
1,312.8
|
1 %
|
$
|
1,296.1
|
Production,
Distribution, and Editorial Costs
Fiscal
2009 production, distribution, and editorial costs declined 4 percent. Book
manufacturing, art, and separation expense decreased due to changes in our book
operations discussed above. In addition, declines in processing, other delivery
expenses, and film amortization more than offset increases in paper
costs.
Production,
distribution, and editorial costs increased 4 percent in fiscal 2008. Higher
expense in our integrated marketing operations, postal rate increases, higher
average paper prices, and the write-down of book inventory to its net realizable
value contributed to the increase. These increases were partially offset by
volume-related decreases in paper and production costs, a reduction in book
manufacturing costs, and lower broadcast program rights amortization
expense.
Selling,
General, and Administrative Expenses
Fiscal
2009 selling, general, and administrative expenses decreased 5 percent. Declines
in performance-based incentive accruals, advertising and promotion expenses, and
travel and entertainment were partially offset by increases in pension costs,
consulting fees, bad debt expenses, and legal expenses. Subscription acquisition
costs also decreased.
Selling,
general, and administrative expenses decreased 2 percent in fiscal 2008.
Declines in subscription acquisition costs, decreased incentive-based and
share-based compensation expense, lower broadcasting legal services, and
advertising and promotion expenses, were partially offset by higher employee
compensation costs, and bad debt expense.
Depreciation
and Amortization
Depreciation
and amortization expenses decreased 13 percent in fiscal 2009 primarily due to
the customer list intangibles acquired in fiscal 2006 being fully amortized in
fiscal 2008. Depreciation and amortization expenses increased 9 percent in
fiscal 2008. The increase primarily reflected increased amortization of
intangibles related to recent acquisitions, amortization of website development
costs related to the relaunch of
BHG.com
and
Parents.com
, and depreciation
of the new broadcasting station facility serving the Hartford, Connecticut
market. In addition, as a result of the deadline for DTV transition, the Company
accelerated the depreciation of certain equipment that is expected to have a
shorter useful life as a result of the digital conversion.
Impairment
of Goodwill and Other Intangible Assets
Based on
the Company’s annual impairment testing of goodwill and other long-lived
intangible assets, in the fourth quarter of fiscal 2009, the Company recorded a
non-cash impairment charge of $211.9 million to reduce the carrying value of our
FCC licenses and $82.6 million to write-off our broadcasting segment’s
goodwill.
Operating
Expenses
Publishing
paper, production, and postage combined expense was the largest component of our
operating costs in fiscal 2009, representing 26 percent of the total. In fiscal
2008 these expenses represented 32 percent, and in fiscal 2007 they were 35
percent. Employee compensation including benefits was the second largest
component of our operating costs in fiscal 2009. Employee compensation
represented 25 percent of total operating expenses in fiscal 2009 compared to 30
percent in fiscal 2008 and 28 percent in fiscal 2007. In fiscal 2009, the
impairment charge recorded was the third largest component. It represented 19
percent of total fiscal 2009 operating expenses. Absent this impairment charge,
publishing paper, production, and postage combined expense represented 32
percent and employee compensation costs represented 31 percent of total
operating costs.
Income
(Loss) from Operations
The
fiscal 2009 loss from operations was of $135.1 million, reflecting the non-cash
impairment charge of $294.5 million. Absent this impairment charge, fiscal 2009
income from operations would have been $159.4 million, a decline of 33 percent
from fiscal 2008. The decline reflects the recession and its effect on
advertising revenues.
Income
from operations declined 16 percent in fiscal 2008. In fiscal 2008, the net loss
in book operations (including restructuring charges), and lower broadcasting
political advertising revenues more than offset revenue growth and higher
operating profits in integrated marketing operations and lower corporate
unallocated expenses.
Net
Interest Expense
Net
interest expense was $20.1 million in fiscal 2009, $21.3 million in fiscal 2008,
and $25.6 million in fiscal 2007. Average long-term debt outstanding was $455
million in fiscal 2009, $445 million in fiscal 2008, and $518 million in fiscal
2007. The Company's approximate weighted average interest rate was 4.6 percent
in fiscal 2009, 5.0 percent in fiscal 2008, and 5.2 percent in fiscal
2007.
Income
Taxes
The
Company’s effective tax rate on income (loss) from continuing operations was
34.0 percent (on a pretax loss) in fiscal 2009, 39.1 percent (on pretax income)
in fiscal 2008, and 35.7 percent (on pretax income, including a one-time tax
benefit discussed below) in fiscal 2007. The lower effective tax rate in fiscal
2009 is primarily due to the tax effect of the impairment charge for
broadcasting goodwill. Absent the impairment charge, the effective tax rate for
fiscal 2009 was 40.7 percent, which is higher than in the prior year primarily
due to accruals for tax contingencies.
The
higher rate in fiscal 2008 is primarily due to an income tax benefit of $9.4
million in fiscal 2007 from the resolution of a tax contingency related to a
capital loss. Recognition of the benefit was deferred until tax-related
contingencies were resolved. Excluding the $9.4 million, the fiscal 2007
effective tax rate was 39.3 percent. Absent that benefit, the effective tax rate
in fiscal 2008 is slightly lower than in the prior year primarily due to the
increase in the Internal Revenue Code Section 199 manufacturers'
deduction.
Earnings
(Loss) from Continuing Operations and Earnings (Loss) per Share from Continuing
Operations
Fiscal
2009 loss from continuing operations was $102.5 million ($2.28 per diluted
share), compared to fiscal 2008 earnings from continuing operations of $133.0
million ($2.79 per diluted share), reflecting the non-cash impairment charge of
$185.1 million (after-tax). Absent the impairment charge from fiscal 2009
results, the Company would have had fiscal 2009 earnings from operations of
$82.6 million ($1.83 per diluted share), a decrease of 38 percent from fiscal
2008. The declines reflect the economic recession and its effect on advertising
revenues.
Fiscal
2008 earnings from continuing operations were $133.0 million ($2.79 per diluted
share), down 20 percent from $166.0 million ($3.38 per diluted share) in fiscal
2007. The higher tax rate, a net loss in our book operations (including
restructuring charges), and lower broadcasting political advertising revenues
more than offset revenue growth and higher operating profits in integrated
marketing operations and lower unallocated corporate expenses.
Discontinued
Operations
Income
(loss) from discontinued operations represents the combined operating results,
net of taxes, of
Country
Home
magazine,
Child
magazine, and two television stations, KFXO and WFLI. The revenues
and expenses for each of these properties have, along with associated taxes,
been removed from continuing operations and reclassified into a single line item
amount on the Consolidated Statements of Earnings (Loss) titled income (loss)
from discontinued operations, net of taxes, for each period presented as
follows:
|
Years
ended June 30,
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
(In
millions except per share data)
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
16.8
|
|
$
|
35.4
|
|
$
|
66.1
|
|
|
Costs
and expenses
|
|
(17.5
|
)
|
|
(34.0
|
)
|
|
(62.1
|
)
|
|
Special
items
|
|
(6.8
|
)
|
|
1.8
|
|
|
(14.9
|
)
|
|
Gain
(loss) on disposal
|
|
–
|
|
|
(0.4
|
)
|
|
4.8
|
|
|
Earnings
(loss) before income taxes
|
|
(7.5
|
)
|
|
2.8
|
|
|
(6.1
|
)
|
|
Income
taxes
|
|
2.9
|
|
|
(1.1
|
)
|
|
2.4
|
|
|
Income
(loss) from discontinued operations
|
$
|
(4.6
|
)
|
$
|
1.7
|
|
$
|
(3.7
|
)
|
|
Income
(loss) from discontinued operations per share:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.10
|
)
|
$
|
0.04
|
|
$
|
(0.08
|
)
|
|
Diluted
|
|
(0.10
|
)
|
|
0.04
|
|
|
(0.07
|
)
|
For
fiscal 2009, loss from discontinued operations represents the operating results,
net of taxes, of
Country
Home
magazine. In connection with the closing of
Country Home
magazine, the
Company recorded a restructuring charge of $6.8 million in the second quarter of
fiscal 2009 which included the write down of various assets of
Country Home
magazine of $5.8
million and severance and outplacement costs of $1.0 million. Most of the asset
write-down charge related to the write-off of deferred subscription acquisition
costs. These fiscal 2009 charges are reflected in the special items line
above.
For
fiscal 2008, income from discontinued operations represents the operating
results of
Country Home
magazine, the operating loss of WFLI,
the CW affiliate serving
the Chattanooga, Tennessee market; a loss on the disposal of WFLI; and the
reversal of a portion of the restructuring charge recorded in fiscal 2007
related to the discontinuation of the print operations of
Child
magazine. The reversal
of a portion of the
Child
restructuring charge is
a result of changes in the estimated net costs for vacated leased space and
employee severance and is reflected in the special items line
above.
For
fiscal 2007, the loss from discontinued operations represents the combined
operating results of
Country
Home
magazine,
Child
magazine, WFLI, and
KFXO, the low-power FOX affiliate serving the Bend, Oregon market; a gain on the
disposal of KFXO; a non-cash impairment charge of $2.8 million on WFLI; and a
restructuring charge of $12.1 million for the write-down of various assets of
Child
magazine. These
impairment and restructuring charges are reflected in the special items line
above.
Net
Earnings (Loss) and Earnings (Loss) per Share
In fiscal
2009 a net loss of $107.1 million ($2.38 per diluted share) was recorded
compared to net earnings of $134.7 million ($2.83 per diluted share) in the
prior year, reflecting the non-cash impairment charge of $185.1 million. Absent
the impairment charge from fiscal 2009 results, the Company would have reported
fiscal 2009 net earnings of $78.0 million ($1.73 per diluted share), a decrease
of 42 percent from fiscal 2008. The decline reflects the economic recession and
its effect on advertising revenues. In addition, loss from discontinued
operations of
Country
Home
magazine as compared to the income from discontinued operations in
the prior year contributed to the decline in net earnings in fiscal 2009. Lower
net earnings were partially offset by the accretive effect of the reduction in
Meredith's average diluted shares outstanding. Average basic shares outstanding
decreased approximately 4 percent as a result of our share repurchase program.
Average diluted shares outstanding decreased approximately 5 percent. Certain
outstanding common stock equivalents were not included in the computation of
dilutive earnings per share for 2009 because of the antidilutive effect on the
earnings per share calculation (the diluted earnings per share becoming less
negative than the basic earnings per share). Therefore, the common stock
equivalents were not taken into account in determining the weighted average
number of shares for the calculation of diluted earnings per share in fiscal
2009.
Fiscal
2008 net earnings were $134.7 million ($2.83 per diluted share), down 17 percent
from $162.3 million ($3.31 per diluted share) in fiscal 2007. Fiscal 2007 showed
a loss from discontinued operations while fiscal 2008 showed income from
discontinued operations. In addition, lower income from continuing operations
was partially offset by the accretive effect of the reduction in Meredith's
average diluted shares outstanding. Average basic shares outstanding decreased 2
percent as a result of our ongoing share repurchase program and average diluted
shares outstanding decreased 3 percent as a result of our share repurchase
program and lower dilutive effects from potential common stock
equivalents.
|
Years
ended June 30,
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
(In
millions)
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities
|
$
|
180.9
|
|
$
|
256.0
|
|
$
|
210.5
|
|
|
Cash
flows from investing activities
|
|
(29.0
|
)
|
|
(95.4
|
)
|
|
(65.2
|
)
|
|
Cash
flows from financing activities
|
|
(161.6
|
)
|
|
(162.2
|
)
|
|
(136.8
|
)
|
|
Net
cash
flows
|
$
|
(9.7
|
)
|
$
|
(1.6
|
)
|
$
|
8.5
|
|
|
Cash
and cash
equivalents
|
$
|
27.9
|
|
$
|
37.6
|
|
$
|
39.2
|
|
|
Long-term
debt
(including
current portion
)
|
|
380.0
|
|
|
485.0
|
|
|
475.0
|
|
|
Shareholders'
equity
|
|
609.4
|
|
|
787.9
|
|
|
833.2
|
|
|
Debt
to total
capitalization
|
|
38 %
|
|
|
38 %
|
|
|
36 %
|
|
OVERVIEW
Meredith's
primary source of liquidity is cash generated by operating activities. The
Company continues to generate significant cash flow from operating activities in
spite of the downturn in advertising revenues due to the recession. Debt
financing is typically used for significant acquisitions. Our core
businesses—magazine and television broadcasting—have been strong cash
generators. Despite the introduction of many new technologies such as the
Internet, cable, and satellite television, we believe these businesses will
continue to have strong market appeal for the foreseeable future. As is true in
any business, operating results and cash flows are subject to changes in demand
for our products and changes in costs. Changes in the level of demand for
magazine and television advertising or other products can have a significant
effect on cash flows.
Historically,
Meredith has been able to absorb normal business downturns without significant
increases in debt and management believes the Company will continue to do so. We
expect cash on hand, internally generated cash flow, and available credit from
financing agreements will provide adequate funds for operating and recurring
cash needs (e.g., working capital, capital expenditures, debt repayments, and
cash dividends) into the foreseeable future. At June 30, 2009, we had up to
$25 million available under our revolving credit facility and up to $45 million
available under our asset-backed commercial paper facility (depending on levels
of accounts receivable). While there are no guarantees that we will be able to
replace current credit agreements when they expire, we expect to be able to do
so.
SOURCES
AND USES OF CASH
Cash and
cash equivalents decreased $9.7 million in fiscal 2009 and $1.6 million in
fiscal 2008; they increased $8.5 million in fiscal 2007. Over the three-year
period, net cash provided by operating activities was used for acquisitions,
debt repayments, stock repurchases, capital investments, and
dividends.
Operating
Activities
The
largest single component of operating cash inflows is cash received from
advertising customers. Advertising accounted for approximately 60 percent of
total revenues in each of the past three years. Other sources of operating cash
inflows include cash received from magazine circulation sales and other revenue
transactions such as integrated marketing, book, brand licensing, and product
sales. Operating cash outflows include payments to vendors and employees and
payments of interest and income taxes. Our most significant vendor payments are
for production and delivery of publications and promotional mailings,
broadcasting programming rights, employee benefits (including pension plans),
and other services and supplies.
Cash
provided by operating activities totaled $180.9 million in fiscal 2009 compared
with $256.0 million in fiscal 2008, a decrease of 30 percent. The largest factor
affecting cash flows from operating activities was the effect of the recession
and its negative impact of the Company’s operating results. Also affecting cash
provided by operating activities was increased pension payments. These items
more than offset substantially lower income tax payments.
Cash
provided by operating activities increased 22 percent in fiscal 2008 as compared
to fiscal 2007. The increase was due primarily to lower employee pension costs
and a decrease in accounts receivable in the current year compared to an
increase in the prior year. These increases in cash from operating activities
were partially offset by lower net earnings and increased cash spending for
employee compensation costs.
Changes
in the Company's cash contributions to qualified defined benefit pension plans
can have a significant effect on cash provided by operations. Meredith has
generally contributed the maximum amount that can be deducted for tax purposes
to these plans. We contributed $9.0 million in fiscal 2009 and $18.6 million in
fiscal 2007. We made no contributions in fiscal 2008. We do not anticipate a
required contribution in fiscal 2010.
Investing
Activities
Investing
cash inflows generally include proceeds from the sale of assets or a business.
Investing cash outflows generally include payments for the acquisition of new
businesses; investments; and additions to property, plant, and
equipment.
Net cash
used by investing activities decreased to $29.0 million in fiscal 2009 from
$95.4 million in fiscal 2008 as we reduced spending on both strategic
acquisitions and capital expenditures.
Net cash
used by investing activities totaled $95.4 million in fiscal 2008, an increase
from $65.2 million in the prior year. Increased spending on the acquisition of
businesses partially offset less cash used for the acquisition of property,
plant, and equipment.
Financing
Activities
Financing
cash inflows generally include borrowings under debt agreements and proceeds
from the exercise of common stock options issued under share-based compensation
plans. Financing cash outflows generally include the repayment of long-term
debt, repurchases of Company stock, and the payment of dividends.
Net cash
used by financing activities totaled approximately $161.6 million in fiscal 2009
compared with $162.2 million in fiscal 2008. In fiscal 2009, long-term debt was
reduced by a net $105.0 million and $21.8 million was used to purchase Company
stock. In fiscal 2008, $150.4 million was used to purchase Company stock and
long-term debt increased by a net $10 million.
Net cash
used by financing activities totaled $162.2 million in fiscal 2008, compared
with net cash used by financing activities of $136.8 million in fiscal 2007. In
fiscal 2008, $150.4 million was used to purchase Company stock whereas in fiscal
2007, $58.7 million was used to purchase Company stock. In fiscal 2008,
long-term debt increased by a net $10 million; in fiscal 2007, long-term debt
was reduced by a net $90 million.
Long-term
Debt
At
June 30, 2009, long-term debt outstanding totaled $380 million ($175
million in fixed-rate unsecured senior notes, $125 million outstanding under a
revolving credit facility, and $80 million under an asset-backed commercial
paper facility). None of the senior notes are due in the next 12 months. We
expect to repay these senior notes with cash from operations and credit
available under existing credit agreements. The fixed-rate senior notes are
repayable in amounts of $50 million and $75 million and are due from
July 1, 2010, to June 16, 2012. Interest rates range from 4.70 percent
to 5.04 percent with a weighted average interest rate of 4.80
percent.
In
connection with the asset-backed commercial paper facility, we entered into a
revolving
agreement in April
2002. Under this agreement, we currently sell all of our rights, title, and
interest in the majority of our accounts receivable related to advertising and
miscellaneous revenues to Meredith Funding Corporation, a special-purpose entity
established to purchase accounts receivable from Meredith. At June 30,
2009, $143.6 million of accounts receivable net of reserves were outstanding
under the agreement. Meredith Funding Corporation in turn sells receivable
interests to an asset-backed commercial paper conduit administered by a major
national bank. In consideration of the sale, Meredith receives cash and a
subordinated note that bears interest at the prime rate (3.25 percent at
June 30, 2009) from Meredith Funding Corporation.
The
revolving agreement is structured as a true sale under which the creditors of
Meredith Funding Corporation will be entitled to be satisfied out of the assets
of Meredith Funding Corporation prior to any value being returned to Meredith or
its creditors. The accounts of Meredith Funding Corporation are fully
consolidated in Meredith's consolidated financial statements. The asset-backed
commercial paper facility renews annually (most recently renewed March 31,
2009) until April 2, 2011, the facility termination date. The interest rate
on the asset-backed commercial paper facility changes monthly and is based on
the average commercial paper cost to the lender plus a fixed spread. The
interest rate was 1.86 percent in June 2009.
The
interest rate on the revolving credit facility is variable based on LIBOR and
Meredith's debt to trailing 12 month EBITDA ratio. The weighted average
effective interest rate for the revolving credit facility was 4.21 percent at
June 30, 2009, after taking into account the effect of outstanding interest
rate swap agreements discussed below. This facility has capacity for up to $150
million outstanding with an option to request up to another $150 million. At
June 30, 2009, $125 million was borrowed under this facility. The revolving
credit facility expires October 7, 2010.
On
July 13, 2009, Meredith secured a new $75 million private placement of debt
from a leading life insurance company. The private placement consists of $50
million due July 2013 and $25 million due July 2014 bearing interest at rates of
6.70 percent and 7.19 percent, respectively. The proceeds were used to pay down
Meredith’s asset-backed commercial paper facility.
We
believe our debt agreements are material to discussions of Meredith's liquidity.
All of our debt agreements include financial covenants, and failure to comply
with any such covenants could result in the debt becoming payable on demand. A
summary of the most significant financial covenants and their status at
June 30, 2009, is as follows:
|
|
Required
at
June 30,
2009
|
Actual
at
June 30,
2009
|
|
Ratio
of debt to trailing 12 month EBITDA
1
|
Less
than 3.75
|
1.8
|
|
|
Ratio
of EBITDA
1
to
interest expense
|
Greater
than 2.75
|
10.9
|
|
|
1. EBITDA
is earnings before interest, taxes, depreciation, and amortization as
defined in the debt
agreements.
|
The
Company was in compliance with these and all other debt covenants at
June 30, 2009.
Interest
Rate Swap Contracts
In fiscal
2007, the Company entered into two interest rate swap agreements to hedge
variable interest rate risk on $100 million of the Company's variable interest
rate revolving credit facility. The swaps expire on December 31, 2009.
Under the swaps, the Company will, on a quarterly basis, pay fixed rates of
interest (average 4.69 percent) and receive variable rates of interest based on
the three-month LIBOR rate (average of 0.60 percent at June 30, 2009) on $100
million notional amount of indebtedness. These contracts did not have a
significant effect on net interest expense in fiscal 2009, 2008, or
2007.
Contractual
Obligations
The
following table summarizes our principal contractual obligations as of
June 30, 2009:
|
|
|
Payments
Due by Period
|
|
Contractual
obligations
|
Total
|
Less
than
1
Year
|
1–3
Years
|
4–5
Years
|
After
5
Years
|
|
(In
millions)
|
|
|
|
|
|
|
Long-term
debt
1
|
$ 380.0
|
$ –
|
$ 305.0
|
$ 75.0
|
$ –
|
|
Debt
interest
2
|
17.8
|
8.7
|
9.1
|
–
|
–
|
|
Broadcast
rights
3
|
46.9
|
19.4
|
23.2
|
4.3
|
–
|
|
Contingent
consideration
4
|
67.7
|
41.7
|
24.0
|
2.0
|
–
|
|
Operating
leases
|
73.2
|
20.4
|
27.9
|
6.0
|
18.9
|
|
Purchase
obligations and other
5
|
107.9
|
33.2
|
37.5
|
28.9
|
8.3
|
|
Total
contractual cash obligations
|
$ 693.5
|
$ 123.4
|
$ 426.7
|
$ 116.2
|
$ 27.2
|
|
1.
|
On
July 13, 2009, Meredith entered into a new $75 million private
placement of debt from a leading life insurance company. The private
placement consists of $50 million due July 2013 and $25 million due July
2014. The proceeds were used to pay down Meredith’s asset-backed
commercial paper facility. Thus $75 million of this debt is shown in the
4-5 Years column.
|
|
2.
|
Debt
interest represents semi-annual interest payments due on fixed-rate notes
outstanding at June 30, 2009.
|
|
3.
|
Broadcast rights include $24.5
million owed for broadcast rights that are not currently available for
airing and are therefore not included in the Consolidated Balance Sheet at
June 30, 2009.
|
|
4.
|
These
amounts include contingent acquisition payments. While it is not certain
if and /or when these payments will be made, we have included the payments
in the table based on our best estimates of the amounts and dates when the
contingencies may be resolved.
|
|
5.
|
Purchase
obligations and other includes expected postretirement benefit
payments.
|
Due to
uncertainty with respect to the timing of future cash flows associated with
unrecognized tax benefits at June 30, 2009, the Company is unable to make
reasonably reliable estimates of the period of cash settlement. Therefore, $63.7
million of unrecognized tax benefits have been excluded from the contractual
obligations table above. See Note 6 to the Consolidated Financial
Statements for further discussion of income taxes.
Purchase
obligations represent legally binding agreements to purchase goods and services
that specify all significant terms. Outstanding purchase orders, which represent
authorizations to purchase goods and services but are not legally binding, are
not included in purchase obligations. We believe current cash balances, cash
generated by future operating activities, and cash available under current
credit agreements will be sufficient to meet our contractual cash obligations
and other operating cash requirements for the foreseeable future. Projections of
future cash flows are, however, subject to substantial uncertainty as discussed
throughout MD&A and particularly in
Item 1A–Risk Factors
beginning on page 11. Debt agreements may be renewed or refinanced
if we determine it is advantageous to do so. We also have commitments in the
form of standby letters of credit totaling $1.0 million that expire within one
year.
We have
maintained a program of Company share repurchases for 21 years. In fiscal 2009,
we spent $21.8 million to repurchase an aggregate of 882,000 shares of Meredith
Corporation common and Class B stock at then current market prices. We spent
$150.4 million to repurchase an aggregate of 3,225,000 shares in fiscal 2008 and
$58.7 million to repurchase an aggregate of 1,116,000 shares in fiscal 2007. We
expect to continue repurchasing shares from time to time subject to market
conditions. In May 2008, the Board of Directors approved a share repurchase
authorization for 2.0 million shares. As of June 30, 2009, approximately
1.5 million shares were remaining under these authorizations for future
repurchase. The status of the repurchase program is reviewed at each quarterly
Board of Directors meeting. See
Item 5–Issuer Purchases of
Equity Securities
of this Form 10-K for detailed information on
share repurchases during the quarter ended June 30, 2009.
Dividends
Meredith
has paid quarterly dividends continuously since 1947 and we have increased our
dividend annually for 16 consecutive years. The last increase occurred in
January 2009 when the Board of Directors approved the quarterly dividend of 22.5
cents per share effective with the dividend payable in March 2009. Given
the current number of shares outstanding, the increase will result in additional
dividend payments of approximately $1.8 million annually. Dividend payments
totaled $39.7 million, or 88 cents per share, in fiscal 2009 compared with $37.3
million, or 80 cents per share, in fiscal 2008, and $33.2 million, or 69 cents
per share, in fiscal 2007.
Capital
Expenditures
Spending
for property, plant, and equipment totaled $23.5 million in fiscal 2009, $29.6
million in fiscal 2008, and $42.6 million in fiscal 2007. Current year spending
related primarily to digital and high definition conversions being completed at
all of the Company's broadcast stations and the construction of a new data
server room. The spending in the prior two fiscal years included expenditures
for broadcasting technical and news equipment, information technology systems
and equipment, and improvements to buildings and office facilities. We spent
approximately $20 million in fiscal 2007 for a new facility for our television
station in Hartford. The Company has no material commitments for capital
expenditures. We expect funds for future capital expenditures to come from
operating activities or, if necessary, borrowings under credit
agreements.
Meredith's
consolidated financial statements are prepared in accordance with GAAP. Our
significant accounting policies are summarized in Note 1 to the
consolidated financial statements. The preparation of our consolidated financial
statements requires management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and accompanying
notes. Some of these estimates and assumptions are inherently difficult to make
and subjective in nature. We base our estimates on historical experience, recent
trends, our expectations for future performance, and other assumptions as
appropriate. We reevaluate our estimates on an ongoing basis; actual results,
however, may vary from these estimates.
The
following are the accounting policies that management believes are most critical
to the preparation of our consolidated financial statements and require
management's most difficult, subjective, or complex judgments. In addition,
there are other items within the consolidated financial statements that require
estimation but are not deemed to be critical accounting policies. Changes in the
estimates used in these and other items could have a material impact on the
consolidated financial statements.
GOODWILL
AND INTANGIBLE ASSETS
Goodwill
and intangible assets with indefinite lives are tested for impairment in
accordance with Statement of Financial Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible
Assets
. All other intangible assets are tested for impairment in
accordance with SFAS 144,
Accounting for the Impairment or
Disposal of Long-Lived Assets
. Goodwill and intangible assets totaled
$1,024.0 million, or approximately 60 percent of Meredith's total assets, as of
June 30, 2009. See Note 4 to the consolidated financial statements for
additional information. The impairment analysis of these assets is considered
critical because of their significance to the Company and our publishing and
broadcasting segments.
Management
is required to evaluate goodwill and intangible assets with indefinite lives for
impairment on an annual basis or when events occur or circumstances change that
would indicate the carrying value exceeds the fair value. The determination of
fair value requires us to estimate the future cash flows expected to result from
the use of the assets. These estimates include assumptions about future revenues
(including projections of overall market growth and our share of market),
estimated costs, and appropriate discount rates where applicable. Our
assumptions are based on historical data, various internal estimates, and a
variety of external sources and are consistent with the assumptions used in both
our short-term financial forecasts and long-term strategic plans. Depending on
the assumptions and estimates used, future cash flow projections can vary within
a range of outcomes. Changes in key assumptions about the publishing or
broadcasting businesses and their prospects or changes in market conditions
could result in an impairment charge.
During
fiscal 2009, we determined that interim triggering events, including declines in
the price of our stock and reduced cash flow forecasts in the second and third
quarters due to the recession required us to perform interim evaluations of
goodwill and intangible assets with indefinite lives for impairment at
December 31, 2008, and March 31 2009. Our December 31, 2008, and
March 31, 2009, impairment tests determined the fair value of our goodwill
and indefinite lived intangible assets exceeded their carrying values, thus the
Company’s interim impairment analyses did not result in any impairment charges
during the second or third quarters of fiscal 2009.
The
Company performed its annual impairment testing as of May 31, 2009. While
our stock price had increased over 150 percent from its low earlier in the year,
worsening broadcast business conditions, including further deterioration in the
local advertising market, lowered future cash flow projections. This evaluation
resulted in the carrying values of our broadcast stations’ goodwill and certain
of their FCC licenses having carrying values that exceeded their estimated fair
values. As a result, the Company recorded a pre-tax non-cash charge of $211.9
million to reduce the carrying value of broadcast FCC licenses and $82.6 million
to write-off our broadcasting segment’s goodwill in the fourth quarter of fiscal
2009.
In
accordance with the provisions of SFAS 142 and SFAS 144, we will
continue to monitor changes in our business in fiscal 2010 for interim
indicators of impairment.
BROADCAST
RIGHTS
Broadcast
rights, which consist primarily of rights to broadcast syndicated programs and
feature films, are recorded at cost when the programs become available for
airing. Amortization of broadcast rights is generally recorded on an accelerated
basis over the contract period. Broadcast rights valued at $12.8 million were
included in the Consolidated Balance Sheet at June 30, 2009. In addition,
we had entered into contracts valued at $24.5 million not included in the
Consolidated Balance Sheet at June 30, 2009, because the related
programming was not yet available for airing. Amortization of broadcast rights
accounted for 11 percent of broadcasting segment operating expenses in fiscal
2009. Valuation of broadcast rights is considered critical to the broadcasting
segment because of the significance of the amortization expense to the
segment.
Broadcast
rights are valued at the lower of unamortized cost or net realizable value. The
determination of net realizable value requires us to estimate future net
revenues expected to be earned as a result of airing of the programming. Future
revenues can be affected by changes in the level of advertising demand,
competition from other television stations or other media, changes in television
programming ratings, changes in the planned usage of programming materials, and
other factors. Changes in such key assumptions could result in an impairment
charge.
PENSION
AND POSTRETIREMENT PLANS
Meredith
has noncontributory pension plans covering substantially all employees. These
plans include qualified (funded) plans as well as nonqualified (unfunded) plans.
These plans provide participating employees with retirement benefits in
accordance with benefit provision formulas. The nonqualified plans provide
retirement benefits only to certain highly compensated employees. Meredith also
sponsors defined healthcare and life insurance plans that provide benefits to
eligible retirees.
The Company adopted the recognition and
disclosure provisions of SFAS No. 158,
Employers'
Accounting for Defined Benefit Pension and Other Postretirement Plans, an
amendment of FASB Statements No. 87, 88, 106 and 132(R)
(SFAS 158) on June 30, 2007.
SFAS 158 had no impact on pension or other postretirement plan expense
recognized in the Company's results of operations, but the new standard required
the Company to recognize the funded status of pension and other postretirement
benefit plans on its Consolidated Balance Sheet at June 30, 2007. The
overall impact of the adoption of SFAS 158, taking into account the
Company's pension and other postretirement plans, was a $1.8 million increase in
the Company's shareholders' equity (accumulated other comprehensive income) at
June 30, 2007.
The
Company adopted the change in measurement date transition requirements of
SFAS 158 effective July 1, 2008. Previously the Company used a
March 31 measurement date for its defined pension and other postretirement
plans. We adopted the change in measurement date by re-measuring plan assets and
benefit obligations as of our fiscal 2008 year end, pursuant to the transition
requirements of SFAS 158. As a result of the change in measurement date, a
$1.8 million pre-tax reduction to retained earnings was recognized in the fourth
quarter of fiscal 2009 that represents the expense for the period from the
March 31, 2008, early measurement date to the end of the 2008 fiscal
year.
The
accounting for pension and postretirement plans is actuarially based and
includes assumptions regarding expected returns on plan assets, discount rates,
and the rate of increase in healthcare costs. We consider the accounting for
pension and postretirement plans critical to Meredith and both of our segments
because of the number of significant judgments required. More information on our
assumptions and our methodology in arriving at these assumptions can be found in
Note 7 to the consolidated financial statements. Changes in key assumptions
could materially affect the associated assets, liabilities, and benefit
expenses. Depending on the assumptions and estimates used, these balances could
vary within a range of outcomes. We monitor trends in the marketplace and rely
on guidance from employee benefit specialists to arrive at reasonable estimates.
These estimates are reviewed annually and updated as needed. Nevertheless, the
estimates are subjective and may vary from actual results.
Meredith
expects to use a long-term rate of return on assets of 8.25 percent in
developing fiscal 2010 pension costs, the same as used in fiscal 2009. The
fiscal 2010 rate was based on various factors that include but are not limited
to the plans' asset allocations, a review of historical capital market
performance, historical plan performance, current market factors such as
inflation and interest rates, and a forecast of expected future asset returns.
The pension plan assets returned a loss of 21 percent in fiscal 2009. They lost
3 percent in fiscal 2008. If we had decreased our expected long-term rate of
return on plan assets by 0.5 percent in fiscal 2009, our pension expense would
have increased by $0.6 million.
Meredith
expects to use a discount rate of 5.75 percent in developing the fiscal 2010
pension costs, down from a rate of 5.80 percent used in fiscal 2009. If we had
decreased the discount rate by 0.5 percent in fiscal 2009, there would have been
no effect on our combined pension and postretirement expenses.
Assumed
rates of increase in healthcare cost levels have a significant effect on
postretirement benefit costs. A one-percentage-point increase in the assumed
healthcare cost trend rate would have increased postretirement benefit costs by
$0.5 million in fiscal 2009.
REVENUE
RECOGNITION
Revenues
from both the newsstand sale of magazines and the sale of books are recorded net
of our best estimate of expected product returns. Net revenues from these
sources totaled 10 percent of fiscal 2009 publishing segment revenues.
Allowances for returns are subject to considerable variability. Return
allowances may exceed 35 percent for books and 65 percent for magazines sold on
the newsstand. Estimation of these allowances for future returns is considered
critical to the publishing segment and the Company as a whole because of the
potential impact on revenues.
Estimates
of returns from magazine newsstand and book sales are based on historical
experience and current marketplace conditions. Allowances for returns are
adjusted continually on the basis of actual results. Unexpected changes in
return levels may result in adjustments to net revenues.
SHARE-BASED
COMPENSATION EXPENSE
Meredith
has a stock incentive plan that permit us to grant various types of share-based
incentives to key employees and directors. The primary types of incentives
granted under these plans are stock options, restricted shares of common stock,
and restricted stock units. Share-based compensation expense totaled $10.2
million in fiscal 2009 and is accounted for under SFAS No. 123 (revised
2004),
Share-Based
Payment
. As of June 30, 2009, unearned compensation cost was $3.8
million for stock options, $5.3 million for restricted stock, and $0.1 million
for restricted stock units granted under the stock incentive plans. These costs
will be recognized over weighted average periods of 1.7 years, 2.4 years, and
1.6 years, respectively.
Restricted
shares and units are valued at the market value of traded shares on the date of
grant. The valuation of stock options requires numerous assumptions. We
determine the fair value of each option as of the date of grant using the
Black-Scholes option-pricing model. This model requires inputs for the expected
volatility of our stock price, expected life of the option, and expected
dividend yield, among others. We base our assumptions on historical data,
expected market conditions, and other factors. In some instances, a range of
assumptions is used to reflect differences in behavior among various groups of
employees. In addition, we estimate the number of options and restricted stock
expected to eventually vest. This is based primarily on past
experience.
We
consider the accounting for share-based compensation expense critical to
Meredith and both of our segments because of the number of significant judgments
required. More information on our assumptions can be found in Note 10 to
the consolidated financial statements. Changes in these assumptions could
materially affect the share-based compensation expense recognized as well as
various liability and equity balances.
INCOME
TAXES
Income
taxes are accounted for in accordance with SFAS No. 109,
Accounting for Income Taxes
.
Income taxes are recorded under this standard for the amount of taxes payable
for the current year and include deferred tax assets and liabilities for the
effect of temporary differences between the financial and tax basis of recorded
assets and liabilities using enacted tax rates. Deferred tax assets are reduced
by a valuation allowance if it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Income tax expense was 34.0
percent of losses before income taxes in fiscal 2009. Net deferred tax
liabilities totaled $73.6 million, or 7 percent of total liabilities, at
June 30, 2009.
We
consider accounting for income taxes critical to our operations because
management is required to make significant subjective judgments in developing
our provision for income taxes, including the determination of deferred tax
assets and liabilities, and any valuation allowances that may be required
against deferred tax assets.
On
July 1, 2007, we adopted Financial Accounting Standards Board (FASB)
Interpretation No. 48,
Accounting for Uncertainty in Income
Taxes
(FIN 48), which clarifies the accounting for uncertainty in
income tax positions. FIN 48 required us to recognize in our consolidated
financial statements the benefit of a tax position if that tax position is more
likely than not of being sustained on audit, based on the technical merits of
the tax position. This involves the identification of potential uncertain tax
positions, the evaluation of tax law, and an assessment of whether a liability
for uncertain tax positions is necessary. Changes in recognition or measurement
are reflected in the period in which the change in judgment occurs. Different
conclusions reached in this assessment can have a material impact on the
consolidated financial statements. See Note 6 to the consolidated financial
statements for additional information related to the adoption of
FIN 48.
The
Company operates in numerous taxing jurisdictions and is subject to audit in
each of these jurisdictions. These audits can involve complex issues that tend
to require an extended period of time to resolve and may eventually result in an
increase or decrease to amounts previously paid to the taxing jurisdictions. Any
such audits are not expected to have a material effect on the Company's
consolidated financial statements.
SFAS 165
—On June 30,
2009, the Company adopted SFAS No. 165, Subsequent Events, (SFAS 165).
SFAS 165 establishes general standards of accounting for and disclosure of
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. Specifically, SFAS 165 sets forth
the period after the balance sheet date during which management of a reporting
entity should evaluate events or transactions that may occur for potential
recognition or disclosure in the financial statements, the circumstances under
which an entity should recognize events or transactions occurring after the
balance sheet date in its financial statements, and the disclosures that an
entity should make about events or transactions that occurred after the balance
sheet date. SFAS 165 provides largely the same guidance on subsequent events
which previously existed only in auditing literature. The adoption of
SFAS 165 had no impact on the consolidated financial statements as
management already followed a similar approach prior to the adoption of this
standard.
SFAS 161
—In March 2008,
the FASB issued SFAS No. 161,
Disclosures about Derivative
Instruments and Hedging Activities – an Amendment of FASB Statement 133
(SFAS 161). SFAS 161 enhances required disclosures regarding
derivatives and hedging activities, including enhanced disclosures regarding
how: (a) an entity uses derivative instruments; (b) derivative instruments and
related hedged items are accounted for under SFAS No. 133,
Accounting for Derivative
Instruments and Hedging Activities
; and (c) derivative instruments and
related hedged items affect an entity’s financial position, financial
performance, and cash flows. We adopted the provisions of this statement
effective March 31, 2009. As a result of the adoption of this statement, we
have expanded our disclosures regarding derivative instruments and hedging
activities within Note 5 to the consolidated financial
statements.
SFAS 158
—In September
2006, the FASB issued SFASB 158, which requires employers that sponsor
defined benefit postretirement plans to recognize the overfunded or underfunded
status of defined benefit postretirement plans, including pension plans, in
their balance sheets and to recognize changes in funded status through
comprehensive income in the year in which the changes occur. Meredith adopted
the recognition and disclosure provisions of SFAS 158 on June 30,
2007.
The adoption of
SFAS 158 resulted in a $1.8 million increase in the Company's shareholders'
equity at June 30, 2007, through accumulated other comprehensive income.
SFAS 158 also requires that employers measure plan assets and obligations
as of the date of their year-end financial statements. The Company adopted the
change in measurement date transition requirements of SFAS 158 effective
July 1, 2008. Previously the Company used a March 31 measurement date
for its defined pension and other postretirement plans. We adopted the change in
measurement date by re-measuring plan assets and benefit obligations as of our
fiscal 2008 year end, pursuant to the transition requirements of SFAS 158.
As a result of the change in measurement date, a $1.8 million pre-tax reduction
to retained earnings was recognized in the fourth quarter of fiscal 2009 that
represents the expense for the period from the March 31, 2008, early
measurement date to the end of the 2008 fiscal year.
SFAS 157
—In September
2006, the FASB issued SFAS No. 157,
Fair Value Measurements
(SFAS 157), which establishes a common definition for fair value in
accordance with GAAP, and establishes a framework for measuring fair value and
expands disclosure requirements about such fair value measurements.
Specifically, SFAS 157 sets forth a definition of fair value, and
establishes a hierarchy prioritizing the use of inputs in valuation techniques.
SFAS 157 defines levels within the hierarchy as follows:
|
●
|
Level
1
|
Quoted
prices (unadjusted) in active markets for identical assets or
liabilities;
|
|
●
|
Level
2
|
Inputs
other than quoted prices included within Level 1 that are either directly
or indirectly observable;
|
|
●
|
Level
3
|
Assets
or liabilities for which fair value is based on valuation models with
significant unobservable pricing inputs and which result in the use of
management estimates.
|
In
February 2008, the FASB issued FASB Staff Position (FSP) FAS 157-2,
Effective Date of FASB Statement
No. 157
(FSP 157-2). FSP 157-2 delayed the effective date
of SFAS 157 to fiscal years beginning after November 15, 2008, for
nonfinancial assets and liabilities, except for items that are recognized or
disclosed at fair value in the financial statements on a recurring basis (at
least annually). The partial delay is intended to provide all relevant parties
additional time to consider the effect of various implementation issues that
have arisen, or that may arise, from the application of
SFAS 157.
The
Company adopted the provisions of SFAS 157 for financial assets and
liabilities as of July 1, 2008. The adoption of these provisions did not
have any impact on the Company's consolidated financial statements because the
Company's existing fair value measurements are consistent with the guidance of
SFAS 157. We are currently evaluating the impact of the provisions of
SFAS 157 that relate to our nonfinancial assets and liabilities, which are
effective for the Company as of July 1, 2009.
As of
June 30, 2009, Meredith had interest rate swap agreements that converted
$100 million of its variable-rate debt to fixed-rate debt. These agreements are
required to be measured at fair value on a recurring basis. The Company
determined that these interest rate swap agreements are defined as Level 2 in
the fair value hierarchy. As of June 30, 2009, the fair value of these
interest rate swap agreements was a liability of $2.1 million based on
significant other observable inputs (London Interbank Offered Rate (LIBOR))
within the fair value hierarchy. Fair value of interest rate swaps is based on a
discounted cash flow analysis, predicated on forward LIBOR prices, of the
estimated amounts the Company would have paid to terminate the
swaps.
SFAS 159
—In February
2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial
Assets and Financial Liabilities-Including an Amendment of FASB Statement
No. 115
(SFAS 159). SFAS 159 was effective for the Company
at the beginning of fiscal 2009. This statement permitted a choice to measure
many financial instruments and certain other items at fair value. Upon the
Company's adoption of SFAS 159 on July 1, 2008, we did not elect the
fair value option for any financial instrument that was not already reported at
fair value.
EITF 06-10
—Emerging
Issues Task Force (EITF) Issue No. 06-10,
Accounting for
Deferred Compensation and
Postretirement Benefit Aspects of Collateral Assignment Split-Dollar Life
Insurance Arrangements
(EITF 06-10), requires that a company
recognize a liability for the postretirement benefits associated with collateral
assignment split-dollar life insurance arrangements. The provisions of
EITF 06-10 are applicable in instances where the Company has contractually
agreed to maintain a life insurance policy (i.e., the Company pays the premiums)
for an employee in periods in which the employee is no longer providing
services. We adopted EITF 06-10 on July 1, 2008, at which time we
recorded a liability and a cumulative effect adjustment to the opening balance
of retained earnings for $2.9 million ($2.6 million, net of tax). Future
compensation charges and adjustments to the liability will be charged to
earnings in the period incurred.
FASB Interpretation
No. 48
—Effective July 1, 2007, the Company adopted FIN 48,
which clarifies the accounting for uncertainty in tax positions. The
interpretation requires that we recognize in our consolidated financial
statements the benefit of a tax position if, based on technical merits, the
position is more likely than not of being sustained upon audit. Tax benefits are
derecognized if information becomes available indicating it is more likely than
not that the position will not be sustained. The provisions of FIN 48 also
provide guidance on classification of income tax liabilities, accounting for
interest and penalties associated with unrecognized tax benefits, accounting for
uncertain tax positions in interim periods, and income tax disclosures. The
adoption of FIN 48 on July 1, 2007, required the Company to make
certain reclassifications in its consolidated balance sheet. In the aggregate,
these reclassifications increased the Company's liability for unrecognized tax
benefits by $36.0 million and decreased its net deferred tax liabilities by
$36.0 million. The adoption of FIN 48 had no impact on the Company's
consolidated retained earnings as of July 1, 2007, or on its consolidated
results of operations or cash flows for the fiscal year ended June 30,
2008. See Note 6 for additional information.
SFAS 141R
—In December
2007, the FASB issued SFAS No. 141 (revised 2007),
Business Combinations
(SFAS 141R). SFAS 141R significantly changes the accounting for
business combinations in a number of areas including the treatment of contingent
consideration, preacquisition contingencies, transaction costs, in-process
research and development, and restructuring costs. In addition, under
SFAS 141R, changes in an acquired entity's deferred tax assets and
uncertain tax positions after the measurement period will impact income tax
expense. SFAS 141R is effective for fiscal years beginning after
December 15, 2008. We will adopt SFAS 141R on July 1, 2009. This
standard will change our accounting treatment for business combinations on a
prospective basis and is expected to have a significant impact on our accounting
for future business combinations.
FSP 142-3
—In April 2008,
the FASB issued FSP 142-3,
Determination of the Useful Lives of
Intangible Assets
, which amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
an intangible asset. This interpretation is effective for financial statements
issued for fiscal years beginning after December 15, 2008. The Company will
adopt this interpretation as of July 1, 2009, and is still evaluating the
potential impact of adoption.
SFAS 168
—In June 2009,
the FASB issued SFAS No. 168,
The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles — A
Replacement of FASB Statement No. 162
(SFAS 168). The FASB
Accounting Standards Codification (Codification) will become the source of
authoritative GAAP recognized by the FASB to be applied by nongovernmental
entities. Rules and interpretive releases of the SEC under authority of federal
securities laws are also sources of authoritative GAAP for SEC registrants.
While not intended to change GAAP, the Codification significantly changes the
way in which the accounting literature is organized. It is structured by
accounting topic to help accountants and auditors more quickly identify the
guidance that applies to a specific accounting issue. The Company will apply the
Codification to the first quarter fiscal 2010 interim financial statements. The
adoption of the Codification will not have an effect on the Company’s financial
position and results of operations. However, because the Codification completely
replaces existing standards, it will affect the way GAAP is referenced by the
Company in its consolidated financial statements and accounting
policies.
FSP EITF 03-6-1
—In June
2008, FASB issued FSP EITF No. 03-6-1,
Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities
(FSP EITF 03-6-1). Under the FSP, unvested share-based payment awards that
contain rights to receive nonforfeitable dividends (whether paid or unpaid) are
participating securities, and should be included in the two- class method of
computing EPS. The Company will adopt the FSP effective July 1, 2009. The
adoption of FSP EITF 03-6-1 is not expected to have a material impact on
the consolidated financial statements.
FSP FAS 107-1 and
APB 28-1
—In April 2009, the FASB issued the FASB Staff Position on
FAS 107-1 and APB 28-1,
Interim Disclosures About Fair Value
of Financial Instruments
(FSP FAS 107-1 and APB 28-1). FSP
FAS 107-1 and APB 28-1 require disclosures about fair value of
financial instruments in interim reporting periods of publicly-traded companies
that were previously only required to be disclosed in annual financial
statements. FSP FAS 107-1 and APB 28-1 are effective for interim
periods ending after June 15, 2009. The Company will adopt these statements
in the first quarter of fiscal 2010 and does not anticipate that their adoption
will have a material impact on its consolidated financial
statements.
Meredith
is exposed to certain market risks as a result of its use of financial
instruments, in particular the potential market value loss arising from adverse
changes in interest rates. The Company does not utilize financial instruments
for trading purposes and does not hold any derivative financial instruments that
could expose the Company to significant market risk. There have been no
significant changes in the market risk exposures since June 30,
2008.
Interest
Rates
We
generally manage our risk associated with interest rate movements through the
use of a combination of variable and fixed-rate debt. At June 30, 2009,
Meredith had outstanding $175 million in fixed-rate long-term debt. In addition,
Meredith has effectively converted $100 million of its variable-rate debt under
the revolving credit facility to fixed-rate debt through the use of interest
rate swaps. In fiscal 2007, the Company entered into two interest rate swap
agreements with a total notional value of $100 million to hedge the variability
of interest payments associated with $100 million of our variable-rate revolving
credit facility. Since the interest rate swaps hedge the variability of interest
payments on variable-rate debt with the same terms, they qualify for cash flow
hedge accounting treatment. There are no earnings or liquidity risks associated
with the Company's fixed-rate debt. The fair value of the fixed-rate debt (based
on discounted cash flows reflecting borrowing rates currently available for debt
with similar terms and maturities) varies with fluctuations in interest rates. A
10 percent decrease in interest rates would have changed the fair value of the
fixed-rate debt to $173.6 million from $171.7 million at June 30,
2009.
At
June 30, 2009, $205 million of our debt was variable-rate debt before
consideration of the impact of the swaps. The Company is subject to earnings and
liquidity risks for changes in the interest rate on this debt. A 10 percent
increase in interest rates would increase annual interest expense by $0.7
million.
The fair
value of the interest rate swaps is the estimated amount, based on discounted
cash flows, the Company would pay or receive to terminate the swap agreements. A
10 percent decrease in interest rates would result in no change from the current
fair value of a loss of $2.1 million at June 30, 2009. We intend to
continue to meet the conditions for hedge accounting. If, however, hedges were
not to be highly effective in offsetting cash flows attributable to the hedged
risk, the changes in the fair value of the derivatives used as hedges could have
an impact on our consolidated net earnings. The Company is exposed to
credit-related losses in the event of nonperformance by counterparties to the
contracts. Given the strong creditworthiness of the counterparties, management
does not expect any of them to fail to meet their obligations.
Broadcast
Rights Payable
The
Company enters into broadcast rights contracts for its television stations. As a
rule, these contracts are on a market-by-market basis and subject to terms and
conditions of the seller of the broadcast rights. These procured rights
generally are sold to the highest bidder in each market, and the process is very
competitive. There are no earnings or liquidity risks associated with broadcast
rights payable. Fair values are determined using discounted cash flows. At
June 30, 2009, a 10 percent decrease in interest rates would have resulted
in a $0.4 million increase in the fair value of the available broadcast rights
payable and the unavailable broadcast rights commitments.
|
Index
to Consolidated Financial Statements, Financial Statement
Schedule,
and
Other Financial Information
|
|
|
|
|
|
Page
|
|
|
44
|
|
|
|
|
|
46
|
|
|
|
|
Financial
Statements
|
|
|
|
48
|
|
|
50
|
|
|
51
|
|
|
52
|
Notes
to
Consolidated Financial Statements
|
55
|
|
|
|
|
|
86
|
|
|
|
|
Financial
Statement Schedule
|
|
|
|
89
|
The Board
of Directors and Shareholders
Meredith
Corporation:
We have
audited the accompanying consolidated balance sheets of Meredith Corporation and
subsidiaries (the Company) as of June 30, 2009 and 2008, and the related
consolidated statements of earnings (loss), shareholders’ equity, and cash flows
for each of the years in the three-year period ended June 30, 2009. In
connection with our audits of the consolidated financial statements, we also
have audited the related financial statement schedule (as listed in Part IV,
Item 15 (a) 2 herein). We also have audited the Company’s internal control over
financial reporting as of June 30, 2009, based on criteria established in
Internal Control – Integrated
Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). The Company’s management is responsible for these
consolidated financial statements and financial statement schedule, for
maintaining effective internal control over financial reporting, and for their
assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Report on Internal Control over
Financial Reporting (as included in Part II, Item 9A). Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule and an opinion on the Company’s internal control over
financial reporting based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement and whether effective
internal control over financial reporting was maintained in all material
respects. Our audits of the consolidated financial statements included
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audits also included performing such other procedures as
we considered necessary in the circumstances. We believe that our audits provide
a reasonable basis for our opinions.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management
and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the
financial statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Meredith Corporation and
subsidiaries as of June 30, 2009 and 2008, and the results of their
operations and their cash flows for each of the years in the three-year period
ended June 30, 2009, in conformity with U.S. generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein. Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of
June 30, 2009, based on criteria established in
Internal Control – Integrated
Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
/s/ KPMG
LLP
Des
Moines, Iowa
August 24,
2009
To the
Shareholders of Meredith Corporation:
Meredith
management is responsible for the preparation, integrity, and objectivity of the
financial information included in this Annual Report on Form 10-K. We take
this responsibility very seriously as we recognize the importance of having
well-informed, confident investors. The consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in the
United States of America and include amounts based on our informed judgments and
estimates. We have adopted appropriate accounting policies and are fully
committed to ensuring that those policies are applied properly and consistently.
In addition, we strive to report our consolidated financial results in a manner
that is relevant, complete, and understandable. We welcome any suggestions from
those who use our reports.
To meet
our responsibility for financial reporting, internal control systems and
accounting procedures are designed to provide reasonable assurance as to the
reliability of financial records. In addition, our internal audit staff monitors
and reports on compliance with Company policies, procedures, and internal
control systems.
The
consolidated financial statements and the effectiveness of the Company's
internal control over financial reporting have been audited by an independent
registered public accounting firm in accordance with the standards of the Public
Company Accounting Oversight Board (United States). The independent registered
public accounting firm was given unrestricted access to all financial records
and related information, including all Board of Directors and Board committee
minutes.
The Audit
Committee of the Board of Directors is responsible for reviewing and monitoring
the Company's accounting policies, internal controls, and financial reporting
practices. The Audit Committee is also directly responsible for the appointment,
compensation, and oversight of the Company's independent registered public
accounting firm. The Audit Committee consists of five independent directors who
meet with the independent registered public accounting firm, management, and
internal auditors to review accounting, auditing, and financial reporting
matters. To ensure complete independence, the independent registered public
accounting firm has direct access to the Audit Committee without the presence of
management representatives.
At
Meredith, we have always placed a high priority on good corporate governance and
will continue to do so in the future.
/s/
Joseph H. Ceryanec
Joseph H.
Ceryanec
Vice
President-Chief Financial Officer
(This
page has been left blank intentionally.)
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
Consolidated
Balance Sheets
|
Assets
|
June 30,
|
|
2009
|
|
|
2008
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
Cash
and cash
equivalents
|
$
|
27,910
|
|
$
|
37,644
|
|
|
Accounts
receivable
|
|
|
|
|
|
|
|
(net
of allowances of $13,810 in 2009 and $23,944 in 2008)
|
|
192,367
|
|
|
230,978
|
|
|
Inventories
|
|
28,151
|
|
|
44,085
|
|
|
Current
portion of subscription acquisition costs
|
|
60,017
|
|
|
59,939
|
|
|
Current
portion of broadcast rights
|
|
8,297
|
|
|
10,779
|
|
|
Deferred
income taxes
|
|
–
|
|
|
2,118
|
|
|
Other
current assets
|
|
23,398
|
|
|
17,547
|
|
|
Total
current assets
|
|
340,140
|
|
|
403,090
|
|
|
Property,
plant, and equipment
|
|
|
|
|
|
|
|
Land
|
|
19,500
|
|
|
20,027
|
|
|
Buildings
and improvements
|
|
125,779
|
|
|
122,977
|
|
|
Machinery
and equipment
|
|
276,376
|
|
|
273,633
|
|
|
Leasehold
improvements
|
|
14,208
|
|
|
12,840
|
|
|
Construction
in progress
|
|
9,041
|
|
|
17,458
|
|
|
Total
property, plant, and equipment
|
|
444,904
|
|
|
446,935
|
|
|
Less
accumulated depreciation
|
|
(253,597
|
)
|
|
(247,147
|
)
|
|
Net
property, plant, and equipment
|
|
191,307
|
|
|
199,788
|
|
|
Subscription
acquisition costs
|
|
63,444
|
|
|
60,958
|
|
|
Broadcast
rights
|
|
4,545
|
|
|
7,826
|
|
|
Other
assets
|
|
45,907
|
|
|
74,472
|
|
|
Intangible
assets, net
|
|
561,581
|
|
|
781,154
|
|
|
Goodwill
|
|
462,379
|
|
|
532,332
|
|
|
Total
assets
|
$
|
1,669,303
|
|
$
|
2,059,620
|
|
|
See
accompanying Notes to Consolidated Financial Statements
|
|
Meredith
Corporation and Subsidiaries
Consolidated
Balance Sheets
(continued)
|
Liabilities
and Shareholders' Equity
|
June 30,
|
|
2009
|
|
|
2008
|
|
|
(In thousands
except per share data
)
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
Current
portion of long-term debt
|
$
|
–
|
|
$
|
75,000
|
|
|
Current
portion of long-term broadcast rights payable
|
|
10,560
|
|
|
11,141
|
|
|
Accounts
payable
|
|
86,381
|
|
|
79,028
|
|
|
Accrued
expenses
|
|
|
|
|
|
|
|
Compensation
and benefits
|
|
42,667
|
|
|
40,894
|
|
|
Distribution
expenses
|
|
12,224
|
|
|
13,890
|
|
|
Other
taxes and expenses
|
|
26,653
|
|
|
47,923
|
|
|
Total
accrued
expenses
|
|
81,544
|
|
|
102,707
|
|
|
Current
portion of unearned subscription revenues
|
|
170,731
|
|
|
175,261
|
|
|
Total
current
liabilities
|
|
349,216
|
|
|
443,137
|
|
|
Long-term
debt
|
|
380,000
|
|
|
410,000
|
|
|
Long-term
broadcast rights payable
|
|
11,851
|
|
|
17,186
|
|
|
Unearned
subscription revenues
|
|
148,393
|
|
|
157,872
|
|
|
Deferred
income taxes
|
|
64,322
|
|
|
139,598
|
|
|
Other
noncurrent liabilities
|
|
106,138
|
|
|
103,972
|
|
|
Total
liabilities
|
|
1,059,920
|
|
|
1,271,765
|
|
|
Shareholders'
equity
|
|
|
|
|
|
|
|
Series
preferred stock, par value $1 per share
|
|
|
|
|
|
|
|
Authorized
5,000 shares; none issued
|
|
–
|
|
|
–
|
|
|
Common
stock, par value $1 per share
|
|
|
|
|
|
|
|
Authorized
80,000 shares; issued and outstanding 35,934 shares in 2009 (excluding
35,086 treasury shares) and 36,295 shares in 2008 (excluding 34,787
treasury shares)
|
|
35,934
|
|
|
36,295
|
|
|
Class B
stock, par value $1 per share, convertible to common stock
|
|
|
|
|
|
|
|
Authorized
15,000 shares; issued and outstanding 9,133 shares in 2009 and 9,181
shares in 2008
|
|
9,133
|
|
|
9,181
|
|
|
Additional
paid-in capital
|
|
53,938
|
|
|
52,693
|
|
|
Retained
earnings
|
|
542,006
|
|
|
701,205
|
|
|
Accumulated
other comprehensive loss
|
|
(31,628
|
)
|
|
(11,519
|
)
|
|
Total
shareholders' equity
|
|
609,383
|
|
|
787,855
|
|
|
Total
liabilities and shareholders' equity
|
$
|
1,669,303
|
|
$
|
2,059,620
|
|
|
See
accompanying Notes to Consolidated Financial Statements
|
|
Meredith
Corporation and Subsidiaries
Consolidated
Statements of Earnings (Loss)
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
(In
thousands except per share data)
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
Advertising
|
$
|
787,207
|
|
$
|
930,598
|
|
$
|
959,073
|
|
|
Circulation
|
|
280,809
|
|
|
300,570
|
|
|
322,609
|
|
|
All
other
|
|
340,781
|
|
|
321,275
|
|
|
298,041
|
|
|
Total
revenues
|
|
1,408,797
|
|
|
1,552,443
|
|
|
1,579,723
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
Production,
distribution, and editorial
|
|
646,595
|
|
|
673,607
|
|
|
647,984
|
|
|
Selling,
general, and administrative
|
|
560,219
|
|
|
590,031
|
|
|
603,098
|
|
|
Depreciation
and amortization
|
|
42,582
|
|
|
49,153
|
|
|
45,015
|
|
|
Impairment
of goodwill and other intangible assets
|
|
294,529
|
|
|
–
|
|
|
–
|
|
|
Total
operating expenses
|
|
1,543,925
|
|
|
1,312,791
|
|
|
1,296,097
|
|
|
Income
(loss) from operations
|
|
(135,128
|
)
|
|
239,652
|
|
|
283,626
|
|
|
Interest
income
|
|
656
|
|
|
1,090
|
|
|
1,586
|
|
|
Interest
expense
|
|
(20,777
|
)
|
|
(22,390
|
)
|
|
(27,182
|
)
|
|
Earnings
(loss) from continuing operations before income taxes
|
|
(155,249
|
)
|
|
218,352
|
|
|
258,030
|
|
|
Income
taxes
|
|
52,742
|
|
|
(85,378
|
)
|
|
(92,020
|
)
|
|
Earnings
(loss) from continuing operations
|
|
(102,507
|
)
|
|
132,974
|
|
|
166,010
|
|
|
Income
(loss) from discontinued operations, net of taxes
|
|
(4,577
|
)
|
|
1,698
|
|
|
(3,664
|
)
|
|
Net
earnings (loss)
|
$
|
(107,084
|
)
|
$
|
134,672
|
|
$
|
162,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings (loss) per share
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) from continuing operations
|
$
|
(2.28
|
)
|
$
|
2.83
|
|
$
|
3.46
|
|
|
Discontinued
operations
|
|
(0.10
|
)
|
|
0.04
|
|
|
(0.08
|
)
|
|
Basic
earnings (loss) per share
|
$
|
(2.38
|
)
|
$
|
2.87
|
|
$
|
3.38
|
|
|
Basic
average shares outstanding
|
|
45,042
|
|
|
46,928
|
|
|
48,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings (loss) per share
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) from continuing operations
|
$
|
(2.28
|
)
|
$
|
2.79
|
|
$
|
3.38
|
|
|
Discontinued
operations
|
|
(0.10
|
)
|
|
0.04
|
|
|
(0.07
|
)
|
|
Diluted
earnings (loss) per share
|
$
|
(2.38
|
)
|
$
|
2.83
|
|
$
|
3.31
|
|
|
Diluted
average shares outstanding
|
|
45,042
|
|
|
47,585
|
|
|
49,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
paid per share
|
$
|
0.88
|
|
$
|
0.80
|
|
$
|
0.69
|
|
|
See
accompanying Notes to Consolidated Financial Statements
|
|
Meredith
Corporation and Subsidiaries
Consolidated
Statements of Shareholders’ Equity
|
|
Common
Stock
- $1
par
value
|
Class B
Stock
- $1
par
value
|
Additional
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Income
(Loss)
|
Total
|
|
Balance
at June 30, 2006
|
$ 38,774
|
$ 9,417
|
$ 52,577
|
$ 599,413
|
$
(2,077)
|
$ 698,104
|
|
Net
earnings
|
–
|
–
|
–
|
162,346
|
–
|
162,346
|
|
Other
comprehensive income, net
|
–
|
–
|
–
|
–
|
2,780
|
2,780
|
|
Total
comprehensive income
|
|
|
|
|
|
165,126
|
|
Share-based
incentive plan transactions
|
1,157
|
–
|
44,354
|
–
|
–
|
45,511
|
|
Purchases
of Company stock
|
(1,092)
|
(24)
|
(56,711)
|
(883)
|
–
|
(58,710)
|
|
Share-based
compensation
|
–
|
–
|
11,108
|
–
|
–
|
11,108
|
|
Conversion
of Class B to common stock
|
131
|
(131)
|
–
|
–
|
–
|
–
|
|
Dividends
paid, 69 cents per share
|
|
|
|
|
|
|
|
Common
stock
|
–
|
–
|
–
|
(26,806)
|
–
|
(26,806)
|
|
Class B
stock
|
–
|
–
|
–
|
(6,442)
|
–
|
(6,442)
|
|
Tax
benefit from incentive plans
|
–
|
–
|
3,514
|
–
|
–
|
3,514
|
|
Adoption
of SFAS 158, net of tax
|
–
|
–
|
–
|
–
|
1,796
|
1,796
|
|
Balance
at June 30, 2007
|
38,970
|
9,262
|
54,842
|
727,628
|
2,499
|
833,201
|
|
Net
earnings
|
–
|
–
|
–
|
134,672
|
–
|
134,672
|
|
Other
comprehensive loss, net
|
–
|
–
|
–
|
–
|
(14,018)
|
(14,018)
|
|
Total
comprehensive income
|
|
|
|
|
|
120,654
|
|
Share-based
incentive plan transactions
|
469
|
–
|
13,796
|
–
|
–
|
14,265
|
|
Purchases
of Company stock
|
(3,204)
|
(21)
|
(23,401)
|
(123,751)
|
–
|
(150,377)
|
|
Share-based
compensation
|
–
|
–
|
7,885
|
–
|
–
|
7,885
|
|
Conversion
of Class B to common stock
|
60
|
(60)
|
–
|
–
|
–
|
–
|
|
Dividends
paid, 80 cents per share
|
|
|
|
|
|
|
|
Common
stock
|
–
|
–
|
–
|
(29,963)
|
–
|
(29,963)
|
|
Class B
stock
|
–
|
–
|
–
|
(7,381)
|
–
|
(7,381)
|
|
Tax
benefit from incentive plans
|
–
|
–
|
(429)
|
–
|
–
|
(429)
|
|
Balance
at June 30, 2008
|
36,295
|
9,181
|
52,693
|
701,205
|
(11,519)
|
787,855
|
|
Net
loss
|
–
|
–
|
–
|
(107,084)
|
–
|
(107,084)
|
|
Other
comprehensive loss, net
|
–
|
–
|
–
|
–
|
(20,109)
|
(20,109)
|
|
Total
comprehensive loss
|
|
|
|
|
|
(127,193)
|
|
Share-based
incentive plan transactions
|
472
|
–
|
3,806
|
–
|
–
|
4,278
|
|
Purchases
of Company stock
|
(879)
|
(2)
|
(12,287)
|
(8,633)
|
–
|
(21,801)
|
|
Share-based
compensation
|
–
|
–
|
10,220
|
–
|
–
|
10,220
|
|
Conversion
of Class B to common stock
|
46
|
(46)
|
–
|
–
|
–
|
–
|
|
Dividends
paid, 88 cents per share
|
|
|
|
|
|
|
|
Common
stock
|
–
|
–
|
–
|
(31,675)
|
–
|
(31,675)
|
|
Class B
stock
|
–
|
–
|
–
|
(8,055)
|
–
|
(8,055)
|
|
Tax
benefit from incentive plans
|
–
|
–
|
(494)
|
–
|
–
|
(494)
|
|
Adoption
of EITF 06-10, net of tax
|
–
|
–
|
–
|
(2,637)
|
–
|
(2,637)
|
|
Adoption
of SFAS 158, net of tax
|
–
|
–
|
–
|
(1,115)
|
–
|
(1,115)
|
|
Balance
at June 30, 2009
|
$ 35,934
|
$ 9,133
|
$ 53,938
|
$ 542,006
|
$ (31,628)
|
$ 609,383
|
|
See
accompanying Notes to Consolidated Financial
Statements
|
Meredith
Corporation and Subsidiaries
Consolidated
Statements of Cash Flows
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
Net
earnings (loss)
|
$
|
(107,084
|
)
|
$
|
134,672
|
|
$
|
162,346
|
|
|
Adjustments
to reconcile net earnings (loss) to net cash provided
by
operating activities
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
32,941
|
|
|
35,370
|
|
|
31,840
|
|
|
Amortization
|
|
9,648
|
|
|
14,192
|
|
|
13,948
|
|
|
Share-based
compensation
|
|
10,220
|
|
|
7,885
|
|
|
11,108
|
|
|
Deferred
income taxes
|
|
(53,333
|
)
|
|
20,527
|
|
|
24,638
|
|
|
Amortization
of broadcast rights
|
|
25,121
|
|
|
26,511
|
|
|
27,990
|
|
|
Payments
for broadcast rights
|
|
(25,275
|
)
|
|
(26,672
|
)
|
|
(28,516
|
)
|
|
Net
gain from dispositions of assets, net of taxes
|
|
(1,205
|
)
|
|
(2,340
|
)
|
|
(2,403
|
)
|
|
Provision
for write-down of impaired assets
|
|
300,131
|
|
|
9,666
|
|
|
10,829
|
|
|
Excess
tax benefits from share-based payments
|
|
(906
|
)
|
|
(1,475
|
)
|
|
(3,514
|
)
|
|
Changes
in assets and liabilities, net of
acquisitions/dispositions
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
38,778
|
|
|
38,128
|
|
|
(19,911
|
)
|
|
Inventories
|
|
15,305
|
|
|
3,185
|
|
|
1,846
|
|
|
Other
current assets
|
|
(5,851
|
)
|
|
(36
|
)
|
|
2,977
|
|
|
Subscription
acquisition costs
|
|
(7,537
|
)
|
|
15,965
|
|
|
12,064
|
|
|
Other
assets
|
|
(2,742
|
)
|
|
(87
|
)
|
|
(20,124
|
)
|
|
Accounts
payable
|
|
(4,408
|
)
|
|
(2,836
|
)
|
|
(6,555
|
)
|
|
Accrued
expenses and other liabilities
|
|
(31,287
|
)
|
|
(11,261
|
)
|
|
5,611
|
|
|
Unearned
subscription revenues
|
|
(14,009
|
)
|
|
(26,185
|
)
|
|
(10,756
|
)
|
|
Other
noncurrent liabilities
|
|
2,413
|
|
|
20,755
|
|
|
(2,896
|
)
|
|
Net
cash provided by operating activities
|
|
180,920
|
|
|
255,964
|
|
|
210,522
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
Acquisitions
of businesses
|
|
(6,218
|
)
|
|
(73,645
|
)
|
|
(30,303
|
)
|
|
Additions
to property, plant, and equipment
|
|
(23,475
|
)
|
|
(29,620
|
)
|
|
(42,599
|
)
|
|
Proceeds
from dispositions of assets
|
|
636
|
|
|
7,855
|
|
|
7,658
|
|
|
Net
cash used in investing activities
|
|
(29,057
|
)
|
|
(95,410
|
)
|
|
(65,244
|
)
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of long-term debt
|
|
145,000
|
|
|
335,000
|
|
|
190,000
|
|
|
Repayments
of long-term debt
|
|
(250,000
|
)
|
|
(325,000
|
)
|
|
(280,000
|
)
|
|
Purchases
of Company stock
|
|
(21,801
|
)
|
|
(150,377
|
)
|
|
(58,710
|
)
|
|
Proceeds
from common stock issued
|
|
4,278
|
|
|
14,265
|
|
|
41,673
|
|
|
Dividends
paid
|
|
(39,730
|
)
|
|
(37,344
|
)
|
|
(33,248
|
)
|
|
Excess
tax benefits from share-based payments
|
|
906
|
|
|
1,475
|
|
|
3,514
|
|
|
Other
|
|
(250
|
)
|
|
(149
|
)
|
|
–
|
|
|
Net
cash used in financing activities
|
|
(161,597
|
)
|
|
(162,130
|
)
|
|
(136,771
|
)
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
(9,734
|
)
|
|
(1,576
|
)
|
|
8,507
|
|
|
Cash
and cash equivalents at beginning of year
|
|
37,644
|
|
|
39,220
|
|
|
30,713
|
|
|
Cash
and cash equivalents at end of year
|
$
|
27,910
|
|
$
|
37,644
|
|
$
|
39,220
|
|
|
See
accompanying Notes to Consolidated Financial Statements
|
|
Meredith
Corporation and Subsidiaries
Consolidated
Statements of Cash Flows
(continued)
|
Years
ended June 30,
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information
|
|
|
|
|
|
|
|
|
|
|
Cash
paid
|
|
|
|
|
|
|
|
|
|
|
Interest
|
$
|
20,350
|
|
$
|
22,407
|
|
$
|
28,202
|
|
|
Income
taxes
|
|
13,097
|
|
|
56,463
|
|
|
61,579
|
|
|
Non-cash
transactions
|
|
|
|
|
|
|
|
|
|
|
Broadcast
rights financed by contracts payable
|
|
19,359
|
|
|
24,500
|
|
|
22,670
|
|
|
Fair
value of equipment received in Nextel exchange
|
|
2,621
|
|
|
1,875
|
|
|
–
|
|
|
See
accompanying Notes to Consolidated Financial Statements
|
|
(This
page has been left blank intentionally.)
Meredith
Corporation and Subsidiaries
1. Summary
of Significant Accounting Policies
Nature of Operations
—Meredith
Corporation (Meredith or the Company) is a diversified media company focused
primarily on the home and family marketplace. The Company's principal businesses
are publishing and television broadcasting. The publishing segment includes
magazine and book publishing, integrated marketing, interactive media, brand
licensing, database-related activities, and other related operations. The
Company's broadcasting operations include 12 network-affiliated television
stations, one AM radio station, related interactive media operations, and video
related operations. Meredith's operations are diversified geographically within
the United States (U.S.) and the Company has a broad customer base.
Principles of
Consolidation
—The consolidated financial statements include the accounts
of Meredith Corporation and its wholly owned subsidiaries. Significant
intercompany balances and transactions are eliminated. Meredith does not have
any off-balance sheet financing activities. The Company's use of special-purpose
entities is limited to Meredith Funding Corporation, whose activities are fully
consolidated in Meredith's consolidated financial statements (See
Note 5).
Use of Estimates
—The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America (GAAP) requires management to
make estimates and assumptions that affect the amounts reported in the
consolidated financial statements. The Company bases its estimates on historical
experience, management expectations for future performance, and other
assumptions as appropriate. Key areas affected by estimates include the
assessment of the recoverability of long-lived assets, including goodwill and
other intangible assets, which is based on such factors as estimated future cash
flows; the determination of the net realizable value of broadcast rights, which
is based on estimated future revenues; provisions for returns of magazines and
books sold, which are based on historical experience and current marketplace
conditions; pension and postretirement benefit expenses, which are actuarially
determined and include assumptions regarding discount rates, expected returns on
plan assets, and rates of increase in compensation and healthcare costs; and
share-based compensation expense, which is based on numerous assumptions
including future stock price volatility and employees' expected exercise and
post-vesting employment termination behavior. While the Company re-evaluates its
estimates on an ongoing basis, actual results may vary from those
estimates.
Discontinued Operations
—The
consolidated financial statements separately report discontinued operations and
the results of continuing operations (See Note 2). Prior period amounts
have been reclassified to conform to the fiscal 2009 presentation. Disclosures
included herein pertain to the Company's continuing operations unless noted
otherwise.
Cash and Cash Equivalents
—Cash
and short-term investments with original maturities of three months or less are
considered to be cash and cash equivalents. Cash and cash equivalents are stated
at cost, which approximates fair value.
Accounts Receivable
—The
Company's accounts receivable are primarily due from advertisers. Credit is
extended to clients based on an evaluation of each client's creditworthiness and
financial condition; collateral is not required. The Company maintains
allowances for uncollectible accounts, rebates, rate adjustments, returns, and
discounts. The allowance for uncollectible accounts is based on the aging of
such receivables and any known specific collectibility exposures. Accounts are
written off when deemed uncollectible. Allowances for rebates, rate adjustments,
returns, and discounts are generally based on historical experience and current
market conditions. Concentration of credit risk with respect to accounts
receivable is generally limited due to the large number of geographically
diverse clients and individually small balances.
Inventories
—Inventories are
stated at the lower of cost or market. Cost is determined on the last-in
first-out (LIFO) basis for paper and on the first-in first-out or average basis
for all other inventories.
Subscription Acquisition
Costs
—Subscription acquisition costs primarily represent magazine agency
commissions. These costs are deferred and amortized over the related
subscription term, typically one to two years. In addition, direct-response
advertising costs that are intended to solicit subscriptions and are expected to
result in probable future benefits are capitalized in accordance with the
American Institute of Certified Public Accountants Statement of Position 93-7,
Reporting on Advertising
Costs
. These costs are amortized over the period during which future
benefits are expected to be received. The asset balance of the capitalized
direct-response advertising costs is reviewed quarterly to ensure the amount is
realizable. Any write-downs resulting from this review are expensed as
subscription acquisition advertising costs in the current period. Capitalized
direct-response advertising costs were $7.8 million at June 30, 2009, and
$7.7 million at June 30, 2008. There were no material write-downs of
capitalized direct-response advertising costs in each of the fiscal years in the
three-year period ended June 30, 2009.
Property, Plant, and
Equipment
—Property, plant, and equipment are stated at cost. Costs of
replacements and major improvements are capitalized, and maintenance and repairs
are charged to operations as incurred. Depreciation expense is provided
primarily by the straight-line method over the estimated useful lives of the
assets: 5–45 years for buildings and improvements and 3–20 years for
machinery and equipment. The costs of leasehold improvements are amortized over
the lesser of the useful lives or the terms of the respective leases.
Depreciation and amortization of property, plant, and equipment was $32.9
million in fiscal 2009, $35.0 million in fiscal 2008, and $31.1 million in
fiscal 2007.
In 2006,
Sprint Nextel Corporation (Nextel) was granted the right from the Federal
Communications Commission (FCC) to claim from broadcasters a portion of the
broadcast spectrum. In order to claim this signal, Nextel must replace all
analog equipment currently using this spectrum with digital equipment. The
transition is being completed on a market-by-market basis. The Company recorded
a $2.5 million gain in fiscal 2009 and a $1.8 million gain in fiscal 2008 in the
selling, general, and administrative line on the Consolidated Statements of
Earnings (Loss) that represents the difference between the fair value of the
digital equipment we received and the book value of the analog equipment we
exchanged.
Broadcast Rights
—Broadcast
rights consist principally of rights to broadcast syndicated programs, sports,
and feature films. The total cost of these rights is recorded as an asset and
liability when programs become available for broadcast. The current portion of
broadcast rights represents those rights available for broadcast that are
expected to be amortized in the succeeding year. These rights are valued at the
lower of unamortized cost or estimated net realizable value and are generally
charged to operations on an accelerated basis over the contract period.
Impairments in unamortized costs to net realizable value are included in
production, distribution, and editorial expenses in the accompanying
Consolidated Statements of Earnings (Loss). There were no impairments to
unamortized costs in fiscal 2009 or fiscal 2008. Impairments in unamortized
costs were $0.1 million in fiscal 2007. Future write-offs can vary based on
changes in consumer viewing trends and the availability and costs of other
programming.
Intangible Assets and
Goodwill
—Goodwill and intangible assets are accounted for in accordance
with Statement of Financial Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets
(SFAS 142). Other intangible assets acquired consist primarily of
FCC broadcast licenses, trademarks, network affiliation agreements, advertiser
relationships, and customer lists.
Goodwill
and certain other intangible assets (FCC broadcast licenses and trademarks),
which have indefinite lives, are not amortized but tested for impairment
annually or more often if circumstances indicate a possible impairment exists.
We also assess, at least annually, whether assets classified as indefinite-lived
intangible assets continue to have indefinite lives. The impairment tests are
based on a fair-value approach as described in SFAS 142. The estimated fair
values of these assets are determined by developing discounted future cash flow
analyses.
Intangible
assets with indefinite lives include FCC broadcast licenses. These licenses are
granted for a term of up to eight years, but are renewable if the Company
provides at least an average level of service to its customers and complies with
the applicable FCC rules and policies and the Communications Act of 1934. The
Company has been successful in every one of its past license renewal requests
and has incurred only minimal costs in the process. The Company expects the
television broadcasting business to continue indefinitely; therefore, the cash
flows from the broadcast licenses are also expected to continue
indefinitely.
Amortizable
intangible assets consist primarily of network affiliation agreements,
advertiser relationships, and customer lists. Intangible assets with finite
lives are amortized over their estimated useful lives. The useful life of an
intangible asset is the period over which the asset is expected to contribute
directly or indirectly to future cash flows. Network affiliation agreements are
amortized over the period of time the agreements are expected to remain in
place, assuming renewals without material modifications to the original terms
and conditions (generally, 25 to 40 years from the original acquisition date).
Other intangible assets are amortized over their estimated useful lives, ranging
from three to seven years.
Additional
information regarding intangible assets and goodwill including a discussion of
an impairment charge taken in fiscal 2009 on broadcasting FCC licenses and
goodwill is provided in Note 4.
Impairment of Long-lived
Assets
—In accordance with SFAS No. 144,
Accounting for the Impairment or
Disposal of Long-Lived Assets
(SFAS 144), long-lived assets
(primarily property, plant, and equipment and amortizable intangible assets) are
reviewed for impairment whenever events and circumstances indicate the carrying
value of an asset may not be recoverable. Recoverability is measured by
comparison of the forecasted undiscounted cash flows of the operation to which
the assets relate to the carrying amount of the assets. The Company recorded
impairment of $0.6 million in fiscal 2008 and $1.0 million in fiscal 2007 on the
Hartford, Connecticut station building that was vacated in fiscal 2007. The
fiscal 2008 and 2007 impairments are recorded in the selling, general, and
administrative line in the Consolidated Statements of Earnings (Loss). Tests for
impairment or recoverability require significant management judgment, and future
events affecting cash flows and market conditions could result in impairment
losses.
Derivative Financial
Instruments
—Meredith generally does not engage in derivative or hedging
activities, except to hedge interest rate risk on debt as described in
Note 5. Fundamental to our approach to risk management is the desire to
minimize exposure to volatility in interest costs of variable rate debt, which
can impact our earnings and cash flows. In fiscal 2007, we entered into interest
rate swap agreements with counterparties that are major financial institutions.
These agreements effectively fix the variable rate cash flow on $100 million of
our revolving credit facility. We designated and accounted for the interest rate
swaps as cash flow hedges in accordance with SFAS No. 133 as amended,
Accounting for Derivative
Instruments and Hedging Activities
. The effective portion of the change
in the fair value of interest rate swaps is reported in other comprehensive
income (loss). The gain or loss included in other comprehensive income (loss) is
subsequently reclassified into net earnings on the same line in the Consolidated
Statements of Earnings (Loss) as the hedged item in the same period that the
hedge transaction affects net earnings. The ineffective portion of a change in
fair value of the interest rate swaps would be reported in interest expense.
During the three fiscal years ended June 30, 2009, the interest rate swap
agreements were considered effective hedges and there were no gains or losses
recognized in earnings for hedge ineffectiveness.
Revenue Recognition
—The
Company's primary source of revenue is advertising. Other sources include
circulation and other revenues.
Advertising
revenues
—Advertising revenues are recognized when advertisements are
published (defined as an issue's on-sale date) or aired by the broadcasting
station, net of agency commissions and net of provisions for estimated rebates,
rate adjustments, and discounts. Barter revenues are included in advertising
revenue and are also recognized when the commercials are broadcast. Barter
advertising revenues and the offsetting expense are recognized at the fair value
of the advertising surrendered as determined by similar cash transactions.
Barter advertising revenues were not material in any period. Website advertising
revenues are recognized ratably over the contract period or as services are
delivered.
Circulation
revenues
—Circulation revenues include magazine single copy and
subscription revenue. Single copy revenue is recognized upon publication, net of
provisions for estimated returns. The Company bases its estimates for returns on
historical experience and current marketplace conditions. Revenues from magazine
subscriptions are deferred and recognized proportionately as products are
distributed to subscribers.
Other revenues
—Revenues from
book sales are recognized net of provisions for anticipated returns when orders
are shipped to the customer. As is the case with circulation revenues, the
Company bases its estimates for returns on historical experience and current
marketplace conditions. Revenues from integrated marketing and other custom
programs are recognized when the products or services are
delivered.
In
certain instances, revenues are recorded gross in accordance with GAAP although
the Company receives cash for a lesser amount due to the netting of certain
expenses. Amounts received from customers in advance of revenue recognition are
deferred as liabilities and recognized as revenue in the period
earned.
Advertising Expenses
—The
majority of the Company's advertising expenses relate to direct-mail costs for
magazine subscription acquisition efforts. Advertising costs that are not
capitalized are expensed the first time the advertising takes place. Total
advertising expenses included in the Consolidated Statements of Earnings (Loss)
were $90.7 million in fiscal 2009, $98.1 million in fiscal 2008, and $109.0
million in fiscal 2007.
Share-Based
Compensation
—Share-based compensation is accounted for in accordance with
SFAS No. 123 (revised 2004),
Share-Based Payment
(SFAS 123R). The Company establishes fair value for its equity awards to
determine their cost and recognizes the related expense over the appropriate
vesting period. The Company recognizes expense for stock options, restricted
stock, restricted stock units, and shares issued under the Company's employee
stock purchase plan. See Note 10 for additional information related to
share-based compensation expense.
Income Taxes
—Income taxes are
accounted for in accordance with SFAS No. 109,
Accounting for Income Taxes
and related interpretations using the asset and liability method. Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
earnings in the period when such a change is enacted.
Beginning
with the adoption of Financial Accounting Standards Board (FASB) Interpretation
No. 48,
Accounting for
Uncertainty in Income Taxes
(FIN 48) as of July 1, 2007, the
Company recognizes the effect of income tax positions only if those positions
are more likely than not of being sustained. Recognized income tax positions are
measured at the largest amount that is greater than 50 percent likely of being
realized. Changes in recognition or measurement are reflected in the period in
which the change in judgment occurs. Prior to the adoption of FIN 48, the
Company recognized the effect of income tax positions only if such positions
were probable of being sustained. The Company records interest and penalties
related to unrecognized tax benefits in income tax expense.
Self-Insurance
—The Company
self-insures for certain medical claims, and its responsibility generally is
capped through the use of a stop loss contract with an insurance company at a
certain dollar level (usually $250 thousand). A third-party administrator is
used to process claims. The Company uses actual claims data and estimates of
incurred but not reported claims to calculate estimated liabilities for
unsettled claims on an undiscounted basis. Although management re-evaluates the
assumptions and reviews the claims experience on an ongoing basis, actual claims
paid could vary significantly from estimated claims.
Pensions and Postretirement Benefits
Other Than Pensions
—Retirement benefits are provided to employees through
pension plans sponsored by the Company. Pension benefits are primarily a
function of both the years of service and the level of compensation for a
specified number of years. It is the Company's policy to fund the qualified
pension plans to at least the extent required to maintain their fully funded
status. In addition, the Company provides health care and life insurance
benefits for certain retired employees, the expected costs of which are accrued
over the years that the employees render services. It is the Company's policy to
fund postretirement benefits as claims are paid. Additional information,
including the Company's adoption of SFAS No. 158,
Employers' Accounting for Defined
Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements
No. 87, 88, 106 and 132(R)
(SFAS 158), in fiscal 2007 is
provided in Note 7.
Comprehensive Income
(Loss)
—Comprehensive income (loss) consists of net earnings (loss) and
other gains and losses affecting shareholders' equity that, under GAAP, are
excluded from net earnings (loss). Other comprehensive income (loss) includes
changes in prior service cost and net actuarial losses from pension and
postretirement benefit plans, net of taxes, and changes in the fair value of
interest rate swap agreements, net of taxes, to the extent they are effective.
The Company's other comprehensive income (loss) is summarized in
Note 12.
Earnings (Loss) Per Share
—The
Company calculates earnings (loss) per share in accordance with SFAS
No. 128,
Earnings Per
Share
. Basic earnings (loss) per share is calculated by dividing net
earnings (loss) by the weighted average common and Class B shares
outstanding. Diluted earnings (loss) per share is calculated similarly but
includes the dilutive effect, if any, of the assumed exercise of securities,
including the effect of shares issuable under the Company's share-based
incentive plans. Loss amounts per share consider only basic shares outstanding
due to the antidilutive effect of adding shares.
Adopted Accounting
Pronouncements
—On June 30, 2009, the Company adopted SFAS
No. 165,
Subsequent
Events
(SFAS 165). SFAS 165 establishes general standards of
accounting for and disclosure of events that occur after the balance sheet date
but before financial statements are issued or are available to be issued.
Specifically, SFAS 165 sets forth the period after the balance sheet date
during which management of a reporting entity should evaluate events or
transactions that may occur for potential recognition or disclosure in the
financial statements, the circumstances under which an entity should recognize
events or transactions occurring after the balance sheet date in its financial
statements, and the disclosures that an entity should make about events or
transactions that occurred after the balance sheet date. SFAS 165 provides
largely the same guidance on subsequent events which previously existed only in
auditing literature. The adoption of SFAS 165 had no impact on the
consolidated financial statements as management already followed a similar
approach prior to the adoption of this standard.
The Company has evaluated
subsequent events through August 24, 2009.
In March 2008, the FASB
issued SFAS No. 161,
Disclosures
about Derivative Instruments and Hedging Activities – an Amendment of FASB
Statement 133
(SFAS 161). SFAS 161 enhances required disclosures regarding
derivatives and hedging activities, including enhanced disclosures regarding
how: (a) an entity uses derivative instruments; (b) derivative instruments and
related hedged items
are accounted for under SFAS No. 133,
Accounting for Derivative
Instruments and Hedging Activities
; and (c) derivative instruments and
related hedged items affect an entity’s financial position, financial
performance, and cash flows. We adopted the provisions of this statement
effective March 31, 2009. As a result of the adoption of this statement, we
have expanded our disclosures regarding derivative instruments and hedging
activities within Note 5 to the consolidated financial
statements.
In
September 2006, the FASB issued SFAS 158, which requires employers that
sponsor defined benefit postretirement plans to recognize the overfunded or
underfunded status of defined benefit postretirement plans, including pension
plans, in their balance sheets and to recognize changes in funded status through
comprehensive income in the year in which the changes occur. Meredith adopted
the recognition and disclosure provisions of SFAS 158 on June 30,
2007.
The
adoption of SFAS 158 resulted in a $1.8 million increase in the Company's
shareholders' equity at June 30, 2007, through accumulated other
comprehensive income. SFAS 158 also requires that employers measure plan
assets and obligations as of the date of their year-end financial statements.
The Company adopted the change in measurement date transition requirements of
SFAS 158 effective July 1, 2008. Previously the Company used a
March 31 measurement date for its defined pension and other postretirement
plans. We adopted the change in measurement date by re-measuring plan assets and
benefit obligations as of our fiscal 2008 year end, pursuant to the transition
requirements of SFAS 158. As a result of the change in measurement date, a
$1.8 million pre-tax reduction to retained earnings was recognized in the fourth
quarter of
fiscal
2009 that represents the expense for the period from the March 31, 2008,
early measurement date to the end of the 2008 fiscal year.
In
September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements
(SFAS 157), which establishes a common definition for fair value in
accordance with GAAP, and establishes a framework for measuring fair value and
expands disclosure requirements about such fair value measurements. In February
2008, the FASB issued FASB Staff Position (FSP) FAS 157-2,
Effective Date of FASB Statement
No. 157
(FSP 157-2). FSP 157-2 delayed the effective date
of SFAS 157 for the Company for nonfinancial assets and liabilities, except
for items that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually), until July 1,
2009.
The
Company adopted the provisions of SFAS 157 for financial assets and
liabilities as of July 1, 2008. The adoption of these provisions did not
have any impact on the Company's consolidated financial statements, because the
Company's existing fair value measurements are consistent with the guidance of
SFAS 157. See Note 13 for information regarding the Company’s fair
value measurements. We are currently evaluating the impact of the provisions of
SFAS 157 that relate to our nonfinancial assets and
liabilities.
In
February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial
Assets and Financial Liabilities-Including an Amendment of FASB Statement
No. 115
(SFAS 159). SFAS 159 was effective for the Company
at the beginning of fiscal 2009. This statement permitted a choice to measure
many financial instruments and certain other items at fair value. Upon the
Company's adoption of SFAS 159 on July 1, 2008, we did not elect the
fair value option for any financial instrument that was not already reported at
fair value.
Emerging
Issues Task Force (EITF) Issue No. 06-10,
Accounting for
Deferred Compensation and
Postretirement Benefit Aspects of Collateral Assignment Split-Dollar Life
Insurance Arrangements
(EITF 06-10), requires that a company
recognize a liability for the postretirement benefits associated with collateral
assignment split-dollar life insurance arrangements. The provisions of
EITF 06-10 are applicable in instances where the Company has contractually
agreed to maintain a life insurance policy (i.e., the Company pays the premiums)
for an employee in periods in which the employee is no longer providing
services. We adopted EITF 06-10 on July 1, 2008, at which time we
recorded a liability and a cumulative effect adjustment to the opening balance
of retained earnings for $2.9 million ($2.6 million, net of tax). Future
compensation charges and adjustments to the liability will be charged to
earnings in the period incurred.
Effective
July 1, 2007, the Company adopted FIN 48, which clarifies the
accounting for uncertainty in tax positions. The interpretation requires that we
recognize in our consolidated financial statements the benefit of a tax position
if, based on technical merits, the position is more likely than not of being
sustained upon audit. Tax benefits are derecognized if information becomes
available indicating it is more likely than not that the position will not be
sustained. The provisions of FIN 48 also provide guidance on classification
of income tax liabilities, accounting for interest and penalties associated with
unrecognized tax benefits, accounting for uncertain tax positions in interim
periods, and income tax disclosures. The adoption of FIN 48 on July 1,
2007, required the Company to make certain reclassifications in its consolidated
balance sheet. In the aggregate, these reclassifications increased the Company's
liability for unrecognized tax benefits by $36.0 million and decreased its net
deferred tax liabilities by $36.0 million. The adoption of FIN 48 had no
impact on the Company's consolidated retained earnings as of July 1, 2007,
or on its consolidated results of operations or cash flows for the fiscal year
ended June 30, 2008. See Note 6 for additional
information.
Pending Accounting
Pronouncements
—In December 2007, the FASB issued SFAS No. 141
(revised 2007),
Business
Combinations
(SFAS 141R). SFAS 141R significantly changes the
accounting for business combinations in a number of areas including the
treatment of contingent consideration, preacquisition contingencies, transaction
costs, in-process research and development, and restructuring costs. In
addition, under SFAS 141R, changes in an acquired entity's deferred tax
assets and uncertain tax positions after the measurement period will impact
income tax expense. SFAS 141R is effective for fiscal years beginning after
December 15, 2008. The Company will adopt SFAS 141R on July 1,
2009. This standard will change our accounting treatment for business
combinations on a prospective basis and is expected to have a significant impact
on our accounting for future business combinations.
In April
2008, the FASB issued FSP 142-3,
Determination of the Useful Lives of
Intangible Assets
, which amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
an intangible asset. This interpretation is effective for financial statements
issued for fiscal years beginning after December 15, 2008. The Company will
adopt this interpretation as of July 1, 2009, and is still evaluating the
potential impact of adoption.
In June
2009, the FASB issued SFAS No. 168,
The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles — A
Replacement of FASB Statement No. 162
(SFAS 168). The FASB
Accounting Standards Codification (Codification) will become the source of
authoritative GAAP recognized by the FASB to be applied by nongovernmental
entities. Rules and interpretive releases of the SEC under authority of federal
securities laws are also sources of authoritative GAAP for SEC registrants.
While not intended to change GAAP, the Codification significantly changes the
way in which the accounting literature is organized. It is structured by
accounting topic to help accountants and auditors more quickly identify the
guidance that applies to a specific accounting issue. The Company will apply the
Codification to the first quarter fiscal 2010 interim financial statements. The
adoption of the Codification will not have an effect on the Company’s financial
position and results of operations. However, because the Codification completely
replaces existing standards, it will affect the way GAAP is referenced by the
Company in its consolidated financial statements and accounting
policies.
In June
2008, the FASB issued FSP EITF No. 03-6-1,
Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities
(FSP EITF 03-6-1). Under the FSP, unvested share-based payment awards that
contain rights to receive nonforfeitable dividends (whether paid or unpaid) are
participating securities, and should be included in the two- class method of
computing EPS. The Company will adopt the FSP effective July 1, 2009. The
adoption of FSP EITF 03-6-1 is not expected to have a material impact on
the consolidated financial statements.
In April
2009, the FASB issued the FASB Staff Position on FAS 107-1 and
APB 28-1,
Interim
Disclosures About Fair Value of Financial Instruments
(FSP FAS 107-1
and APB 28-1). FSP FAS 107-1 and APB 28-1 require disclosures
about fair value of financial instruments in interim reporting periods of
publicly-traded companies that were previously only required to be disclosed in
annual financial statements. FSP FAS 107-1 and APB 28-1 are effective
for interim periods ending after June 15, 2009. The Company will adopt
these statements in the first quarter of fiscal 2010 and does not anticipate
that their adoption will have a material impact on its consolidated financial
statements.
2. Acquisitions
and Investments, Restructurings, Dispositions, and Discontinued
Operations
Acquisitions
and Investments
In fiscal
2009, the Company paid $6.2 million primarily for a minority investment in Real
Girls Media Network, contingent purchase price payments related to prior years’
acquisitions, and the purchase of Internet domain names. In fiscal 2008, the
Company paid $73.6 million for the acquisitions of Directive Corporation and Big
Communications and for contingent purchase price payments related to fiscal 2006
and 2007 acquisitions. In fiscal 2007, the Company paid $30.3 million for the
acquisitions of ReadyMade, Genex, New Media Strategies, and Healia and a
contingent purchase price payment related to a prior year acquisition. All of
these acquisitions are immaterial to the Company individually and in the
aggregate.
The
excess of the purchase price over the fair value of the net assets acquired was
preliminarily allocated to goodwill and other intangible assets. Definite-lived
intangible assets recorded for all current transactions are amortized using the
straight-line method for periods not exceeding 20 years. Liabilities assumed in
conjunction with the acquisition of and investments in businesses are as
follows:
|
Years
ended June 30,
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
Fair
value of assets acquired
|
$
|
6,218
|
|
$
|
79,941
|
|
$
|
39,091
|
|
|
Cash
paid (net of cash acquired)
|
|
(6,218
|
)
|
|
(73,645
|
)
|
|
(30,303
|
)
|
|
Liabilities
assumed
|
$
|
–
|
|
$
|
6,296
|
|
$
|
8,788
|
|
For
certain acquisitions consummated during the last three fiscal years, the sellers
are entitled to contingent payments should the acquired operations achieve
certain financial targets generally based on earnings before interest and taxes,
as defined in the respective acquisition agreements. None of the contingent
consideration is dependent on the continued employment of the sellers. As of
June 30, 2009, the Company estimates that aggregate actual contingent
payments will range from approximately $50.5 million to $82.6 million; the most
likely estimate being approximately $67.7 million. The maximum amount of
contingent payments the sellers may receive over the next three years is $252.9
million. The additional purchase consideration, if any, will be recorded as
additional goodwill on our Consolidated Balance Sheet when the contingencies are
resolved. For the years ended June 30, 2009 and 2008, the Company
recognized additional consideration of $13.8 million and $46.5 million,
respectively, which increased goodwill.
Restructuring
In
December 2008, in response to a weakening economy and a widespread advertising
downturn, management committed to additional actions against our previously
announced performance improvement plan that included a companywide workforce
reduction, the closing of
Country Home
magazine, and
relocation of certain creative functions. In connection with this plan, the
Company recorded a restructuring charge of $15.8 million, including severance
costs of $10.0 million, the write-down of various assets of
Country Home
magazine of $5.6
million, and other accruals of $0.2 million. The majority of the asset
write-down charge relates to the write-off of deferred subscription acquisition
costs. Severance costs relate to the involuntary termination of employees. The
Country Home charges are recorded in discontinued operations as discussed below.
The remaining charges are recorded in the selling, general, and administrative
line in the Consolidated Statements of Earnings (Loss). The plan affected
approximately 275 employees. The remaining severance and benefit costs are
expected to be paid over the next six months.
In June
2009,
management
committed to additional steps against its performance improvement plan that
included plans to centralize certain functions across Meredith’s television
stations and limited workforce reductions in the publishing segment. In
connection with these steps, the Company recorded a pre-tax restructuring charge
in the fourth quarter of fiscal 2009 of $5.5 million including severance and
benefit costs of $5.1 million, and the write-down of certain fixed assets at the
television stations of $0.4 million. These charges are recorded in the selling,
general, and administrative line in the Consolidated Statements of Earnings
(Loss). The plan affected approximately 100 employees. The majority of the
severance and benefit costs are expected to be paid over the next 12
months.
The Company undertook
restructuring plans for Meredith Books in the fourth quarter of both fiscal 2008
and fiscal 2007.
Book restructuring charges recorded in the production,
distribution, and editorial line in the Consolidated Statements of Earnings
(Loss) include the write-down of inventory and prepaid editorial expenses of
$4.5 million in fiscal 2008 and $1.1 million in fiscal 2007. Book restructuring
charges recorded in the selling, general, and administrative line in the
Consolidated Statements of Earnings (Loss) include the write-down of book
prepaid royalty expenses and severance and benefit costs of $7.6 million in
fiscal 2008 and $2.3 million in fiscal 2007. The Company also recorded $4.0
million in severance and benefit costs in fiscal 2008 for other Company
personnel. The restructuring affected approximately 95 employees in fiscal 2008
and 15 employees in fiscal 2007. The majority of the related severance and
benefit costs have been paid.
Details
of changes in the Company's restructuring accrual since June 30, 2008, are
as follows:
|
Twelve
Months Ended June 30,
|
|
2009
|
|
|
(In
thousands)
|
|
|
|
|
Balance
at June 30, 2008
|
$
|
1,876
|
|
|
Severance
accrual
|
|
15,063
|
|
|
Other
accruals
|
|
182
|
|
|
Cash
payments
|
|
(7,227
|
)
|
|
Balance
at June 30, 2009
|
$
|
9,894
|
|
Dispositions
and Discontinued Operations
In
December 2008, the Company announced the closing of
Country Home
magazine,
effective with the March 2009 issue. Of the $15.8 million in restructuring
charges recorded in the second quarter of fiscal 2008 as discussed above, $6.8
million related to
Country
Home
magazine. These fiscal 2009 charges are reflected in the special
items line in the following table of discontinued operations.
In April
2008, the Company completed its sale of WFLI, the CW affiliate serving the
Chattanooga, Tennessee market. This sale resulted in a loss of $0.2 million.
Related to this sale, in fiscal 2007, a non-cash impairment charge of $2.8
million was recorded to reduce goodwill and FCC licenses of WFLI to their fair
value less cost to sell based on the planned sale of the station (See
Note 4). This impairment charge is recorded in the special items line in
the following table of discontinued operations.
Meredith
completed the sale of KFXO, the low-power FOX affiliate serving the Bend,
Oregon, market in May 2007. This sale resulted in a gain of $4.8
million.
In March
2007, management committed to a restructuring plan that included the
discontinuation of the print operations of
Child
magazine. In connection
with this plan, the Company recorded a restructuring charge of $12.1 million
including the write-down of various assets of
Child
magazine of $5.4
million, personnel costs of $3.5 million, vacated lease space accrual of $3.0
million, and other accruals of $0.2 million. Most of the asset write-down charge
related to the write-off of deferred subscription acquisition costs. Personnel
costs represented expenses for severance and outplacement charges related to the
involuntary termination of employees. The restructuring affected approximately
60 employees. The majority of personnel costs were paid out over the next 12
months. In fiscal 2008, the Company reversed a portion of the Child
restructuring charge as a result of changes in the estimated net costs for
vacated lease space and employee severance. These charges in fiscal 2007 and the
related reversal in fiscal 2008 are reflected in the special items line in the
following table of discontinued operations.
The
results of the
Country
Home
magazine, the print operations of
Child
magazine and the two
television stations, KFXO and WFLI, have been segregated from continuing
operations and reported as discontinued operations for all periods presented.
Amounts applicable to discontinued operations that have been reclassified in the
Consolidated Statements of Earnings (Loss) are as follows:
|
Years
ended June 30,
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
(In
thousands except per share data)
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
16,828
|
|
$
|
35,336
|
|
$
|
66,122
|
|
|
Costs
and expenses
|
|
(17,569
|
)
|
|
(34,039
|
)
|
|
(62,055
|
)
|
|
Special
items
|
|
(6,761
|
)
|
|
1,836
|
|
|
(14,880
|
)
|
|
Gain
(loss) on disposal
|
|
–
|
|
|
(351
|
)
|
|
4,754
|
|
|
Earnings
(loss) before income taxes
|
|
(7,502
|
)
|
|
2,782
|
|
|
(6,059
|
)
|
|
Income
taxes
|
|
2,925
|
|
|
(1,084
|
)
|
|
2,395
|
|
|
Income
(loss) from discontinued operations
|
$
|
(4,577
|
)
|
$
|
1,698
|
|
$
|
(3,664
|
)
|
|
Income
(loss) per share from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.10
|
)
|
$
|
0.04
|
|
$
|
(0.08
|
)
|
|
Diluted
|
|
(0.10
|
)
|
|
0.04
|
|
|
(0.07
|
)
|
3. Inventories
Inventories
consist of paper stock, books, and editorial content. Of total net inventory
values, 41 percent at June 30, 2009, and 44 percent at June 30, 2008,
were determined using the LIFO method. LIFO inventory expense (income) included
in the Consolidated Statements of Earnings (Loss) was $0.7 million in
fiscal 2009, $2.7 million in fiscal 2008, and $(2.3) million in fiscal
2007.
|
June 30,
|
|
2009
|
|
2008
|
|
|
(In
thousands)
|
|
|
|
|
|
|
Raw
materials
|
$
|
18,322
|
$
|
24,837
|
|
|
Work
in process
|
|
15,554
|
|
19,890
|
|
|
Finished
goods
|
|
2,604
|
|
8,388
|
|
|
|
|
36,480
|
|
53,115
|
|
|
Reserve
for LIFO cost valuation
|
|
(8,329
|
)
|
(9,030
|
)
|
|
Inventories
|
$
|
28,151
|
$
|
44,085
|
|
4. Intangibles
Assets and Goodwill
Intangible
assets consist of the following:
|
June 30,
|
|
2009
|
|
|
2008
|
|
|
(In
thousands)
|
|
Gross
Amount
|
|
Accumulated
Amortization
|
|
Net
Amount
|
|
|
Gross
Amount
|
|
Accumulated
Amortization
|
|
Net
Amount
|
|
|
Intangible
assets
subject
to amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Publishing
segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncompete
agreements
|
$
|
480
|
|
$
|
(224
|
)
|
$
|
256
|
|
$
|
3,134
|
|
$
|
(2,621
|
)
|
$
|
513
|
|
|
Advertiser
relationships
|
|
18,400
|
|
|
(10,515
|
)
|
|
7,885
|
|
|
18,400
|
|
|
(7,886
|
)
|
|
10,514
|
|
|
Customer
lists
|
|
9,230
|
|
|
(2,252
|
)
|
|
6,978
|
|
|
24,530
|
|
|
(16,783
|
)
|
|
7,747
|
|
|
Other
|
|
3,544
|
|
|
(2,177
|
)
|
|
1,367
|
|
|
3,014
|
|
|
(1,555
|
)
|
|
1,459
|
|
|
Broadcasting
segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Network
affiliation
agreements
|
|
218,559
|
|
|
(97,967
|
)
|
|
120,592
|
|
|
218,559
|
|
|
(93,076
|
)
|
|
125,483
|
|
|
Total
|
$
|
250,213
|
|
$
|
(113,135
|
)
|
|
137,078
|
|
$
|
267,637
|
|
$
|
(121,921
|
)
|
|
145,716
|
|
|
Intangible
assets not
subject
to amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Publishing
segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internet
domain names
|
|
|
|
|
|
|
|
996
|
|
|
|
|
|
|
|
|
–
|
|
|
Trademarks
|
|
|
|
|
|
|
|
124,431
|
|
|
|
|
|
|
|
|
124,431
|
|
|
Broadcasting
segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FCC
licenses
|
|
|
|
|
|
|
|
299,076
|
|
|
|
|
|
|
|
|
511,007
|
|
|
Total
|
|
|
|
|
|
|
|
424,503
|
|
|
|
|
|
|
|
|
635,438
|
|
|
Intangibles
assets, net
|
|
|
|
|
|
|
$
|
561,581
|
|
|
|
|
|
|
|
$
|
781,154
|
|
Amortization
expense was $9.6 million in fiscal 2009, $14.2 million in fiscal 2008, and $13.9
million in fiscal 2007. Future amortization expense for intangible assets is
expected to be as follows: $9.4 million in fiscal 2010, $9.3 million
in fiscal 2011, $9.0 million in fiscal 2012, $6.3 million in fiscal 2013, and
$6.0 million in fiscal 2014.
Changes
in the carrying amount of goodwill were as follows:
|
(In
thousands)
|
|
Publishing
|
|
Broadcasting
|
|
Total
|
|
|
Balance
at June 30, 2007
|
|
$
|
376,895
|
|
|
$
|
82,598
|
|
|
$
|
459,493
|
|
|
Acquisitions
|
|
70,188
|
|
|
–
|
|
|
70,188
|
|
|
Adjustments
|
|
2,651
|
|
|
–
|
|
|
2,651
|
|
|
Balance
at June 30, 2008
|
|
449,734
|
|
|
82,598
|
|
|
532,332
|
|
|
Acquisitions
|
|
13,813
|
|
|
–
|
|
|
13,813
|
|
|
Impairment
|
|
–
|
|
|
(82,598
|
)
|
|
(82,598
|
)
|
|
Adjustments
|
|
(1,168
|
)
|
|
–
|
|
|
(1,168
|
)
|
|
Balance
at June 30, 2009
|
|
$
|
462,379
|
|
|
$
|
–
|
|
|
$
|
462,379
|
|
Included
in additions to goodwill in fiscal 2009 is $13.8 million and in fiscal 2008 is
$46.5 million of contingent consideration accrued or paid in connection with
prior years' acquisitions. See Note 2 for further discussion of contingent
payments related to acquisitions.
Management
is required to evaluate goodwill and intangible assets with indefinite lives for
impairment on an annual basis or when events occur or circumstances change that
would indicate the carrying value exceeds the fair value. During fiscal 2009, we
determined that interim triggering events, including declines in the price of
our stock and reduced cash flow forecasts resulting from the recession in the
second and third quarters required us to perform interim evaluations of goodwill
and intangible assets with indefinite lives for impairment at December 31,
2008 and March 31 2009. Our December 31, 2008, and March 31,
2009, impairment tests determined the fair value of our goodwill and indefinite
lived intangible assets exceeded their carrying values, thus the Company’s
interim impairment analyses did not result in any impairment charges during the
second or third quarters of fiscal 2009.
The
Company performed its annual impairment testing as of May 31, 2009. While
our stock price had increased over 150 percent from its low earlier in the year,
worsening broadcasting business conditions, including further deterioration in
the local advertising market, lowered future cash flow projections. This
evaluation resulted in the carrying values of our broadcast stations’ goodwill
and certain of their FCC licenses having carrying values that exceeded their
estimated fair values. As a result, the Company recorded a pre-tax non-cash
impairment charge of $211.9 million to reduce the carrying value of broadcast
FCC licenses and $82.6 million to write-off our broadcasting segment’s goodwill
in the fourth quarter of fiscal 2009. The Company recorded an income tax benefit
of $109.4 million related to these charges.
In March
2007, a non-cash impairment charge of $2.8 million was recorded to reduce
goodwill and FCC license of WFLI, the broadcast station in Chattanooga, to their
fair values less cost to sell based on the planned sale of the station. Because
the fair value was less than the carrying values of the assets, the Company
recorded an impairment charge to reduce the carrying values of the assets to
fair value. This impairment charge was recorded in discontinued operations in
the Consolidated Statements of Earnings (Loss).
5. Long-term
Debt
Long-term
debt consists of the following:
|
June 30,
|
|
2009
|
|
2008
|
|
|
(In
thousands)
|
|
|
|
|
|
|
Variable-rate
credit facilities
|
|
|
|
|
|
|
Asset-backed
commercial paper facility of $125 million due 4/2/2011
|
$
|
80,000
|
$
|
35,000
|
|
|
Revolving
credit facility of $150 million due 10/7/2010
|
|
125,000
|
|
100,000
|
|
|
|
|
|
|
|
|
|
Private
placement notes
|
|
|
|
|
|
|
4.50%
senior notes, due 7/1/2008
|
|
–
|
|
75,000
|
|
|
4.57%
senior notes, due 7/1/2009
|
|
–
|
|
100,000
|
|
|
4.70%
senior notes, due 7/1/2010
|
|
75,000
|
|
75,000
|
|
|
4.70%
senior notes, due 6/16/2011
|
|
50,000
|
|
50,000
|
|
|
5.04%
senior notes, due 6/16/2012
|
|
50,000
|
|
50,000
|
|
|
Total
long-term debt
|
|
380,000
|
|
485,000
|
|
|
Current
portion of long-term debt
|
|
–
|
|
(75,000
|
)
|
|
Long-term
debt
|
$
|
380,000
|
$
|
410,000
|
|
The
following table shows principal payments on the debt due in succeeding fiscal
years:
|
Years
ended June 30,
|
|
|
|
|
(In
thousands)
|
|
|
|
|
2010
|
$
|
–
|
|
|
2011
|
|
255,000
|
|
|
2012
|
|
50,000
|
|
|
2013
|
|
50,000
|
|
|
2014
|
|
25,000
|
|
|
Total
long-term debt
|
$
|
380,000
|
|
In
connection with the asset-backed commercial paper facility, Meredith entered
into a revolving agreement in April 2002. Under this agreement the Company
currently sells all of its rights, title, and interest in the majority of its
accounts receivable related to advertising and miscellaneous revenues to
Meredith Funding Corporation, a special purpose entity established to purchase
accounts receivable from Meredith. At June 30, 2009, $143.6 million of
accounts receivable net of reserves were outstanding under the agreement.
Meredith Funding Corporation in turn sells receivable interests to an
asset-backed commercial paper conduit administered by a major national bank. In
consideration of the sale, Meredith receives cash and a subordinated note,
bearing interest at the prime rate, 3.25 percent at June 30, 2009, from
Meredith Funding Corporation. The agreement is structured as a true sale under
which the creditors of Meredith Funding Corporation will be entitled to be
satisfied out of the assets of Meredith Funding Corporation prior to any value
being returned to Meredith or its creditors. The accounts of Meredith Funding
Corporation are fully consolidated in Meredith's consolidated financial
statements. The asset-backed commercial paper facility renews annually until
April 2, 2011, the facility termination date. The interest rate on the
asset-backed commercial paper program changes monthly and is based on a fixed
spread over the average commercial paper cost to the lender. The interest rate
was 1.86 percent in June 2009.
On
July 13, 2009, Meredith secured a new $75 million private placement of debt
from a leading life insurance company. The private placement consists of $50
million due July 2013 and $25 million due July 2014. They carry interest rates
of 6.70 percent and 7.19 percent, respectively. The proceeds were used to pay
down Meredith’s asset-backed commercial paper facility.
The
interest rate on the revolving credit facility is variable based on LIBOR and
Meredith's debt to trailing 12 month EBITDA ratio. After the effect of
outstanding interest rate swap agreements discussed below was taken into
account, the weighted average effective interest rate for the revolving credit
facility was 4.21 percent at June 30, 2009. At June 30, 2009, $125
million was borrowed under this facility. The revolving credit facility expires
on October 7, 2010.
In fiscal
2007, the Company entered into two interest rate swap agreements to hedge
variable interest rate risk on $100 million of the Company's variable interest
rate revolving credit facility. The swaps expire on December 31, 2009.
Under the swaps the Company will, on a quarterly basis, pay fixed rates of
interest
(
average 4.69 percent) and receive variable rates of interest based on
the three-month LIBOR rate (average of 0.60 percent at June 30, 2009) on
$100 million notional amount of indebtedness. The swaps are designated as cash
flow hedges. The Company evaluates the effectiveness of the hedging
relationships on an ongoing basis by recalculating changes in fair value of the
derivatives and related hedged items independently (the long-haul method).
Unrealized gains or losses on cash flow hedges are recorded in other
comprehensive income (loss) to the extent the cash flow hedges are effective. No
material ineffectiveness existed at June 30, 2009. The fair value of the
interest rate swap agreements is the estimated amount the Company would pay or
receive to terminate the swap agreements. At June 30, 2009, the swaps had a
fair value to the Company of a loss of $2.1 million. The Company is exposed to
credit-related losses in the event of nonperformance by counterparties to the
swap agreements. Given the strong creditworthiness of the counterparties,
management does not expect any of them to fail to meet their
obligations.
Interest
rates on the private placement notes range from 4.70 percent to 5.04 percent at
June 30, 2009. The weighted average interest rate on the private placement
notes outstanding at June 30, 2009, was 4.80 percent.
All of
the Company's debt agreements include financial covenants and failure to comply
with any such covenants could result in the debt becoming payable on demand. A
summary of the Company's significant financial covenants and their status at
June 30, 2009, follows:
|
|
Required
at
June 30,
2009
|
Actual
at
June 30,
2009
|
|
Ratio
of debt to trailing 12 month EBITDA
1
|
Less
than 3.75
|
1.8
|
|
|
Ratio
of EBITDA
1
to
interest expense
|
Greater
than 2.75
|
10.9
|
|
|
1. EBITDA
is earnings before interest, taxes, depreciation, and amortization as
defined in the debt
agreements.
|
The
Company was in compliance with these and all other debt covenants at
June 30, 2009.
Interest
expense related to long-term debt totaled $20.2 million in fiscal 2009, $21.8
million in fiscal 2008, and $26.8 million in fiscal 2007.
At
June 30, 2009, Meredith had credit available under the asset-backed
commercial paper program of up to $45 million (depending on levels of accounts
receivable) and had $25 million of credit available under the revolving credit
facility with an option to request up to another $150 million. The commitment
fee for the asset-backed commercial paper facility ranges from 0.75 to 0.80
percent of the unused commitment based on utilization levels. The commitment fee
for the revolving credit facility ranges from 0.075 to 0.200 percent of the
unused commitment based on the Company's leverage ratio. Commitment fees paid in
fiscal 2009 were not material.
6. Income
Taxes
The
following table shows income tax expense (benefit) attributable to earnings from
continuing operations:
|
Years
ended June 30,
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
Currently
payable
|
|
|
|
|
|
|
|
|
|
Federal
|
$
|
3,862
|
|
$
|
55,204
|
|
$
|
52,823
|
|
State
|
|
(1,844
|
)
|
|
9,647
|
|
|
8,756
|
|
|
|
2,018
|
|
|
64,851
|
|
|
61,579
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
Federal
|
|
(45,407
|
)
|
|
17,288
|
|
|
25,757
|
|
State
|
|
(9,353
|
)
|
|
3,239
|
|
|
4,684
|
|
|
|
(54,760
|
)
|
|
20,527
|
|
|
30,441
|
|
Income
taxes
|
$
|
(52,742
|
)
|
$
|
85,378
|
|
$
|
92,020
|
The
differences between the statutory U.S. federal income tax rate and the effective
tax rate were as follows:
|
Years
ended June 30,
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
U.S.
statutory tax rate
|
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
|
State
income taxes, less federal income tax benefits
|
|
4.6
|
|
|
3.4
|
|
|
3.4
|
|
|
Benefit
from capital loss in prior year
|
|
–
|
|
|
–
|
|
|
(3.6
|
)
|
|
Impairment
charge (federal impact)
|
|
(3.2
|
)
|
|
–
|
|
|
–
|
|
|
Other
|
|
(2.4
|
)
|
|
0.7
|
|
|
0.9
|
|
|
Effective
income tax rate
|
|
34.0
|
%
|
|
39.1
|
%
|
|
35.7
|
%
|
The lower
effective tax rate in fiscal 2009 is primarily due to the tax effect of the
impairment charge for broadcasting goodwill. Excluding the impairment charge,
the effective tax rate for fiscal 2009 was 40.7 percent. Absent the impairment
charge, the effective tax rate in fiscal 2009 is higher than in the prior year
primarily due to accruals for tax contingencies. The fiscal 2009 state effective
rate excluding the impairment charge was 3.0 percent.
An income
tax benefit of $9.4 million was recognized in fiscal 2007 as a result of the
resolution of a tax contingency related to the loss on the sale of stock in
Craftways, a business sold in fiscal 2003. This income tax benefit lowered the
fiscal 2007 effective tax rate by 3.6 percent.
The tax
effects of temporary differences that gave rise to deferred tax assets and
deferred tax liabilities were as follows:
|
June 30,
|
|
2009
|
|
|
2008
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
Deferred
tax assets
|
|
|
|
|
|
|
|
Accounts
receivable allowances and return reserves
|
$
|
13,770
|
|
$
|
17,486
|
|
|
Compensation
and benefits
|
|
41,123
|
|
|
32,835
|
|
|
Indirect
benefit of uncertain state and foreign tax positions
|
|
12,148
|
|
|
10,004
|
|
|
All
other assets
|
|
5,859
|
|
|
8,237
|
|
|
Total
deferred tax assets
|
|
72,900
|
|
|
68,562
|
|
|
Valuation
allowance
|
|
(625
|
)
|
|
–
|
|
|
Net
deferred tax assets
|
|
72,275
|
|
|
68,562
|
|
|
Deferred
tax liabilities
|
|
|
|
|
|
|
|
Subscription
acquisition costs
|
|
30,225
|
|
|
23,098
|
|
|
Accumulated
depreciation and amortization
|
|
84,810
|
|
|
157,145
|
|
|
Gains
from dispositions
|
|
21,607
|
|
|
21,595
|
|
|
All
other liabilities
|
|
9,267
|
|
|
7,522
|
|
|
Total
deferred tax liabilities
|
|
145,909
|
|
|
209,360
|
|
|
Net
deferred tax liability
|
$
|
73,634
|
|
$
|
140,798
|
|
The
Company's deferred tax assets are more likely than not to be fully realized
except for a valuation allowance of $625,000 that was recorded for capital
losses expiring in fiscal 2010. The net current portions of deferred tax assets
and liabilities are included in accrued expenses–other taxes and expenses at
June 30, 2009 and 2008, in the Consolidated Balance Sheets.
As
discussed in Note 1, the Company adopted the provisions of FIN 48 as
of July 1, 2007. The adoption of FIN 48 had no impact on the Company's
retained earnings. The total amount of unrecognized tax benefits as of the date
of adoption was $47.9 million. A reconciliation of the beginning and ending
balances of the total amounts of gross unrecognized tax benefits is as
follows:
|
(In
thousands)
|
|
|
Balance
at July 1, 2007, on adoption of FIN 48
|
$
|
47,887
|
|
Increases
in tax positions for prior years
|
|
1,560
|
|
Decreases
in tax positions for prior years
|
|
(331)
|
|
Increases
in tax positions for current year
|
|
10,026
|
|
Lapse
in statute of limitations
|
|
(6,319)
|
|
Balance
at June 30, 2008
|
|
52,823
|
|
Increases
in tax positions for prior years
|
|
5,455
|
|
Decreases
in tax positions for prior years
|
|
(4,498)
|
|
Increases
in tax positions for current year
|
|
5,791
|
|
Settlements
|
|
(165)
|
|
Lapse
in statute of limitations
|
|
(6,257)
|
|
Balance
at June 30, 2009
|
$
|
53,149
|
The total
amount of unrecognized tax benefits that, if recognized, would impact the
effective tax rate was $17.6 million as of June 30, 2009, and $16.4 million
as of June 30, 2008. The Company recognizes interest and penalties related
to unrecognized tax benefits as a component of income tax expense. The amount of
accrued interest and penalties related to unrecognized tax benefits was $10.5
million and $9.0 million as of June 30, 2009, and 2008, respectively. The
fiscal 2009 accrual for accrued interest and penalties was $1.5
million.
The total
amount of unrecognized tax benefits at June 30, 2009, may change
significantly within the next 12 months, decreasing by an estimated range of
$2.2 million to $29.8 million. The change, if any, may result primarily from
foreseeable federal and state examinations, ongoing federal and state
examinations, anticipated state settlements, expiration of various statutes of
limitation, the results of tax cases, or other regulatory
developments.
The
Company's federal tax returns have been audited through fiscal 2002, are closed
by expiration of the statute of limitations for fiscal 2003, 2004, and 2005, and
remain subject to audit for fiscal years beyond fiscal 2005. Fiscal 2006 and
fiscal 2007 are currently under examination. The Company has various state
income tax examinations ongoing and at various stages of completion, but
generally the state income tax returns have been audited or closed to audit
through fiscal 2004.
7. Pension
and Postretirement Benefit Plans
Savings
and Investment Plan
Meredith
maintains a 401(k) Savings and Investment Plan that permits eligible employees
to contribute funds on a pretax basis. The plan allows employee contributions of
up to 50 percent of eligible compensation subject to the maximum allowed under
federal tax provisions. The Company matches 100 percent of the first 3 percent
and 50 percent of the next 2 percent of employee contributions.
The
401(k) Savings and Investment Plan allows employees to choose among various
investment options, including the Company's common stock, for both their
contributions and the Company's matching contribution. Company contribution
expense under this plan totaled $8.1 million in fiscal 2009, $7.9 million in
fiscal 2008, and $7.1 million in fiscal 2007.
Pension
and Postretirement Plans
Meredith
has noncontributory pension plans covering substantially all employees. These
plans include qualified (funded) plans as well as nonqualified (unfunded) plans.
These plans provide participating employees with retirement benefits in
accordance with benefit provision formulas. The nonqualified plans provide
retirement benefits only to certain highly compensated employees. The Company
also sponsors defined healthcare and life insurance plans that provide benefits
to eligible retirees.
The
Company adopted the recognition and disclosure provisions of SFAS 158 on
June 30, 2007. SFAS 158 requires an entity to recognize the funded
status of its defined benefit pension and postretirement plans – measured as the
difference between plan assets at fair value and the benefit obligation – on the
balance sheet and to recognize changes in the funded status, that arise during
the period but are not recognized as components of net periodic benefit cost,
within other comprehensive income (loss), net of income taxes. Since the full
recognition of the funded status of an entity's defined benefit pension plan is
recorded on the balance sheet, the additional minimum liability is no longer
recorded under SFAS 158. Because the recognition provisions of
SFAS 158 were adopted as of June 30, 2007, the Company first measured
and recorded changes to its previously recognized additional minimum liability
through other comprehensive income (loss) and then applied the recognition
provisions of SFAS 158, including the reversal of the additional minimum
liability, through accumulated other comprehensive income to fully recognize the
funded status of the Company's defined benefit pension and postretirement plans.
The decrease in the minimum pension liability, net of taxes, included in other
comprehensive income (loss) was $2.0 million in fiscal 2007.
The
Company adopted the change in measurement date transition requirements of
SFAS 158 effective July 1, 2008. Previously the Company used a
March 31 measurement date for its defined pension and other postretirement
plans. We adopted the change in measurement date by re-measuring plan assets and
benefit obligations as of our fiscal 2008 year end, pursuant to the transition
requirements of SFAS 158. As a result of the change in measurement date, a
$1.8 million pre-tax reduction to retained earnings was recognized in the fourth
quarter of fiscal 2009 that represents the expense for the period from the
March 31, 2008, early measurement date to the end of the 2008 fiscal
year.
Obligations
and Funded Status
The
following tables present changes in, and components of, the Company's net
assets/liabilities for pension and other postretirement benefits:
|
|
|
|
Pension
|
|
|
Postretirement
|
|
|
June 30,
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in benefit obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit
obligation, beginning of year
|
|
$
|
99,340
|
|
$
|
86,396
|
|
$
|
15,886
|
|
$
|
16,498
|
|
|
Effect
of eliminating early measurement date
|
|
|
1,969
|
|
|
–
|
|
|
(2
|
)
|
|
–
|
|
|
Service
cost
|
|
|
8,632
|
|
|
7,715
|
|
|
461
|
|
|
463
|
|
|
Interest
cost
|
|
|
5,721
|
|
|
4,962
|
|
|
980
|
|
|
945
|
|
|
Participant
contributions
|
|
|
–
|
|
|
–
|
|
|
811
|
|
|
690
|
|
|
Plan
amendments
|
|
|
82
|
|
|
1,573
|
|
|
–
|
|
|
–
|
|
|
Actuarial
loss (gain)
|
|
|
(741
|
)
|
|
5,699
|
|
|
(929
|
)
|
|
(684
|
)
|
|
Benefits
paid (including lump sums)
|
|
|
(10,994
|
)
|
|
(7,005
|
)
|
|
(2,388
|
)
|
|
(2,026
|
)
|
|
Benefit
obligation, end of year
|
|
$
|
104,009
|
|
$
|
99,340
|
|
$
|
14,819
|
|
$
|
15,886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of plan assets, beginning of year
|
|
$
|
121,007
|
|
$
|
112,017
|
|
$
|
–
|
|
$
|
–
|
|
|
Effect
of eliminating early measurement date
|
|
|
714
|
|
|
–
|
|
|
–
|
|
|
–
|
|
|
Actual
return on plan assets
|
|
|
(26,181
|
)
|
|
(3,156
|
)
|
|
–
|
|
|
–
|
|
|
Employer
contributions
|
|
|
10,856
|
|
|
19,151
|
|
|
1,577
|
|
|
1,336
|
|
|
Participant
contributions
|
|
|
–
|
|
|
–
|
|
|
811
|
|
|
690
|
|
|
Benefits
paid (including lump sums)
|
|
|
(10,994
|
)
|
|
(7,005
|
)
|
|
(2,388
|
)
|
|
(2,026
|
)
|
|
Fair
value of plan assets, end of year
|
|
$
|
95,402
|
|
$
|
121,007
|
|
$
|
–
|
|
$
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded
(under funded) status, end of year
|
|
$
|
(8,608
|
)
|
$
|
21,667
|
|
$
|
(14,819
|
)
|
$
|
(15,886
|
)
|
|
Contributions
between measurement date and fiscal year end
|
|
|
–
|
|
|
31
|
|
|
–
|
|
|
362
|
|
|
Net
recognized amount, end of year
|
|
$
|
(8,608
|
)
|
$
|
21,698
|
|
$
|
(14,819
|
)
|
$
|
(15,524
|
)
|
Benefits
paid directly from Meredith assets are included in both employer contributions
and benefits paid.
The
following amounts are recognized in the Consolidated Balance
Sheets:
|
|
|
|
Pension
|
|
|
Postretirement
|
|
|
June 30,
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid
benefit cost
|
|
$
|
3,834
|
|
$
|
34,136
|
|
$
|
–
|
|
$
|
–
|
|
|
Accrued
expenses–compensation and benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
benefit liability
|
|
|
(1,156
|
)
|
|
(1,725
|
)
|
|
(1,255
|
)
|
|
(1,339
|
)
|
|
Other
noncurrent liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
benefit liability
|
|
|
(11,286
|
)
|
|
(10,713
|
)
|
|
(13,564
|
)
|
|
(14,185
|
)
|
|
Net
amount recognized, end of year
|
|
$
|
(8,608
|
)
|
$
|
21,698
|
|
$
|
(14,819
|
)
|
$
|
(15,524
|
)
|
The
accumulated benefit obligation for all defined benefit pension plans was $95.2
million and $88.9 million at June 30, 2009 and 2008,
respectively.
The
following table provides information about pension plans with projected benefit
obligations in excess of plan assets:
|
June 30,
|
2009
|
|
2008
|
|
|
(In
thousands)
|
|
|
|
|
|
Projected
benefit obligation
|
$ 12,503
|
|
$ 12,559
|
|
|
Fair
value of plan assets
|
62
|
|
90
|
|
The
following table provides information about pension plans with accumulated
benefit obligations in excess of plan assets:
|
June 30,
|
2009
|
|
2008
|
|
|
(In
thousands)
|
|
|
|
|
|
Accumulated
benefit obligation
|
$ 10,130
|
|
$ 9,916
|
|
|
Fair
value of plan assets
|
62
|
|
90
|
|
Costs
The
components of net periodic benefit costs recognized in the Consolidated
Statements of Earnings (Loss) were as follows:
|
|
Pension
|
Postretirement
|
|
Years
ended June 30,
|
|
2009
|
|
2008
|
|
2007
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components
of net periodic benefit costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
cost
|
$
|
8,632
|
$
|
7,715
|
$
|
6,191
|
|
$
|
461
|
$
|
463
|
$
|
441
|
|
|
Interest
cost
|
|
5,721
|
|
4,962
|
|
4,862
|
|
|
980
|
|
945
|
|
986
|
|
|
Expected
return on plan assets
|
|
(9,324
|
)
|
(9,855
|
)
|
(7,883
|
)
|
|
–
|
|
–
|
|
–
|
|
|
Prior
service cost amortization
|
|
839
|
|
592
|
|
645
|
|
|
(736
|
)
|
(736
|
)
|
(728
|
)
|
|
Actuarial
loss amortization
|
|
533
|
|
177
|
|
486
|
|
|
–
|
|
22
|
|
68
|
|
|
Settlement
charge
|
|
93
|
|
–
|
|
5,941
|
|
|
–
|
|
–
|
|
–
|
|
|
Net
periodic benefit costs
|
$
|
6,494
|
$
|
3,591
|
$
|
10,242
|
|
$
|
705
|
$
|
694
|
$
|
767
|
|
The
pension settlement charges in fiscal 2009 and fiscal 2007 were triggered by
lump-sum payments made as a result of the retirement or departure of
executives.
Amounts
recognized in the accumulated other comprehensive loss component of
shareholders' equity for Company-sponsored plans were as follows:
|
June 30,
2009
|
|
Pension
|
|
|
Postretirement
|
|
Total
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
Unrecognized
net actuarial losses, net of taxes
|
$
|
31,585
|
|
|
$
|
154
|
|
|
$
|
31,739
|
|
|
Unrecognized
prior service credit (costs), net of taxes
|
|
1,306
|
|
|
|
(2,658
|
)
|
|
|
(1,352
|
)
|
|
Total
|
$
|
32,891
|
|
|
$
|
(2,504
|
)
|
|
$
|
30,387
|
|
During
fiscal 2010, the Company expects to recognize as part of its net periodic
benefit costs approximately $6.5 million of net actuarial losses, $0.9 million
of prior-service costs for the pension plans, and $0.7 million of prior service
credit for the postretirement plan that are included, net of taxes, in the
accumulated other comprehensive loss component of shareholders' equity at
June 30, 2009.
Assumptions
Benefit
obligations were determined using the following weighted average
assumptions:
|
|
Pension
|
Postretirement
|
|
June 30,
|
2009
|
|
2008
|
|
|
2009
|
|
2008
|
|
|
Weighted
average assumptions
|
|
|
|
|
|
|
|
|
|
|
Discount
rate
|
5.75
|
%
|
5.80
|
%
|
|
6.20
|
%
|
6.25
|
%
|
|
Rate
of compensation increase – year one
|
0.00
|
%
|
4.50
|
%
|
|
0.00
|
%
|
4.50
|
%
|
|
Rate
of compensation increase – subsequent years
|
4.50
|
%
|
4.50
|
%
|
|
4.50
|
%
|
4.50
|
%
|
|
Rate
of increase in health care cost levels
|
|
|
|
|
|
|
|
|
|
|
Initial
level
|
NA
|
|
NA
|
|
|
7.50
|
%
|
8.00
|
%
|
|
Ultimate
level
|
NA
|
|
NA
|
|
|
5.00
|
%
|
5.00
|
%
|
|
Years
to ultimate level
|
NA
|
|
NA
|
|
|
5
yrs
|
|
6
yrs
|
|
|
NA–Not
applicable
|
|
|
|
|
|
|
|
|
|
Net
periodic benefit costs were determined using the following weighted average
assumptions:
|
|
Pension
|
Postretirement
|
|
Years
ended June 30,
|
2009
|
|
2008
|
|
2007
|
|
2009
|
|
2008
|
|
2007
|
|
|
Weighted
average assumptions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount
rate
|
5.80
|
%
|
5.70
|
%
|
5.80
|
%
|
6.25
|
%
|
5.80
|
%
|
5.90
|
%
|
|
Expected
return on plan assets
|
8.25
|
%
|
8.25
|
%
|
8.00
|
%
|
NA
|
|
NA
|
|
NA
|
|
|
Rate
of compensation increase
|
4.50
|
%
|
4.50
|
%
|
4.50
|
%
|
4.50
|
%
|
4.50
|
%
|
4.50
|
%
|
|
Rate
of increase in health care cost levels
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial
level
|
NA
|
|
NA
|
|
NA
|
|
8.00
|
%
|
8.00
|
%
|
9.00
|
%
|
|
Ultimate
level
|
NA
|
|
NA
|
|
NA
|
|
5.00
|
%
|
5.00
|
%
|
5.00
|
%
|
|
Years
to ultimate level
|
NA
|
|
NA
|
|
NA
|
|
6
yrs
|
|
3
yrs
|
|
4
yrs
|
|
|
NA–Not
applicable
|
|
|
|
|
|
|
|
|
|
|
|
|
The
expected return on plan assets assumption was determined, with the assistance of
the Company's investment consultants, based on a variety of factors. These
factors include but are not limited to the plans' asset allocations, review of
historical capital market performance, historical plan performance, current
market factors such as inflation and interest rates, and a forecast of expected
future asset returns. The Company reviews this long-term assumption on a
periodic basis.
Assumed
rates of increase in healthcare cost have a significant effect on the amounts
reported for the healthcare plans. A change of one percentage point in the
assumed healthcare cost trend rates would have the following
effects:
|
|
One
Percentage
Point
Increase
|
|
One
Percentage
Point
Decrease
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
Effect
on service and interest cost components for fiscal 2009
|
$
|
51
|
|
|
$
|
(43
|
)
|
|
Effect
on postretirement benefit obligation as of June 30,
2009
|
|
467
|
|
|
|
(401
|
)
|
Plan
Assets
The
targeted and weighted average asset allocations by asset category for
investments held by the Company's pension plans are as follows:
|
|
|
2009
Allocation
|
|
|
2008
Allocation
|
|
|
June 30,
|
|
Target
|
|
|
Actual
|
|
|
Target
|
|
|
Actual
|
|
|
Domestic
equity securities
|
|
45 %
|
|
|
45 %
|
|
|
45 %
|
|
|
46 %
|
|
|
Fixed
income investments
|
|
30 %
|
|
|
31 %
|
|
|
30 %
|
|
|
28 %
|
|
|
International
equity securities
|
|
15 %
|
|
|
14 %
|
|
|
15 %
|
|
|
16 %
|
|
|
Global
equity securities
|
|
10 %
|
|
|
10 %
|
|
|
10 %
|
|
|
10 %
|
|
|
Fair
value of plan assets
|
|
100 %
|
|
|
100 %
|
|
|
100 %
|
|
|
100 %
|
|
The
primary objective of the Company's pension plans is to provide eligible
employees with scheduled pension benefits by using a prudent investment
approach. The Company employs a total return investment approach whereby a mix
of equities and fixed income investments are used to maximize the long-term
return on plan assets for a prudent level of risk. Risk tolerance is established
through careful consideration of plan liabilities, plan funded status, and
corporate financial condition. The investment portfolio contains a diversified
blend of equity and fixed-income investments. Furthermore, equity investments
are diversified across domestic and international stocks and between growth and
value stocks and small and large capitalizations. Investment risk is measured
and monitored on an ongoing basis through quarterly investment portfolio
reviews, annual liability measurements, and periodic asset-liability studies.
The target asset allocations represent a long-term perspective. A 6 to 10
percent range is used for individual asset classes. The overall asset mix is
reviewed on a quarterly basis, and plan assets are rebalanced back to target
allocations as needed.
Equity
securities did not include any Meredith Corporation common or Class B stock
at June 30, 2009 or 2008.
Cash
Flows
Although
we do not have a minimum funding requirement for the pension plans in fiscal
2010, the Company is currently determining what voluntary pension plan
contributions, if any, will be made in fiscal 2010. Actual contributions will be
dependent upon investment returns, changes in pension obligations, and other
economic and regulatory factors. Meredith expects to contribute $1.3 million to
its postretirement plan in fiscal 2010.
The
following benefit payments, which reflect expected future service as
appropriate, are expected to be paid:
|
Years
ending June 30,
|
Pension
Benefits
|
|
Postretirement
Benefits
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
2010
|
$
|
18,871
|
|
|
$
|
1,255
|
|
|
2011
|
|
12,244
|
|
|
|
1,329
|
|
|
2012
|
|
13,006
|
|
|
|
1,316
|
|
|
2013
|
|
12,160
|
|
|
|
1,287
|
|
|
2014
|
|
12,781
|
|
|
|
1,260
|
|
|
2015-2019
|
|
64,749
|
|
|
|
6,630
|
|
Other
On
July 1, 2008, the Company adopted the provisions of EITF 06-10, which
requires that a company recognize a liability for the postretirement benefits
associated with collateral assignment split-dollar life insurance arrangements.
The provisions of EITF 06-10 were applied as a change in accounting
principle through a cumulative-effect adjustment to retained earnings. The
adoption of EITF 06-10 resulted in a $2.9 million ($2.6 million, net of
tax) reduction to the opening balance of retained earnings. The net periodic
pension cost for fiscal 2009 was $177,000 and the accrued liability at
June 30, 2009, was $2.8 million.
8. Earnings
(Loss) Per Share
The
calculation of basic earnings (loss) per share for each period is based on the
weighted average number of common and Class B shares outstanding during the
period. The calculation of diluted earnings (loss) per share for each period is
based on the weighted average number of common and Class B shares
outstanding during the period plus the effect, if any, of dilutive common stock
equivalent shares. The following table presents the calculations of earnings
(loss) per share:
|
Years
ended June 30,
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
(In
thousands except per share data)
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) from continuing operations
|
$
|
(102,507
|
)
|
$
|
132,974
|
|
$
|
166,010
|
|
|
Basic
average shares outstanding
|
|
45,042
|
|
|
46,928
|
|
|
48,048
|
|
|
Dilutive
effect of stock options and equivalents
|
|
–
|
|
|
657
|
|
|
1,060
|
|
|
Diluted
average shares outstanding
|
|
45,042
|
|
|
47,585
|
|
|
49,108
|
|
|
Earnings
(loss) per share from continuing operations
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
(2.28
|
)
|
$
|
2.83
|
|
$
|
3.46
|
|
|
Diluted
|
|
(2.28
|
)
|
|
2.79
|
|
|
3.38
|
|
For the
year ended June 30, 2009, approximately 128,000 outstanding common stock
equivalent shares were not included in the computation of dilutive loss per
share because of the antidilutive effect on the loss per share calculation (the
diluted loss per share becoming less negative than the basic loss per share).
Therefore, these common stock equivalent shares are not taken into account in
determining the weighted average number of shares for the calculation of diluted
loss per share for fiscal 2009.
In
addition, antidilutive options excluded from the above calculations totaled
5,055,600 options for the year ended June 30, 2009 ($41.87 weighted average
exercise price), 2,033,500 options for the year ended June 30, 2008 ($50.43
weighted average exercise price), and 411,000 options for the year ended
June 30, 2007 ($47.18 weighted average exercise price).
9. Capital
Stock
The
Company has two classes of common stock outstanding: common and Class B.
Holders of both classes of stock receive equal dividends per share. Class B
stock, which has 10 votes per share, is not transferable as Class B stock
except to family members of the holder or certain other related entities. At any
time, Class B stock is convertible, share for share, into common stock with
one vote per share. Class B stock transferred to persons or entities not
entitled to receive it as Class B stock will automatically be converted and
issued as common stock to the transferee. The principal market for trading the
Company's common stock is the New York Stock Exchange (trading symbol MDP). No
separate public trading market exists for the Company's Class B
stock.
From time
to time, the Company's Board of Directors has authorized the repurchase of
shares of the Company's common stock on the open market. In May 2008, the Board
approved the repurchase of 2.0 million shares.
Repurchases
under these authorizations were as follows:
|
Years
ended June 30,
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
Number
of shares
|
|
882
|
|
|
3,225
|
|
|
1,116
|
|
|
Cost
at market value
|
$
|
21,801
|
|
$
|
150,377
|
|
$
|
58,710
|
|
As of
June 30, 2009, authorization to repurchase approximately 1.5 million shares
remained.
10. Common
Stock and Share-based Compensation Plans
As of
June 30, 2009, Meredith had an employee stock purchase plan and a stock
incentive plan, both of which were shareholder-approved. A more detailed
description of these plans follows. Compensation expense recognized for these
plans was $10.2 million in fiscal 2009, $7.9 million in fiscal 2008, and $11.1
million in fiscal 2007. The total income tax benefit recognized in earnings was
$3.8 million in fiscal 2009, $2.9 million in fiscal 2008, and $4.3 million in
fiscal 2007.
Employee
Stock Purchase Plan
Meredith
has an employee stock purchase plan (ESPP) available to substantially all
employees. The ESPP allows employees to purchase shares of Meredith common stock
through payroll deductions at the lesser of 85 percent of the fair market value
of the stock on either the first or last trading day of an offering period. The
ESPP has quarterly offering periods. One million common shares are authorized
for issuance under the ESPP.
Compensation cost for the
ESPP is based on the present value of the cash discount and the fair value of
the call option component as of the grant date using the Black-Scholes
option-pricing model. The term of the option is three months, the term of the
offering period. The expected stock price volatility was approximately 17
percent in fiscal 2009 and fiscal 2008, and 14 percent in fiscal 2007.
Information about the shares issued under this plan is as follows:
|
Years
ended June 30,
|
2009
|
|
2008
|
2007
|
|
|
Shares
issued
(in
thousands)
|
|
174
|
|
108
|
|
72
|
|
|
Average
fair value
|
$
|
3.23
|
$
|
6.80
|
$
|
7.99
|
|
|
Average
purchase price
|
|
16.33
|
|
34.50
|
|
45.14
|
|
|
Average
market price
|
|
21.64
|
|
40.59
|
|
56.20
|
|
Stock
Incentive Plan
Meredith
has a stock incentive plan that permit the Company to issue up to 3.8 million
shares in the form of stock options, restricted stock, stock equivalent units,
restricted stock units, performance shares, and performance cash awards to key
employees and directors of the Company. Approximately 2.1 million shares are
available for future awards under the plan as of June 30, 2009. The plan is
designed to provide an incentive to contribute to the achievement of long-range
corporate goals; provide flexibility in motivating, attracting, and retaining
employees; and to align more closely the interests of employees with those of
shareholders.
The
Company has awarded restricted shares of common stock to eligible key employees
and to non-employee directors under the plan. In addition, certain awards are
granted based on specified levels of Company stock ownership. All awards have
restriction periods tied primarily to employment and/or service. The awards
generally vest over three or five years. The awards are recorded at the market
value of traded shares on the date of the grant as unearned compensation. The
initial values of the grants net of estimated forfeitures are amortized over the
vesting periods. The Company's restricted stock activity during the year ended
June 30, 2009, was as follows:
|
Restricted
Stock
|
Shares
|
Weighted
Average Grant Date
Fair
Value
|
|
Aggregate
Intrinsic
Value
|
|
(Shares
and Aggregate Intrinsic Value in thousands)
|
|
|
|
|
|
|
|
|
Nonvested
at June 30, 2008
|
124
|
|
$ 52.15
|
|
|
|
|
|
Granted
|
37
|
|
21.74
|
|
|
|
|
|
Vested
|
(23
|
)
|
50.30
|
|
|
|
|
|
Nonvested
at June 30, 2009
|
138
|
|
44.34
|
|
|
$ 3,545
|
|
As of
June 30, 2009, there was $2.7 million of unearned compensation cost related
to restricted stock granted under the plan. That cost is expected to be
recognized over a weighted average period of 2.2 years. The weighted average
grant date fair value of restricted stock granted during the years ended
June 30, 2009, 2008, and 2007 was $21.74, $53.44, and $53.07, respectively.
The total fair value of shares vested during the years ended June 30, 2009,
2008, and 2007, was $0.5 million, $0.6 million, and $1.6 million,
respectively.
Meredith
also has outstanding stock equivalent units resulting from the deferral of
compensation of employees and directors under various deferred compensation
plans. The period of deferral is specified when the deferral election is made.
These stock equivalent units are issued at the market price of the underlying
stock on the date of deferral. In addition, shares of restricted stock may be
converted to stock equivalent units upon vesting.
The
following table summarizes the activity for stock equivalent units during the
year ended June 30, 2009:
|
Stock
Equivalent Units
|
Units
|
|
Weighted
Average
Issue
Date
Fair
Value
|
|
(Units
in thousands)
|
|
|
|
|
|
|
|
Balance
at June 30, 2008
|
87
|
|
|
$
|
39.60
|
|
|
Additions
|
49
|
|
|
|
31.94
|
|
|
Converted
to common stock
|
(4
|
)
|
|
|
42.61
|
|
|
Balance
at June 30, 2009
|
132
|
|
|
|
36.67
|
|
The stock
equivalent units outstanding at June 30, 2009, had no aggregate intrinsic
value. The total intrinsic value of stock equivalent units converted to common
stock was zero for the year ended June 30, 2009, compared to $0.4 million for
2008 and $1.6 million for 2007.
Starting
in fiscal 2009, the Company awarded performance-based restricted shares of
common stock to eligible key employees under the plan. These performance-based
restricted shares will vest only if the Company attains a specified return on
equity goal for the subsequent three-year period. The awards were recorded at
the market value of traded shares on the date of the grant as unearned
compensation. The initial value of the grant net of estimated forfeitures is
being amortized over the vesting period, as vesting is currently considered
probable. If in the future the stated target is no longer probable of being met,
any recognized compensation would be reversed. The Company's performance-based
restricted stock activity during the year ended June 30, 2009, was as
follows:
|
Performance-based
Restricted Stock
|
Shares
|
Weighted
Average Grant Date
Fair
Value
|
|
Aggregate
Intrinsic
Value
|
|
(Shares
and Aggregate Intrinsic Value in thousands)
|
|
|
|
|
|
|
|
|
Nonvested
at June 30, 2008
|
–
|
|
$ –
|
|
|
|
|
|
Granted
|
179
|
|
28.60
|
|
|
|
|
|
Vested
|
–
|
|
–
|
|
|
|
|
|
Forfeited
|
(2
|
)
|
29.23
|
|
|
|
|
|
Nonvested
at June 30, 2009
|
177
|
|
28.60
|
|
|
$ 4,524
|
|
As of
June 30, 2009, there was $2.6 million of unearned compensation cost related
to performance-based restricted stock granted under the plan. That cost is
expected to be recognized over a weighted average period of 2.1 years. The
weighted average grant date fair value of performance-based restricted stock
granted during the year ended June 30, 2009, was $28.60. No
performance-based restricted stock vested during the year ended June 30,
2009.
In fiscal
2008 and fiscal 2007, the Company awarded performance-based restricted stock
units to eligible key employees under the plan. These restricted stock units
will vest only if the Company attains specified earnings per share goals for the
subsequent three-year period. The awards were recorded at the market value of
traded shares on the date of the grant as unearned compensation. The initial
values of the grants net of estimated forfeitures are being amortized over a
three-year vesting period.
The
Company's restricted stock unit activity during the year ended June 30,
2009, was as follows:
|
Restricted
Stock Units
|
|
Units
|
Weighted
Average
Grant
Date
Fair
Value
|
|
Aggregate
Intrinsic
Value
|
|
(Units
and Aggregate Intrinsic Value in thousands)
|
|
|
|
|
|
|
|
|
|
Nonvested
at July 1, 2008
|
|
133
|
|
$ 50.29
|
|
|
|
|
|
Forfeited
|
|
(72
|
)
|
47.42
|
|
|
|
|
|
Nonvested
at June 30, 2009
|
|
61
|
|
53.65
|
|
|
$
|
1,569
|
|
|
Nonvested
units expected to vest
|
|
2
|
|
47.14
|
|
|
|
51
|
|
As of
June 30, 2009, there was $0.1 million of unearned compensation cost related
to restricted stock units granted in January 2008 under the plan. That cost is
expected to be recognized over a weighted average period of 1.6 years. The
restricted stock units granted in August 2007 are not expected to vest and thus
there is no unearned compensation currently recorded related to this grant. The
weighted average grant date fair value of restricted stock units granted during
the years ended June 30, 2008 and 2007, was $53.69 and $47.02,
respectively. During the year ended June 30, 2008, 30,924 restricted stock
units vested. No restricted stock units vested during the years ended
June 30, 2009 and 2007.
Meredith
has granted nonqualified stock options to certain employees and directors under
the plan. The grant date of options issued is the date the Compensation
Committee of the Board of Directors approves the granting of the options. The
exercise price of options granted is set at the fair value of the Company's
common stock on the grant date. All options granted under the plan expire at the
end of 10 years. Most of the options granted vest three years from the date of
grant.
Meredith
also occasionally has granted options tied to attaining specified earnings per
share and/or return on equity goals for the subsequent three-year period.
Attaining these goals results in the acceleration of vesting for all, or a
portion of, the options to three years from the date of grant. Options not
subject to accelerated vesting vest eight years from the date of grant subject
to certain tenure qualifications.
A summary
of stock option activity and weighted average exercise prices
follows:
|
Stock
Options
|
|
Options
|
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|
(Options
and Aggregate Intrinsic Value in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
July 1, 2008
|
|
4,420
|
|
$
|
44.48
|
|
|
|
|
|
|
Granted
|
|
1,049
|
|
|
27.84
|
|
|
|
|
|
|
Exercised
|
|
–
|
|
|
–
|
|
|
|
|
|
|
Forfeited
|
|
(303
|
)
|
|
42.48
|
|
|
|
|
|
|
Outstanding
June 30, 2009
|
|
5,166
|
|
|
41.19
|
|
5.48
years
|
|
$
|
941
|
|
|
Exercisable
June 30, 2009
|
|
3,355
|
|
|
43.02
|
|
3.84
years
|
|
4
|
|
The fair
value of each option is estimated as of the date of grant using the
Black-Scholes option-pricing model. Expected volatility is based on historical
volatility of the Company's common stock and other factors. The expected life of
options granted incorporates historical employee exercise and termination
behavior. Different expected lives are used for separate groups of employees who
have similar historical exercise patterns. The risk-free rate for periods that
coincide with the expected life of the options is based on the U.S. Treasury
yield curve in effect at the time of grant.
The
following summarizes the assumptions used in determining the fair value of
options granted:
|
Years
ended June 30,
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Risk-free
interest rate
|
|
2.2-3.5
|
%
|
|
4.0-4.7
|
%
|
|
4.6-4.9
|
%
|
|
Expected
dividend yield
|
|
2.39
|
%
|
|
1.24
|
%
|
|
1.18
|
%
|
|
Expected
option life
|
|
6-8
|
yrs
|
|
6-8
|
yrs
|
|
4-7
|
yrs
|
|
Expected
stock price volatility
|
|
17-18
|
%
|
|
17-19
|
%
|
|
19-21
|
%
|
|
Weighted
average stock price volatility
|
|
17.06
|
%
|
|
17.24
|
%
|
|
19.28
|
%
|
The
weighted average grant date fair value of options granted during the years ended
June 30, 2009, 2008, and 2007, was $4.90, $14.18, and $13.40, respectively.
There were no options exercised in 2009. The total intrinsic value of options
exercised during the years ended June 30, 2008 and 2007, was $3.6 million
and $20.4 million, respectively. As of June 30, 2009, there was $3.8
million in unrecognized compensation cost for stock options granted under the
plan. This cost is expected to be recognized over a weighted average period of
1.7 years.
Cash
received from option exercises under all share-based payment plans for the years
ended June 30, 2008 and 2007, was $10.4 million and $36.3 million,
respectively. The actual tax benefit realized for the tax deductions from option
exercises totaled $1.4 million and $8.1 million, respectively, for the years
ended June 30, 2008 and 2007.
11. Commitments
and Contingent Liabilities
The
Company occupies certain facilities and sales offices and uses certain equipment
under lease agreements. Rental expense for such leases was $17.1 million in
fiscal 2009, $17.6 million in fiscal 2008, and $17.7 million in fiscal
2007.
Below are
the minimum rental commitments at June 30, 2009, under all noncancelable
operating leases due in succeeding fiscal years:
|
Years
ending June 30,
|
|
|
(In
thousands)
|
|
|
|
|
2010
|
$
|
20,358
|
|
|
2011
|
|
18,782
|
|
|
2012
|
|
9,153
|
|
|
2013
|
|
3,800
|
|
|
2014
|
|
2,202
|
|
|
Later
years
|
|
18,914
|
|
|
Total
minimum rentals
|
$
|
73,209
|
|
Most of
the future lease payments relate to the lease of office facilities in New York
City through December 31, 2011. In the normal course of business, leases
that expire are generally renewed or replaced by leases on similar
property.
The
Company has recorded commitments for broadcast rights payable in future fiscal
years. The Company also is obligated to make payments under contracts for
broadcast rights not currently available for use and therefore not included in
the consolidated financial statements. Such unavailable contracts amounted to
$24.5 million at June 30, 2009. The fair value of these commitments for
unavailable broadcast rights, determined by the present value of future cash
flows discounted at the Company's current borrowing rate, was $22.3 million at
June 30, 2009.
The table
shows broadcast rights payments due in succeeding fiscal years:
|
Years
ending June 30,
|
Recorded
Commitments
|
|
Unavailable
Rights
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
2010
|
$
|
10,560
|
|
|
$
|
8,876
|
|
|
2011
|
|
4,846
|
|
|
|
10,058
|
|
|
2012
|
|
3,776
|
|
|
|
4,505
|
|
|
2013
|
|
2,583
|
|
|
|
941
|
|
|
2014
|
|
646
|
|
|
|
140
|
|
|
Later
years
|
|
–
|
|
|
|
13
|
|
|
Total
amounts payable
|
$
|
22,411
|
|
|
$
|
24,533
|
|
For
certain acquisitions consummated by the Company during the last three fiscal
years, the sellers are entitled to contingent payments should the acquired
operations achieve certain financial targets agreed to in the respective
acquisition agreements. See Note 2 for further details on contingent
payments.
The
Company is involved in certain litigation and claims arising in the normal
course of business. In the opinion of management, liabilities, if any, arising
from existing litigation and claims will not have a material effect on the
Company's earnings, financial position, or liquidity.
12. Other
Comprehensive Income (Loss)
Comprehensive
income (loss) is defined as the change in equity during a period from
transactions and other events and circumstances from nonowner sources.
Comprehensive income (loss) includes net earnings as well as items of other
comprehensive income (loss). Beginning in the Company's 2008 fiscal year, and as
a result of the Company's adoption of SFAS 158 as of June 30, 2007,
other comprehensive income (loss) no longer includes the change in minimum
pension liabilities, but includes changes in unrecognized net actuarial losses
and prior service costs.
The
following table summarizes the items of other comprehensive income (loss) and
the accumulated other comprehensive income (loss) balances:
|
|
Minimum
Pension/Post
Retirement
Liability
Adjustments
|
Interest
Rate
Swaps
|
Accumulated
Other
Comprehensive
Income
(Loss)
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
Balance
at June 30, 2006
|
$
|
(2,077
|
)
|
$
|
–
|
|
$
|
(2,077
|
)
|
|
Current-year
adjustments, pretax
|
|
3,199
|
|
|
1,358
|
|
|
4,557
|
|
|
Tax
expense
|
|
(1,248
|
)
|
|
(529
|
)
|
|
(1,777
|
)
|
|
Other
comprehensive income
|
|
1,951
|
|
|
829
|
|
|
2,780
|
|
|
Adoption
of SFAS 158
|
|
2,944
|
|
|
–
|
|
|
2,944
|
|
|
Tax
expense
|
|
(1,148
|
)
|
|
–
|
|
|
(1,148
|
)
|
|
Adoption
of SFAS 158, net of taxes
|
|
1,796
|
|
|
–
|
|
|
1,796
|
|
|
Balance
at June 30, 2007
|
|
1,670
|
|
|
829
|
|
|
2,499
|
|
|
Current-year
adjustments, pretax
|
|
(19,545
|
)
|
|
(3,467
|
)
|
|
(23,012
|
)
|
|
Tax
expense
|
|
7,643
|
|
|
1,351
|
|
|
8,994
|
|
|
Other
comprehensive loss
|
|
(11,902
|
)
|
|
(2,116
|
)
|
|
(14,018
|
)
|
|
Balance
at June 30, 2008
|
|
(10,232
|
)
|
|
(1,287
|
)
|
|
(11,519
|
)
|
|
Current-year
adjustments, pretax
|
|
(33,020
|
)
|
|
54
|
|
|
(32,966
|
)
|
|
Tax
expense
|
|
12,878
|
|
|
(21
|
)
|
|
12,857
|
|
|
Other
comprehensive income (loss)
|
|
(20,142
|
)
|
|
33
|
|
|
(20,109
|
)
|
|
Balance
at June 30, 2009
|
$
|
(30,374
|
)
|
$
|
(1,254
|
)
|
$
|
(31,628
|
)
|
13. Fair
Value Measurement
The
Company adopted SFAS 157 as of July 1, 2008, with the exception of the
application of the standard to non-recurring, non-financial assets and
liabilities. The adoption of SFAS 157 did not have a material impact on our
fair value measurements because the Company's existing fair value measurements
are consistent with the guidance of SFAS 157. SFAS 157 defines fair
value as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date. Specifically, SFAS 157 establishes a hierarchy
prioritizing the use of inputs in valuation techniques. SFAS 157 defines
levels within the hierarchy as follows:
|
●
|
Level
1
|
Quoted
prices (unadjusted) in active markets for identical assets or
liabilities;
|
|
●
|
Level
2
|
Inputs
other than quoted prices included within Level 1 that are either directly
or indirectly observable;
|
|
●
|
Level
3
|
Assets
or liabilities for which fair value is based on valuation models with
significant unobservable pricing inputs and which result in the use of
management estimates.
|
As of
June 30, 2009, Meredith had interest rate swap agreements that converted
$100 million of its variable-rate debt to fixed-rate debt. These agreements are
required to be measured at fair value on a recurring basis. The Company
determined that these interest rate swap agreements are defined as Level 2 in
the fair value hierarchy. As of June 30, 2009, the fair value of these
interest rate swap agreements was a liability of $2.1 million based on
significant other observable inputs (London Interbank Offered Rate (LIBOR))
within the fair value hierarchy. Fair value of interest rate swaps is based on a
discounted cash flow analysis, predicated on forward LIBOR prices, of the
estimated amounts the Company would have paid to terminate the
swaps.
The
carrying amount and estimated fair value of broadcast rights payable were $22.4
million and $20.3 million, respectively, as of June 30, 2009, and $28.3
million and $26.0 million, respectively, as of June 30, 2008. The fair
value of broadcast rights payable was determined using the present value of
future cash flows discounted at the Company's current borrowing
rate.
The
carrying amount and estimated fair value of long-term debt were $380.0 million
and $376.7 million, respectively, as of June 30, 2009, and $485.0 million
and $483.4 million, respectively, as of June 30, 2008. The fair value of
long-term debt was determined using the present value of future cash flows using
borrowing rates currently available for debt with similar terms and
maturities.
14. Financial
Information about Industry Segments
Meredith
is a diversified media company focused primarily on the home and family
marketplace. On the basis of products and services, the Company has established
two reportable segments: publishing and broadcasting. The publishing segment
includes magazine and book publishing, integrated marketing, interactive media,
brand licensing, database-related activities, and other related operations. The
broadcasting segment consists primarily of the operations of network-affiliated
television stations. Virtually all of the Company's revenues are generated in
the U.S. and all of the assets reside within the U.S. There are no material
intersegment transactions.
There are
two principal financial measures reported to the chief executive officer (the
chief operating decision maker) for use in assessing segment performance and
allocating resources. Those measures are operating profit and earnings from
continuing operations before interest, taxes, depreciation, and amortization
(EBITDA). Operating profit for segment reporting, disclosed below, is revenues
less operating costs and unallocated corporate expenses. Segment operating
expenses include allocations of certain centrally incurred costs such as
employee benefits, occupancy, information systems, accounting services, internal
legal staff, and human resources administration. These costs are allocated based
on actual usage or other appropriate methods, primarily number of employees.
Unallocated corporate expenses are corporate overhead expenses not attributable
to the operating groups. Nonoperating income (expense) and interest income and
expense are not allocated to the segments. In accordance with SFAS No. 131,
Disclosures about Segments of
an Enterprise and Related Information
, EBITDA is not presented
below.
Significant
non-cash items included in segment operating expenses other than depreciation
and amortization of fixed and intangible assets is the broadcasting impairment
charge taken in fiscal 2009 of $294.5 million and the amortization of broadcast
rights in the broadcasting segment. Broadcast rights amortization totaled $25.1
million in fiscal 2009, $26.8 million in fiscal 2008, and $28.0 million in
fiscal 2007.
Segment
assets include intangible, fixed, and all other non-cash assets identified with
each segment. Jointly used assets such as office buildings and information
technology equipment are allocated to the segments by appropriate methods,
primarily number of employees. Unallocated corporate assets consist primarily of
cash and cash items, assets allocated to or identified with corporate staff
departments, and other miscellaneous assets not assigned to one of the
segments.
The
following table presents financial information by segment:
|
Years
ended June 30,
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
Publishing
|
$
|
1,134,261
|
|
$
|
1,233,838
|
|
$
|
1,231,891
|
|
|
Broadcasting
|
|
274,536
|
|
|
318,605
|
|
|
347,832
|
|
|
Total
revenues
|
$
|
1,408,797
|
|
$
|
1,552,443
|
|
$
|
1,579,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
|
|
|
|
|
|
|
|
|
Publishing
|
$
|
151,017
|
|
$
|
188,341
|
|
$
|
211,733
|
|
|
Broadcasting
|
|
(257,774
|
)
|
|
77,860
|
|
|
106,804
|
|
|
Unallocated
corporate
|
|
(28,371
|
)
|
|
(26,549
|
)
|
|
(34,911
|
)
|
|
Income
(loss) from operations
|
$
|
(135,128
|
)
|
$
|
239,652
|
|
$
|
283,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
|
|
|
|
|
|
|
|
Publishing
|
$
|
15,433
|
|
$
|
20,373
|
|
$
|
18,699
|
|
|
Broadcasting
|
|
25,180
|
|
|
26,655
|
|
|
24,171
|
|
|
Unallocated
corporate
|
|
1,969
|
|
|
2,125
|
|
|
2,145
|
|
|
Total
depreciation and amortization
|
$
|
42,582
|
|
$
|
49,153
|
|
$
|
45,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Publishing
|
$
|
964,615
|
|
$
|
988,370
|
|
$
|
981,781
|
|
|
Broadcasting
|
|
603,659
|
|
|
926,785
|
|
|
953,437
|
|
|
Unallocated
corporate
|
|
101,029
|
|
|
144,465
|
|
|
154,733
|
|
|
Total
assets
|
$
|
1,669,303
|
|
$
|
2,059,620
|
|
$
|
2,089,951
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
|
|
|
|
|
|
|
|
Publishing
|
$
|
3,860
|
|
$
|
8,260
|
|
$
|
5,610
|
|
|
Broadcasting
|
|
14,731
|
|
|
16,605
|
|
|
34,018
|
|
|
Unallocated
corporate
|
|
4,884
|
|
|
4,755
|
|
|
2,971
|
|
|
Total
capital expenditures
|
$
|
23,475
|
|
$
|
29,620
|
|
$
|
42,599
|
|
15. Selected
Quarterly Financial Data (unaudited)
|
Year
ended June 30, 2009
|
|
First
Quarter
|
|
|
Second
Quarter
|
|
|
Third
Quarter
|
|
|
Fourth
Quarter
|
|
|
Total
|
|
|
(In
thousands except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Publishing
|
$
|
293,667
|
|
$
|
276,908
|
|
$
|
280,320
|
|
$
|
283,366
|
|
$
|
1,134,261
|
|
|
Broadcasting
|
|
70,403
|
|
|
84,376
|
|
|
57,274
|
|
|
62,483
|
|
|
274,536
|
|
|
Total
revenues
|
$
|
364,070
|
|
$
|
361,284
|
|
$
|
337,594
|
|
$
|
345,849
|
|
$
|
1,408,797
|
|
|
Operating
profit (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Publishing
|
$
|
33,890
|
|
$
|
23,208
|
|
$
|
47,971
|
|
$
|
45,948
|
|
$
|
151,017
|
|
|
Broadcasting
|
|
10,696
|
|
|
22,329
|
|
|
1,348
|
|
|
(292,147
|
)
|
|
(257,774
|
)
|
|
Unallocated
corporate
|
|
(6,435
|
)
|
|
(9,587
|
)
|
|
(5,959
|
)
|
|
(6,390
|
)
|
|
(28,371
|
)
|
|
Income
(loss) from operations
|
$
|
38,151
|
|
$
|
35,950
|
|
$
|
43,360
|
|
$
|
(252,589
|
)
|
$
|
(135,128
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) from continuing operations
|
$
|
19,068
|
|
$
|
17,403
|
|
$
|
24,874
|
|
$
|
(163,852
|
)
|
$
|
(102,507
|
)
|
|
Discontinued
operations
|
|
(431
|
)
|
|
(4,860
|
)
|
|
554
|
|
|
160
|
|
|
(4,577
|
)
|
|
Net
earnings (loss)
|
$
|
18,637
|
|
$
|
12,543
|
|
$
|
25,428
|
|
$
|
(163,692
|
)
|
$
|
(107,084
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) from continuing operations
|
$
|
0.42
|
|
$
|
0.39
|
|
$
|
0.55
|
|
$
|
(3.64
|
)
|
$
|
(2.28
|
)
|
|
Net
earnings (loss)
|
|
0.41
|
|
|
0.28
|
|
|
0.56
|
|
|
(3.64
|
)
|
|
(2.38
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) from continuing operations
|
|
0.42
|
|
|
0.39
|
|
|
0.55
|
|
|
(3.64
|
)
|
|
(2.28
|
)
|
|
Net
earnings (loss)
|
|
0.41
|
|
|
0.28
|
|
|
0.56
|
|
|
(3.64
|
)
|
|
(2.38
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
per share
|
|
0.215
|
|
|
0.215
|
|
|
0.225
|
|
|
0.225
|
|
|
0.880
|
|
First and
second quarter amounts differ from amounts previously reported in the Forms 10-Q
for the quarters ended September 30, 2008 and December 31, 2008,
respectively, due to the reclassification of amounts related to discontinued
operations.
As a
result of changes in shares outstanding during the year, the sum of the four
quarters' earnings (loss) per share may not necessarily equal the loss per share
for the year.
|
Year
ended June 30, 2008
|
|
First
Quarter
|
|
|
Second
Quarter
|
|
|
Third
Quarter
|
|
|
Fourth
Quarter
|
|
|
Total
|
|
|
(In
thousands except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Publishing
|
$
|
320,721
|
|
$
|
300,986
|
|
$
|
314,732
|
|
$
|
297,399
|
|
$
|
1,233,838
|
|
|
Broadcasting
|
|
74,551
|
|
|
87,637
|
|
|
77,546
|
|
|
78,871
|
|
|
318,605
|
|
|
Total
revenues
|
$
|
395,272
|
|
$
|
388,623
|
|
$
|
392,278
|
|
$
|
376,270
|
|
$
|
1,552,443
|
|
|
Operating
profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Publishing
|
$
|
54,946
|
|
$
|
44,258
|
|
$
|
64,309
|
|
$
|
24,828
|
|
$
|
188,341
|
|
|
Broadcasting
|
|
13,577
|
|
|
27,564
|
|
|
18,689
|
|
|
18,030
|
|
|
77,860
|
|
|
Unallocated
corporate
|
|
(8,333
|
)
|
|
(7,024
|
)
|
|
(5,032
|
)
|
|
(6,160
|
)
|
|
(26,549
|
)
|
|
Income
from operations
|
$
|
60,190
|
|
$
|
64,798
|
|
$
|
77,966
|
|
$
|
36,698
|
|
$
|
239,652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
from continuing operations
|
$
|
33,171
|
|
$
|
35,058
|
|
$
|
46,182
|
|
$
|
18,563
|
|
$
|
132,974
|
|
|
Discontinued
operations
|
|
199
|
|
|
1,001
|
|
|
(98
|
)
|
|
596
|
|
|
1,698
|
|
|
Net
earnings
|
$
|
33,370
|
|
$
|
36,059
|
|
$
|
46,084
|
|
$
|
19,159
|
|
$
|
134,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
from continuing operations
|
$
|
0.70
|
|
$
|
0.74
|
|
$
|
0.99
|
|
$
|
0.41
|
|
$
|
2.83
|
|
|
Net
earnings
|
|
0.70
|
|
|
0.76
|
|
|
0.99
|
|
|
0.42
|
|
|
2.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
from continuing operations
|
|
0.68
|
|
|
0.73
|
|
|
0.97
|
|
|
0.40
|
|
|
2.79
|
|
|
Net
earnings
|
|
0.68
|
|
|
0.75
|
|
|
0.97
|
|
|
0.41
|
|
|
2.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
per share
|
|
0.185
|
|
|
0.185
|
|
|
0.215
|
|
|
0.215
|
|
|
0.800
|
|
Amounts
differ from amounts previously reported in the Form 10-K for the year ended
June 30, 2008, due to the reclassification of amounts to discontinued
operations.
As a
result of changes in shares outstanding during the year, the sum of the four
quarters' earnings per share may not necessarily equal the earnings per share
for the year.
ELEVEN-YEAR
FINANCIAL HISTORY WITH SELECTED FINANCIAL DATA
|
Years
ended June 30,
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
|
(In
thousands except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Results
of operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
1,408,797
|
$
|
1,552,443
|
$
|
1,579,723
|
$
|
1,521,201
|
$
|
1,177,346
|
$
|
1,120,298
|
|
|
Costs
and expenses
|
|
1,206,814
|
|
1,263,638
|
|
1,251,082
|
|
1,215,211
|
|
921,894
|
|
900,988
|
|
|
Depreciation
and amortization
|
|
42,582
|
|
49,153
|
|
45,015
|
|
45,124
|
|
34,976
|
|
35,223
|
|
|
Nonrecurring
items
|
|
294,529
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
|
Income
(loss) from operations
|
|
(135,128)
|
|
239,652
|
|
283,626
|
|
260,866
|
|
220,476
|
|
184,087
|
|
|
Net
interest expense
|
|
(20,121)
|
|
(21,300)
|
|
(25,596)
|
|
(29,227)
|
|
(19,002)
|
|
(22,501)
|
|
|
Nonoperating
income (expense)
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
|
Income
taxes
|
|
(52,742)
|
|
(85,378)
|
|
(92,020)
|
|
(90,339)
|
|
(77,948)
|
|
(62,509)
|
|
|
Earnings
(loss) from continuing operations
|
|
(102,507)
|
|
132,974
|
|
166,010
|
|
141,300
|
|
123,526
|
|
99,077
|
|
|
Discontinued
operations
|
|
(4,577)
|
|
1,698
|
|
(3,664)
|
|
3,492
|
|
4,623
|
|
4,882
|
|
|
Cumulative
effect of change in accounting principle
|
|
–
|
|
–
|
|
–
|
|
–
|
|
893
|
|
–
|
|
|
Net
earnings (loss)
|
$
|
(107,084)
|
$
|
134,672
|
$
|
162,346
|
$
|
144,792
|
$
|
129,042
|
$
|
103,959
|
|
|
Basic
per share information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) from continuing operations
|
$
|
(2.28)
|
$
|
2.83
|
$
|
3.46
|
$
|
2.87
|
$
|
2.48
|
$
|
1.97
|
|
|
Discontinued
operations
|
|
(0.10)
|
|
0.04
|
|
(0.08)
|
|
0.07
|
|
0.09
|
|
0.10
|
|
|
Cumulative
effect of change in accounting principle
|
|
–
|
|
–
|
|
–
|
|
–
|
|
0.02
|
|
–
|
|
|
Net
earnings (loss)
|
$
|
(2.38)
|
$
|
2.87
|
$
|
3.38
|
$
|
2.94
|
$
|
2.59
|
$
|
2.07
|
|
|
Diluted
per share information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) from continuing operations
|
$
|
(2.28)
|
$
|
2.79
|
$
|
3.38
|
$
|
2.79
|
$
|
2.41
|
$
|
1.91
|
|
|
Discontinued
operations
|
|
(0.10)
|
|
0.04
|
|
(0.07)
|
|
0.07
|
|
0.09
|
|
0.09
|
|
|
Cumulative
effect of change in accounting principle
|
|
–
|
|
–
|
|
–
|
|
–
|
|
0.02
|
|
–
|
|
|
Net
earnings (loss)
|
$
|
(2.38)
|
$
|
2.83
|
$
|
3.31
|
$
|
2.86
|
$
|
2.52
|
$
|
2.00
|
|
|
Average
diluted shares outstanding
|
|
45,042
|
|
47,585
|
|
49,108
|
|
50,610
|
|
51,220
|
|
51,926
|
|
|
Other
per share information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
$
|
0.88
|
$
|
0.80
|
$
|
0.69
|
$
|
0.60
|
$
|
0.52
|
$
|
0.43
|
|
|
Stock
price–high
|
|
31.31
|
|
62.50
|
|
63.41
|
|
56.83
|
|
55.51
|
|
55.94
|
|
|
Stock
price–low
|
|
10.60
|
|
28.01
|
|
45.04
|
|
46.50
|
|
44.51
|
|
43.65
|
|
|
Financial
position at June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
$
|
340,140
|
$
|
403,090
|
$
|
452,640
|
$
|
431,520
|
$
|
304,495
|
$
|
314,014
|
|
|
Working
capital
|
|
(9,076)
|
|
(40,047)
|
|
(34,389)
|
|
(32,426)
|
|
(134,585)
|
|
(56,736)
|
|
|
Total
assets
|
|
1,669,303
|
|
2,059,620
|
|
2,089,951
|
|
2,040,675
|
|
1,491,308
|
|
1,465,927
|
|
|
Long-term
obligations (including current portion)
|
|
402,411
|
|
513,327
|
|
505,653
|
|
601,499
|
|
285,884
|
|
332,953
|
|
|
Shareholders'
equity
|
|
609,383
|
|
787,855
|
|
833,201
|
|
698,104
|
|
651,827
|
|
609,971
|
|
|
Number
of employees at June 30,
|
|
3,276
|
|
3,572
|
|
3,166
|
|
3,161
|
|
2,706
|
|
2,696
|
|
|
Comparable
basis reporting
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) from continuing operations
|
$
|
(102,507)
|
$
|
132,974
|
$
|
166,010
|
$
|
141,300
|
$
|
123,526
|
$
|
99,077
|
|
|
Adjustment
for SFAS 142 add back amortization, net of taxes
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
–
|
|
|
Adjusted
earnings (loss) from continuing operations
|
$
|
(102,507)
|
$
|
132,974
|
$
|
166,010
|
$
|
141,300
|
$
|
123,526
|
$
|
99,077
|
|
|
Adjusted
earnings (loss) from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per
basic share
|
$
|
(2.28)
|
$
|
2.83
|
$
|
3.46
|
$
|
2.87
|
$
|
2.48
|
$
|
1.97
|
|
|
Per
diluted share
|
|
(2.28)
|
|
2.79
|
|
3.38
|
|
2.79
|
|
2.41
|
|
1.91
|
|
|
1.
|
Meredith adopted SFAS 142,
Goodwill and Other Intangible Assets
, effective July 1,
2002. Comparable basis reporting assumes the provisions of SFAS 142
eliminating the amortization of goodwill and certain intangible assets
were effective in all periods.
|
|
Meredith
Corporation and Subsidiaries
ELEVEN-YEAR
FINANCIAL HISTORY WITH SELECTED FINANCIAL DATA
(continued)
|
Years
ended June 30,
|
|
2003
|
|
2002
|
|
2001
|
|
2000
|
|
1999
|
|
|
(In
thousands except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
Results
of operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
1,038,478
|
$
|
951,639
|
$
|
1,005,346
|
$
|
1,050,212
|
$
|
993,249
|
|
|
Costs
and expenses
|
|
849,564
|
|
797,771
|
|
820,914
|
|
833,935
|
|
795,416
|
|
|
Depreciation
and amortization
|
|
36,312
|
|
53,620
|
|
51,546
|
|
52,329
|
|
44,072
|
|
|
Nonrecurring
items
|
|
–
|
|
–
|
|
25,308
|
|
23,096
|
|
–
|
|
|
Income
from operations
|
|
152,602
|
|
100,248
|
|
107,578
|
|
140,852
|
|
153,761
|
|
|
Net
interest income expense
|
|
(27,209)
|
|
(32,589)
|
|
(31,901)
|
|
(33,751)
|
|
(21,287)
|
|
|
Nonoperating
income (expense)
|
|
(1,551)
|
|
63,812
|
|
21,477
|
|
–
|
|
2,375
|
|
|
Income
taxes
|
|
(47,898)
|
|
(50,854)
|
|
(37,524)
|
|
(48,462)
|
|
(55,584)
|
|
|
Earnings
from continuing operations
|
|
75,944
|
|
80,617
|
|
59,630
|
|
58,639
|
|
79,265
|
|
|
Discontinued
operations
|
|
5,714
|
|
5,070
|
|
6,701
|
|
7,172
|
|
5,427
|
|
|
Cumulative
effect of change in accounting principle
|
|
(85,749)
|
|
–
|
|
–
|
|
–
|
|
–
|
|
|
Net
earnings (loss)
|
$
|
(4,091)
|
$
|
85,687
|
$
|
66,331
|
$
|
65,811
|
$
|
84,692
|
|
|
Basic
per share information
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
from continuing operations
|
$
|
1.53
|
$
|
1.63
|
$
|
1.19
|
$
|
1.14
|
$
|
1.52
|
|
|
Discontinued
operations
|
|
0.11
|
|
0.10
|
|
0.14
|
|
0.14
|
|
0.10
|
|
|
Cumulative
effect of change in accounting principle
|
|
(1.72)
|
|
–
|
|
–
|
|
–
|
|
–
|
|
|
Net
earnings (loss)
|
$
|
(0.08)
|
$
|
1.73
|
$
|
1.33
|
$
|
1.28
|
$
|
1.62
|
|
|
Diluted
per share information
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
from continuing operations
|
$
|
1.48
|
$
|
1.57
|
$
|
1.16
|
$
|
1.11
|
$
|
1.48
|
|
|
Discontinued
operations
|
|
0.11
|
|
0.10
|
|
0.13
|
|
0.14
|
|
0.10
|
|
|
Cumulative
effect of change in accounting principle
|
|
(1.67)
|
|
–
|
|
–
|
|
–
|
|
–
|
|
|
Net
earnings (loss)
|
$
|
(0.08)
|
$
|
1.67
|
$
|
1.29
|
$
|
1.25
|
$
|
1.58
|
|
|
Average
diluted shares outstanding
|
|
51,276
|
|
51,230
|
|
51,354
|
|
52,774
|
|
53,761
|
|
|
Other
per share information
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
$
|
0.37
|
$
|
0.35
|
$
|
0.33
|
$
|
0.31
|
$
|
0.29
|
|
|
Stock
price–high
|
|
47.75
|
|
45.00
|
|
38.97
|
|
42.00
|
|
48.50
|
|
|
Stock
price–low
|
|
33.42
|
|
26.50
|
|
26.75
|
|
22.37
|
|
26.69
|
|
|
Financial
position at June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
$
|
268,429
|
$
|
272,211
|
$
|
291,082
|
$
|
288,799
|
$
|
256,175
|
|
|
Working
capital
|
|
(28,682)
|
|
(35,195)
|
|
(80,324)
|
|
(69,902)
|
|
(87,940)
|
|
|
Total
assets
|
|
1,431,824
|
|
1,460,264
|
|
1,437,747
|
|
1,439,773
|
|
1,423,396
|
|
|
Long-term
obligations (including current portion)
|
|
419,574
|
|
429,331
|
|
505,758
|
|
541,146
|
|
564,573
|
|
|
Shareholders'
equity
|
|
517,763
|
|
525,489
|
|
462,582
|
|
391,965
|
|
368,934
|
|
|
Number
of employees at June 30,
|
|
2,633
|
|
2,569
|
|
2,616
|
|
2,703
|
|
2,642
|
|
|
Comparable
basis reporting
1
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
from continuing operations
|
$
|
75,944
|
$
|
80,617
|
$
|
59,630
|
$
|
58,639
|
$
|
79,265
|
|
|
Adjustment
for SFAS 142 add back amortization, net of taxes
|
|
–
|
|
11,998
|
|
12,106
|
|
12,103
|
|
9,592
|
|
|
Adjusted
earnings from continuing operations
|
$
|
75,944
|
$
|
92,615
|
$
|
71,736
|
$
|
70,742
|
$
|
88,857
|
|
|
Adjusted
earnings from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Per
basic share
|
$
|
1.53
|
$
|
1.87
|
$
|
1.44
|
$
|
1.38
|
$
|
1.70
|
|
|
Per
diluted share
|
|
1.48
|
|
1.81
|
|
1.40
|
|
1.34
|
|
1.65
|
|
|
1.
|
Meredith adopted SFAS 142,
Goodwill and Other Intangible Assets
, effective July 1,
2002. Comparable basis reporting assumes the provisions of SFAS 142
eliminating the amortization of goodwill and certain intangible assets
were effective in all
periods.
|
NOTES
TO ELEVEN–YEAR FINANCIAL HISTORY WITH SELECTED FINANCIAL DATA
General
Prior
years are reclassified to conform to the current-year presentation.
Significant
acquisitions occurred in July 2005 with the purchase of the G+J Consumer Titles;
in December 2002 with the acquisition of the American Baby Group; in June 2002
with the exchange of WOFL and WOGX for KPTV; and in March 1999 with the
acquisition of WGCL.
Long-term
obligations include broadcast rights payable and Company debt associated with
continuing operations.
Shareholders'
equity includes temporary equity where applicable.
Earnings
from continuing operations
Fiscal
2009
nonrecurring expense
represented an impairment charge related to broadcasting FCC licenses and
goodwill.
Fiscal
2003
nonoperating expense
primarily represented a loss on the sale of a subsidiary.
Fiscal
2002
nonoperating income
primarily represented a gain from the disposition of the Orlando and Ocala
television stations.
Fiscal
2001
nonrecurring items primarily represented charges for employment
reduction programs and Internet investment write-offs. Nonoperating income
represented a gain from the disposition of
Golf for Women
magazine.
Fiscal
2000
nonrecurring items represented charges for asset write-downs,
contractual obligations, and personnel costs associated with the decision to
exit certain publishing operations and other restructuring
activities.
Fiscal
1999
nonoperating income represented a gain from the sale of the real
estate operations.
Discontinued
operations
Fiscal 2009
included the operations of and related shut-down charges of
Country Home
magazine.
Fiscal 2008
included the operations of
Country Home
magazine; the
operations of and after-tax loss from the disposition of WFLI, which was sold in
fiscal 2008; and the reversal of a portion of the prior year shut-down charges
of
Child
magazine.
Fiscal 2007
included the operations of
Country Home
magazine; the
results of the discontinued operations and related shut-down charges of
Child
magazine; the
operations of and after-tax gain from the disposition of KFXO, which was sold in
fiscal 2007; and the operations, including an impairment charge, of WFLI, which
is held for sale at June 30, 2007.
Fiscal 2006
included the results of the discontinued operations of
Country Home
magazine,
Child
magazine, KFXO, and
WFLI.
Fiscal
2005
included the results of the discontinued operations of
Country Home
magazine, KFXO,
and WFLI. The operations of KFXO for fiscal years prior to fiscal 2005 were not
shown as discontinued operations due to immateriality.
Fiscal 1999 to
fiscal 2004
included the results of the discontinued operations of
Country Home
magazine.
Changes
in accounting principles
Fiscal
2005
reflected the adoption
of SFAS 123R,
Share-based
Payment
.
Fiscal
2003
reflected
the adoption of
SFAS 142,
Goodwill and
Other Intangible Assets.
SCHEDULE
II–VALUATION AND QUALIFYING ACCOUNTS
|
|
|
Additions
|
|
|
Reserves
Deducted from Receivables in
the
Consolidated Financial Statements:
|
Balance
at
beginning
of
period
|
|
Charged
to
costs
and
expenses
|
|
Charged
to
other
accounts
|
|
Deductions
|
|
Balance
at
end
of
period
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
year ended June 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve
for doubtful accounts
|
$
|
11,109
|
$
|
3,319
|
$
|
–
|
|
$
|
(3,429
|
)
|
$
|
10,999
|
|
|
Reserve
for returns
|
|
12,835
|
|
12,495
|
|
–
|
|
|
(22,519
|
)
|
|
2,811
|
|
|
Total
|
$
|
23,944
|
$
|
15,814
|
$
|
–
|
|
$
|
(25,948
|
)
|
$
|
13,810
|
|
|
Fiscal
year ended June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve
for doubtful accounts
|
$
|
10,248
|
$
|
6,530
|
$
|
–
|
|
$
|
(5,669
|
)
|
$
|
11,109
|
|
|
Reserve
for returns
|
|
10,754
|
|
34,123
|
|
–
|
|
|
(32,042
|
)
|
|
12,835
|
|
|
Total
|
$
|
21,002
|
$
|
40,653
|
$
|
–
|
|
$
|
(37,711
|
)
|
$
|
23,944
|
|
|
Fiscal
year ended June 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve
for doubtful accounts
|
$
|
7,699
|
$
|
4,957
|
$
|
–
|
|
$
|
(2,408
|
)
|
$
|
10,248
|
|
|
Reserve
for returns
|
|
12,115
|
|
23,798
|
|
–
|
|
|
(25,159
|
)
|
|
10,754
|
|
|
Total
|
$
|
19,814
|
$
|
28,755
|
$
|
–
|
|
$
|
(27,567
|
)
|
$
|
21,002
|
|
None.
Evaluation
of Disclosure Controls and Procedures
Meredith
conducted an evaluation under the supervision and with the participation of
management, including the Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the Company's disclosure controls and procedures (as
defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934
as amended (the Exchange Act)) as of June 30, 2009. On the basis of this
evaluation, Meredith's Chief Executive Officer and Chief Financial Officer have
concluded the Company's disclosure controls and procedures are effective in
ensuring that information required to be disclosed in the reports that Meredith
files or submits under the Exchange Act are (i) recorded, processed, summarized,
and reported within the time periods specified in the Securities and Exchange
Commission's rules and forms and (ii) accumulated and communicated to Meredith's
management, including the Chief Executive Officer and Chief Financial Officer,
to allow timely decisions regarding required disclosures.
Management's
Report on Internal Control over Financial Reporting
The
Company's management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Rule
13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended.
Under the supervision and with the participation of management, including the
Chief Executive Officer and Chief Financial Officer, the Company conducted an
evaluation of the effectiveness of the design and operation of internal control
over financial reporting based on criteria established in
Internal Control–Integrated
Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). On the basis of that evaluation, management
concluded that internal control over financial reporting was effective as of
June 30, 2009.
KPMG LLP,
an independent registered public accounting firm, has issued an audit report on
the effectiveness of the Company's internal control over financial reporting.
This report appears on page 44.
Changes
in Internal Control over Financial Reporting
There
have been no changes in the Company's internal control over financial reporting
during the quarter ended June 30, 2009, that have materially affected or
are reasonably likely to materially affect the Company's internal control over
financial reporting.
Not
applicable.
On
July 13, 2009, the Company issued $75 million in fixed-rate unsecured
senior notes to a leading insurance company. The senior notes mature as follows:
$50 million on July 13, 2013, and $25 million on July 13, 2014, and
bear interest at rates of 6.70 percent and 7.19 percent, respectively. The
proceeds were used to pay down the asset-backed commercial paper facility
resulting in no net incremental debt.
The
information required by this Item is set forth in Registrant's Proxy Statement
for the Annual Meeting of Shareholders to be held on November 4, 2009,
under the captions "Election of Directors," "Corporate Governance," "Meetings
and Committees of the Board" and "Section 16(a) Beneficial Ownership
Reporting Compliance," and in Part I of this Form 10-K beginning on
page 10 under the caption "Executive Officers of the Company" and is
incorporated herein by reference.
The
Company has adopted a Code of Business Conduct and Ethics and a Code of Ethics
for CEO and Senior Financial Officers. These codes are applicable to the Chief
Executive Officer, Chief Financial Officer, Controller, and any persons
performing similar functions. The Company's Code of Business Conduct and Ethics
and the Company's Code of Ethics for CEO and Senior Financial Officers are
available free of charge on the Company's corporate website at
Meredith.com
. Copies of the
codes are also available free of charge upon written request to the Secretary of
the Company. The Company will post any amendments to the Code of Business
Conduct and Ethics or the Code of Ethics for CEO and Senior Financial Officers,
as well as any waivers that are required to be disclosed by the rules of either
the U.S. Securities and Exchange Commission or the New York Stock Exchange on
the Company's corporate website.
There
have been no material changes to the procedures by which shareholders of the
Company may recommend nominees to the Company's Board of Directors.
The
information required by this Item is set forth in Registrant's Proxy Statement
for the Annual Meeting of Shareholders to be held on November 4, 2009,
under the captions "Compensation Discussion and Analysis," "Compensation
Committee Report," "Summary Compensation Table," "Director Compensation," and
"Compensation Committee Interlocks and Insider Participation" and is
incorporated herein by reference.
Certain
information required by this Item is set forth in Registrant's Proxy Statement
for the Annual Meeting of Shareholders to be held on November 4, 2009,
under the captions "Security Ownership of Certain Beneficial Owners and
Management" and is incorporated herein by reference.
The
following table sets forth information with respect to the Company's common
stock that may be issued under all equity compensation plans of the Company in
existence as of June 30, 2009. All of the equity compensation plans for
which information is included in the following table have been approved by
shareholders.
|
Plan
Category
|
(a)
Number
of securities to
be
issued upon exercise
of
outstanding options,
warrants,
and rights
|
(b)
Weighted
average
exercise
price of
outstanding
options,
warrants,
and rights
|
(c)
Number
of securities
remaining
available for
future
issuance under
equity
compensation
plans
(excluding
securities
reflected in
column
(a))
|
|
Equity
compensation plans approved by shareholders
|
5,360,476
|
|
$41.23
|
|
2,599,041
|
|
|
Equity
compensation plans not approved by shareholders
|
None
|
|
NA
|
|
None
|
|
|
Total
|
5,360,476
|
|
$41.23
|
|
2,599,041
|
|
NA
- Not applicable
The
information required by this Item is set forth in Registrant's Proxy Statement
for the Annual Meeting of Shareholders to be held on November 4, 2009,
under the captions "Related Person Transaction Policy and Procedures" and
"Corporate Governance - Director Independence" and is incorporated herein by
reference.
The
information required by this Item is set forth in Registrant's Proxy Statement
for the Annual Meeting of Shareholders to be held on November 4, 2009,
under the caption "Audit Committee Disclosure" and is incorporated herein by
reference.
The
following consolidated financial statements listed under (a) 1. and the
financial statement schedule listed under (a) 2. of the Company and its
subsidiaries are filed as part of this report as set forth in the Index on
page 43 (Item 8).
|
(a)
|
Financial
Statements, Financial Statement Schedule, and Exhibits
|
|
|
|
|
|
|
1.
|
Financial
Statements
|
|
|
|
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
|
|
|
Consolidated
Balance Sheets as of June 30, 2009 and 2008
|
|
|
|
Consolidated
Statements of Earnings (Loss) for the Years Ended June 30, 2009,
2008, and 2007
|
|
|
|
Consolidated
Statements of Shareholders' Equity for the Years Ended June 30, 2009,
2008, and 2007
|
|
|
|
Consolidated
Statements of Cash Flows for the Years Ended June 30, 2009, 2008, and
2007
|
|
|
|
Notes
to Consolidated Financial Statements
|
|
|
|
Eleven-Year
Financial History with Selected Financial Data
|
|
|
|
|
|
|
|
2.
|
Financial
Statement Schedule for the years ended June 30, 2009, 2008, and
2007
|
|
|
|
|
|
|
|
Schedule
II–Valuation and Qualifying Accounts
|
|
|
|
|
|
|
|
|
All
other Schedules have been omitted because the items required by such
schedules are not present in the consolidated financial statements, are
covered in the consolidated financial statements or notes thereto, or are
not significant in amount.
|
|
|
|
|
|
|
|
3.
|
Exhibits
|
|
|
|
|
|
|
|
Certain
of the exhibits to this Form 10-K are incorporated herein by
reference, as specified:
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1
|
The
Company's Restated Articles of Incorporation, as amended, are incorporated
herein by reference to Exhibit 3.1 to the Company's Quarterly Report
on Form 10-Q for the period ended December 31,
2003.
|
|
|
|
|
|
|
|
|
3.2
|
The
Restated Bylaws, as amended, are incorporated herein by reference to
Exhibit 3.2 to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 2004.
|
|
|
|
|
|
|
|
|
4.1
|
Credit
Agreement dated as of April 5, 2002, among Meredith Corporation and a
group of banks including amendment dated May 7, 2004, is incorporated
herein by reference to Exhibit 4.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 2004. Second
amendment to the aforementioned agreement is incorporated herein by
reference to Exhibit 4 to the Company's Quarterly Report on
Form 10-Q for the period ended December 31, 2004. Third
amendment to the aforementioned agreement is incorporated herein by
reference to Exhibit 4.2 to the Company's Quarterly Report on
Form 10-Q for the period ended September 30,
2005.
|
|
|
|
|
|
|
|
|
4.2
|
Note
Purchase Agreement dated as of July 1, 2005, among Meredith
Corporation, as issuer and seller, and named purchasers is incorporated
herein by reference to Exhibit 4.1 to the Company's Current Report on
Form 8-K filed July 7, 2005.
|
|
|
|
|
|
|
|
|
4.3
|
Note
Purchase Agreement dated as of July 13, 2009, among Meredith
Corporation, as issuer and seller, and named
purchasers.
|
|
|
|
|
|
|
|
|
4.4
|
Note
Purchase Agreement dated as of June 16, 2008, among Meredith
Corporation, as issuer and seller, and named
purchasers.
|
|
|
|
|
|
|
|
|
4.5
|
Amendment
No. 1 dated as of July 13, 2009, to Note Purchase Agreement
dated as of June 16, 2008.
|
|
|
|
|
|
|
|
|
10.1
|
Indemnification
Agreement in the form entered into between the Company and its officers
and directors is incorporated herein by reference to Exhibit 10 to
the Company's Quarterly Report on Form 10-Q for the period ending
December 31, 1988.*
|
|
|
|
|
|
|
|
|
10.2
|
Meredith
Corporation Deferred Compensation Plan, dated as of November 8, 1993,
is incorporated herein by reference to Exhibit 10 to the Company's
Quarterly Report on Form 10-Q for the period ending December 31,
1993.*
|
|
|
|
|
|
|
|
|
10.3
|
Meredith
Corporation Management Incentive Plan is incorporated herein by reference
to Exhibit 10.3 to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1999.*
|
|
|
|
|
|
|
|
|
10.4
|
Meredith
Corporation Stock Plan for Non-Employee Directors is incorporated herein
by reference to Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the period ended December 31,
2002.*
|
|
|
|
|
|
|
|
|
10.5
|
Amended
and Restated Replacement Benefit Plan effective January 1, 2001, is
incorporated herein by reference to Exhibit 10.17 to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30,
2003.*
|
|
|
|
|
|
|
|
|
10.6
|
Amended
and Restated Supplemental Benefit Plan effective January 1, 2001, is
incorporated herein by reference to Exhibit 10.18 to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30,
2003.*
|
|
|
|
|
|
|
|
|
10.7
|
Form
of Nonqualified Stock Option Award Agreement between Meredith Corporation
and the named employee for the 2004 Stock Incentive Plan is incorporated
herein by reference to Exhibit 10.3 to the Company's Quarterly Report
on Form 10-Q for the period ended December 31,
2004.*
|
|
|
|
|
|
|
|
|
10.8
|
Form
of Restricted Stock Unit Award Agreement between Meredith Corporation and
the named employee for the 2004 Stock Incentive Plan is incorporated
herein by reference to Exhibit 10.4 to the Company's Current Report
on Form 8-K filed August 8, 2005.*
|
|
|
|
|
|
|
|
|
10.9
|
Meredith
Corporation 2004 Stock Incentive Plan is incorporated herein by reference
to Exhibit 10.14 to the Company’s Annual Report on Form 10-K for
the fiscal year ended June 30, 2008.*
|
|
|
|
|
|
|
|
|
10.10
|
Form
of Restricted Stock Award Agreement between Meredith Corporation and the
named employee for the 2004 Stock Incentive Plan is incorporated herein by
reference to Exhibit 10.15 to the Company’s Annual Report on
Form 10-K for the fiscal year ended June 30,
2008.*
|
|
|
|
|
|
|
|
|
10.11
|
Form
of Restricted Stock Award Agreement (performance based) between Meredith
Corporation and the named employee for the 2004 Stock Incentive Plan is
incorporated herein by reference to the Company's Current Report on
Form 8-K filed August 18, 2008.*
|
|
|
|
|
|
|
|
|
10.12
|
Consultancy
Agreement dated May 11, 2004, between Meredith Corporation and
William T. Kerr is incorporated herein by reference to Exhibit 10.1
to the Company’s Form 10-Q for the period ended March 31, 2004.
First amendment to the aforementioned agreement is incorporated herein by
reference to Exhibit 10 to the Company's Current Report on
Form 8-K filed September 5, 2008.*
|
|
|
|
|
|
|
|
|
10.13
|
Amended
and Restated Severance Agreement in the form entered into between the
Company and its executive officers is incorporated herein by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for
the period ended December 31, 2008.
|
|
|
|
|
|
|
|
|
10.14
|
Letter
employment agreement dated February 14, 2005, between Meredith
Corporation and Paul A. Karpowicz is incorporated by reference to
Exhibit 99.1 to the Company’s Current Report on Form 8-K filed
February 10, 2005. First amendment to the aforementioned agreement is
incorporated herein by reference to Exhibit 10.5 to the Company's
Quarterly Report on Form 10-Q for the period ended December 31,
2008.*
|
|
|
|
|
|
|
|
|
10.15
|
Employment
Agreement dated January 20, 2006, and re-executed August 24,
2009, between Meredith Corporation and Stephen M.
Lacy.*
|
|
|
|
|
|
|
|
|
10.16
|
Employment
Agreement dated March 9, 2008, and re-executed August 24, 2009,
between Meredith Corporation and John H. (Jack) Griffin,
Jr.*
|
|
|
|
|
|
|
|
|
10.17
|
Employment
Agreement dated August 14, 2008, and re-executed August 24,
2009, between Meredith Corporation and John S. Zieser.*
|
|
|
|
|
|
|
|
|
10.18
|
Letter
employment agreement dated September 26, 2008, between Meredith
Corporation and
Joseph
H. Ceryanec is incorporated herein by reference to the Company's Current
Report on Form 8-K filed October 1, 2008. First amendment to the
aforementioned agreement is incorporated herein by reference to
Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for
the period ended December 31, 2008.*
|
|
|
|
|
|
|
|
|
10.19
|
Receivables
Sale Agreement dated as of April 9, 2002 among Meredith Corporation,
as Sole Initial Originator and Meredith Funding Corporation (a
wholly-owned subsidiary of Meredith Corporation), as buyer is incorporated
herein by reference to the Company’s Quarterly Report on Form 10-Q
for the period ended March 31, 2002. Receivables Purchase Agreement
dated as of April 9, 2002 among Meredith Funding Corporation, as
Seller, Meredith Corporation, as Servicer, Falcon Asset Securitization
Corporation, The Financial Institutions from time to time party hereto and
Bank One, NA (Main Office Chicago), as Agent, is incorporated herein by
reference to the Company’s Quarterly Report on Form 10-Q for the
period ended March 31, 2002. Eighth amendment to the aforementioned
agreements is incorporated herein by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the period ended
March 31, 2009. Ninth amendment to the aforementioned agreements is
incorporated herein by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the period ended March 31,
2009.
|
|
|
|
|
|
|
|
|
21
|
Subsidiaries
of the Registrant
|
|
|
|
|
|
|
|
|
23
|
Consent
of Independent Registered Public Accounting Firm
|
|
|
|
|
|
|
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) and
Rule 15d-14(a) of the Securities Exchange Act, as
amended.
|
|
|
|
|
|
|
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14(a) and
Rule 15d-14(a) of the Securities Exchange Act, as
amended.
|
|
|
|
|
|
|
|
|
32
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
|
|
|
|
The
Company agrees to furnish to the Commission, upon request, a copy of each
agreement with respect to long-term debt of the Company for which the
amount authorized thereunder does not exceed 10 percent of the total
assets of the Company on a consolidated basis.
|
|
|
|
|
|
|
*
Management contract or
compensatory plan or arrangement
|
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
MEREDITH
CORPORATION
|
|
By /s/
John S. Zieser
|
|
John
S. Zieser, Chief Development
Officer/General
Counsel and
Secretary
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
|
|
|
|
|
/s/
Joseph H. Ceryanec
|
|
/s/ Stephen
M. Lacy
|
|
Joseph
H. Ceryanec, Vice President -
Chief
Financial Officer (Principal
Financial
and Accounting Officer)
|
|
Stephen
M. Lacy, President and
Chief
Executive Officer and Director
(Principal
Executive Officer)
|
|
|
|
|
|
|
|
|
|
/s/ William
T. Kerr
|
|
/s/ Herbert
M. Baum
|
|
William
T. Kerr, Chairman
of
the Board and Director
|
|
Herbert
M. Baum, Director
|
|
|
|
|
|
|
|
|
|
/s/ Mary
Sue Coleman
|
|
/s/ James
R. Craigie
|
|
Mary
Sue Coleman, Director
|
|
James
R. Craigie, Director
|
|
|
|
|
|
|
|
|
|
/s/ Alfred
H. Drewes
|
|
/s/ D.
Mell Meredith Frazier
|
|
Alfred
H. Drewes, Director
|
|
D.
Mell Meredith Frazier, Director
|
|
|
|
|
|
|
|
|
|
/s/ Frederick
B. Henry
|
|
/s/ Joel
W. Johnson
|
|
Frederick
B. Henry, Director
|
|
Joel
W. Johnson, Director
|
|
|
|
|
|
|
|
|
|
/s/ David
J. Londoner
|
|
/s/ Philip
A. Marineau
|
|
David
J. Londoner, Director
|
|
Philip
A. Marineau, Director
|
|
|
|
|
|
|
|
|
|
/s/ Elizabeth
E. Tallett
|
|
|
|
Elizabeth
E. Tallett, Director
|
|
|
Each of
the above signatures is affixed as of August 24, 2009.
|
Exhibit
Number
|
|
Item
|
|
|
|
|
|
|
|
|
4.3
|
|
Note
Purchase Agreement dated as of July 13, 2009, among Meredith
Corporation, as issuer and seller, and named
purchasers.
|
|
|
|
|
|
|
|
4.4
|
|
Note
Purchase Agreement dated as of June 16, 2008, among Meredith
Corporation, as issuer and seller, and named
purchasers.
|
|
|
|
|
|
|
|
4.5
|
|
Amendment
No. 1 dated as of July 13, 2009, to Note Purchase Agreement
dated as of June 16, 2008.
|
|
|
|
|
|
|
|
10.15
|
|
Employment
Agreement dated January 20, 2006, and re-
executed August 24, 2009, between
Meredith Corporation
and Stephen M. Lacy.*
|
|
|
|
|
|
|
|
10.16
|
|
Employment
Agreement dated March 9, 2008, and re-executed August 24, 2009,
between Meredith Corporation and John H. (Jack) Griffin,
Jr.*
|
|
|
|
|
|
|
|
10.17
|
|
Employment
Agreement dated August 14, 2008, and re-executed August 24,
2009, between Meredith Corporation and John S.
Zieser.*
|
|
|
|
|
|
|
|
21
|
|
Subsidiaries
of the Registrant.
|
|
|
|
|
|
|
|
23
|
|
Consent
of Independent Registered Public Accounting Firm.
|
|
|
|
|
|
|
|
31.1
|
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) and
Rule 15d-14(a) of the Securities Exchange Act, as
amended.
|
|
|
|
|
|
|
|
31.2
|
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14(a) and
Rule 15d-14(a) of the Securities Exchange Act, as
amended.
|
|
|
|
|
|
|
|
32
|
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
*
Management contract or
compensatory plan or
arrangement
|
Exhibit
4.3
Meredith Corporation
$50,000,000
6.70% Senior Notes, Series L, due July 13, 2013
$25,000,000
7.19% Senior Notes, Series M, due July 13, 2014
______________
Note
Purchase Agreement
_____________
Dated as
of July 13, 2009
A/73051641.7/0718998-0000340837
|
|
SECTION 1.AUTHORIZATION
OF NOTES
|
|
|
SECTION 2.SALE
AND PURCHASE OF NOTES
|
|
|
SECTION 4.CONDITIONS
TO CLOSING
|
|
|
Section
4.1
|
Representations
and Warranties
|
|
|
|
Section
4.2
|
Performance;
No Default
|
|
|
|
Section
4.3
|
Compliance
Certificates
|
|
|
|
Section
4.4
|
Opinions
of Counsel
|
|
|
|
Section
4.5
|
Purchase
Permitted By Applicable Law, Etc
|
|
|
|
Section
4.6
|
Sale
of Other Notes
|
|
|
|
Section
4.7
|
Payment
of Special Counsel Fees
|
|
|
|
Section
4.8
|
Private
Placement Number
|
|
|
|
Section
4.9
|
Changes
in Corporate Structure
|
|
|
|
Section
4.10
|
Amendment
of 2008 Note Purchase Agreement
|
|
|
|
Section
4.11
|
Funding
Instructions
|
|
|
|
Section
4.12
|
Proceedings
and Documents
|
|
|
|
SECTION 5.REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
|
|
|
Section
5.1
|
Organization;
Power and Authority
|
|
|
|
Section
5.2
|
Authorization,
Etc
|
|
|
|
Section
5.4
|
Organization
and Ownership of Shares of Subsidiaries; Affiliates
|
|
|
|
Section
5.5
|
Financial
Statements
|
|
|
|
Section
5.6
|
Compliance
with Laws, Other Instruments, Etc
|
|
|
|
Section
5.7
|
Governmental
Authorizations, Etc
|
|
|
|
Section
5.8
|
Litigation;
Observance of Agreements, Statutes and Orders
|
|
|
|
Section
5.10
|
Title
to Property; Leases
|
|
|
|
Section
5.11
|
Licenses,
Permits, Etc
|
|
|
|
Section
5.12
|
Compliance
with ERISA
|
|
|
|
Section
5.13
|
Private
Offering by the Company
|
|
|
|
Section
5.14
|
Use
of Proceeds; Margin Regulations
|
|
|
|
Section
5.15
|
Existing
Debt; Future Liens
|
|
|
|
Section
5.16
|
Foreign
Assets Control Regulations, Etc
|
|
|
|
Section
5.17
|
Status
under Certain Statutes
|
|
|
|
Section
5.18
|
Notes
Rank Pari Passu
|
|
|
|
Section
5.19
|
Environmental
Matters
|
|
|
|
SECTION 6.REPRESENTATIONS
OF THE PURCHASER
|
|
|
Section
6.1
|
Purchase
for Investment
|
|
|
|
Section
6.2
|
Source
of Funds
|
|
|
|
SECTION 7.INFORMATION
AS TO THE COMPANY
|
|
|
Section
7.1
|
Financial
and Business Information
|
|
|
|
Section
7.2
|
Officer’s
Certificate
|
|
|
|
SECTION 8.PAYMENT
AND PREPAYMENT OF THE NOTES
|
|
|
Section
8.1
|
Required
Payment
|
|
|
|
Section
8.2
|
Optional
Prepayments with Make-Whole Amount
|
|
|
Section
8.3
|
Change
in Control
|
|
|
|
Section
8.4
|
Allocation
of Partial Prepayments
|
|
|
|
Section
8.5
|
Maturity;
Surrender, Etc
|
|
|
|
Section
8.6
|
Purchase
of Notes
|
|
|
|
Section
8.7
|
Make-Whole
Amount
|
|
|
|
SECTION 9.AFFIRMATIVE
COVENANTS
|
|
|
Section
9.1
|
Compliance
with Law
|
|
|
|
Section
9.3
|
Maintenance
of Properties
|
|
|
|
Section
9.4
|
Payment
of Taxes and Claims
|
|
|
|
Section
9.5
|
Corporate
Existence, Etc
|
|
|
|
Section
9.6
|
Notes
to Rank Pari Passu
|
|
|
|
Section
9.7
|
Books
and Records
|
|
|
|
Section
9.8
|
Guaranty
by Subsidiaries; Liens
|
|
|
|
Section
9.9
|
Intercreditor
Agreement
|
|
|
|
SECTION 10.NEGATIVE
COVENANTS
|
|
|
Section
10.1
|
Transactions
with Affiliates
|
|
|
|
Section
10.2
|
Interest
Coverage Ratio
|
|
|
|
Section
10.3
|
Limitations
on Debt
|
|
|
|
Section
10.5
|
Mergers,
Consolidations and Sales of Assets
|
|
|
|
Section
10.6
|
Limitation
on Sale-and-Leaseback Transactions
|
|
|
Section
10.7
|
Termination
of Pension Plans
|
|
|
|
Section
10.8
|
Nature
of Business
|
|
|
|
Section
10.9
|
Terrorism
Sanctions Regulations
|
|
|
|
SECTION 11.EVENTS
OF DEFAULT
|
|
|
SECTION 12.REMEDIES
ON DEFAULT, ETC
|
|
|
Section
12.1
|
Acceleration
|
|
|
|
Section
12.2
|
Other
Remedies
|
|
|
|
Section
12.4
|
No
Waivers or Election of Remedies, Expenses, Etc
|
|
|
|
SECTION 13.REGISTRATION;
EXCHANGE; SUBSTITUTION OF NOTES
|
|
|
Section
13.1
|
Registration
of Notes
|
|
|
|
Section
13.2
|
Transfer
and Exchange of Notes
|
|
|
|
Section
13.3
|
Replacement
of Notes
|
|
|
|
SECTION 14.PAYMENTS
ON NOTES
|
|
|
Section
14.1
|
Place
of Payment
|
|
|
|
Section
14.2
|
Home
Office Payment
|
|
|
|
Section
15.1
|
Transaction
Expenses
|
|
|
|
SECTION 16.SURVIVAL
OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT
|
|
|
SECTION 17.AMENDMENT
AND WAIVER
|
|
|
Section
17.1
|
Requirements
|
|
|
|
Section
17.2
|
Solicitation
of Holders of Notes
|
|
|
|
Section
17.3
|
Binding
Effect, etc
|
|
|
|
Section
17.4
|
Notes
Held by Company, etc
|
|
|
|
SECTION 19.REPRODUCTION
OF DOCUMENTS
|
|
|
SECTION 20.CONFIDENTIAL
INFORMATION
|
|
|
SECTION 21.SUBSTITUTION
OF PURCHASER
|
|
|
Section
22.1
|
Successors
and Assigns
|
|
|
|
Section
22.2
|
Payments
Due on Non-Business Days
|
|
|
|
Section
22.3
|
Accounting
Terms
|
|
|
|
Section
22.4
|
Severability
|
|
|
|
Section
22.5
|
Construction,
etc
|
|
|
|
Section
22.6
|
Counterparts
|
|
|
|
Section
22.7
|
Governing
Law
|
|
|
|
Section
22.8
|
Jurisdiction
and Process; Waiver of Jury Trial
|
|
SCHEDULES
AND EXHIBITS
Schedule
A
Information
Relating to Purchasers
*
Schedule B Defined
Terms
Schedule 5.3
Disclosure Materials
Schedule 5.4
Subsidiaries of the Company and Ownership of Subsidiary Stock
Schedule 5.5 Financial
Statements
Schedule 5.14 Use
of Proceeds
Schedule 5.15 Existing
Debt
|
|
*
Exhibit 1-A
|
|
Form
of 6.70% Senior Note, Series L, due July 13,
2013
|
|
|
*
Exhibit 1-B
|
|
Form
of 7.19% Senior Note, Series M, due July 13,
2014
|
|
|
Exhibit 4.4(a)
|
|
Form
of Opinion of Special Counsel for the
Company
|
|
|
Exhibit 4.4(b)
|
|
Form
of Opinion of General Counsel for the
Company
|
|
|
Exhibit 4.4(c)
|
|
Form
of Opinion of Special Counsel for the
Purchasers
|
Material
Schedules and Exhibits (those marked with *) are included in this
filing
MEREDITH
CORPORATION
1716
Locust Street
Des Moines,
Iowa 50309
$50,000,000
6.70% Senior Notes, Series L, due July 13, 2013
$25,000,000
7.19% Senior Notes, Series M, due July 13, 2014
Dated as
of July 13, 2009
To Each
of the Purchasers listed in
Schedule
A hereto:
Ladies
and Gentlemen:
Meredith
Corporation, an Iowa corporation (the “
Company
”), agrees with each of
the purchasers whose names appear at the end hereof (each, a “
Purchaser
” and, collectively,
the “
Purchasers
”) as
follows:
|
SECTION 1.
|
AUTHORIZATION
OF NOTES.
|
The
Company will authorize the issue and sale of
(a)
$50,000,000
aggregate principal amount of its 6.70% Senior Notes, Series L, due July 13,
2013 (the “
Series
L Notes
”, such term to include any such notes issued in substitution
therefore pursuant to Section 13); and
(b)
$25,000,000
aggregate principal amount of its 7.19% Senior Notes, Series M, due July 13,
2014 (the “
Series M
Notes
”, such term to include any such notes issued in substitution
therefore pursuant to Section 13).
The term
“
Notes
”
as used in this
Agreement shall include, collectively, the Series L Notes and Series M
Notes. The Series L Notes and Series M Notes shall be substantially
in the respective forms set forth in Exhibits 1-A and 1-B in each case with
such changes therefrom, if any, as may be approved by the Purchasers and the
Company. Certain capitalized and other terms used in this Agreement
are defined in Schedule B; and references to a “Schedule” or an “Exhibit”
are, unless otherwise specified, to a Schedule or an Exhibit attached to this
Agreement.
|
SECTION 2.
|
SALE
AND PURCHASE OF NOTES.
|
Subject
to the terms and conditions of this Agreement, the Company will issue and sell
to each Purchaser and each Purchaser will purchase from the Company, at the
Closing provided for in Section 3, Notes in the principal amount and of the
Series specified opposite such Purchaser’s name in Schedule A at the
purchase price of 100% of the principal amount and of the Series
thereof. The Purchasers’ obligations hereunder are several and not
joint obligations, and no Purchaser shall have any liability to any Person for
the performance or non-performance of any obligation by any other Purchaser
hereunder.
The sale
and purchase of the Notes to be purchased by each Purchaser shall occur at the
offices of Bingham McCutchen LLP, 399 Park Avenue, New York, New York at 10:00
a.m. at a closing (the “
Closing
”) on July 13, 2009 or
on such other Business Day thereafter on or prior to July 28, 2009 as may be
agreed upon by the Company and the Purchasers. At the Closing the
Company will deliver to each Purchaser the Notes to be purchased by such
Purchaser in the form of a single Note (or such greater number of Notes in
denominations of at least $100,000 as such Purchaser may request) dated the date
of the Closing and registered in such Purchaser’s name (or in the name of its
nominee), against delivery by such Purchaser to the Company or its order of
immediately available funds in the amount of the purchase price therefor by wire
transfer of immediately available funds for the account of the Company to
account number 0289646226 at Wells Fargo Bank N.A., San Francisco, CA, USA ABA
#121000248. If at the Closing the Company shall fail to tender such
Notes to any Purchaser as provided above in this Section 3, or any of the
conditions specified in Section 4 shall not have been fulfilled to such
Purchaser’s satisfaction, such Purchaser shall, at its election, be relieved of
all further obligations under this Agreement, without thereby waiving any rights
such Purchaser may have by reason of such failure or such
nonfulfillment.
|
SECTION 4.
|
CONDITIONS
TO CLOSING.
|
Each
Purchaser’s obligation to purchase and pay for the Notes to be sold to such
Purchaser at the Closing is subject to the fulfillment to such Purchaser’s
satisfaction, prior to or at the Closing, of the following
conditions:
Section
4.1
Representations and
Warranties
.
The
representations and warranties of the Company in this Agreement shall be correct
when made and at the time of the Closing.
Section
4.2
Performance; No
Default
.
The
Company shall have performed and complied with all agreements and conditions
contained in this Agreement required to be performed or complied with by it
prior to or at the Closing, and after giving effect to the issue and sale of the
Notes (and the application of the proceeds thereof as contemplated by
Section 5.14), no Default or Event of Default shall have occurred and be
continuing.
Section
4.3
Compliance
Certificates
.
(a)
Officer’s
Certificate
. The Company shall have delivered to such
Purchaser an Officer’s Certificate, dated the date of the Closing, certifying
that the conditions specified in Sections 4.1, 4.2 and 4.9 have been
fulfilled.
(b)
Secretary’s
Certificate
. The Company shall have delivered to such
Purchaser a certificate of its Secretary or Assistant Secretary, dated the date
of Closing, certifying as to the resolutions attached thereto and other
corporate proceedings relating to the authorization, execution and delivery of
the Notes and this Agreement.
Section
4.4
Opinions of
Counsel
.
Such
Purchaser shall have received opinions in form and substance satisfactory to
such Purchaser, dated the date of the Closing (a) from Sidley Austin LLP,
special counsel for the Company, covering the matters set forth in
Exhibit 4.4(a) and (b) from John S. Zieser, Esq., Chief Development
Officer, General Counsel and Secretary of the Company, covering the matters set
forth in Exhibit 4.4(b) and covering such other matters incident to the
transactions contemplated hereby as such Purchaser or its counsel may reasonably
request (and the Company hereby instructs its counsel to deliver such opinion to
the Purchasers) and (c) from Bingham McCutchen LLP, the Purchasers’ special
counsel in connection with such transactions, substantially in the form set
forth in Exhibit 4.4(c) and covering such other matters incident to such
transactions as such Purchaser may reasonably request.
Section
4.5
Purchase Permitted By Applicable Law,
Etc
.
On the
date of the Closing, such Purchaser’s purchase of Notes shall (a) be permitted
by the laws and regulations of each jurisdiction to which such Purchaser is
subject, without recourse to provisions (such as section 1405(a)(8) of the
New York Insurance Law) permitting limited investments by insurance companies
without restriction as to the character of the particular investment, (b) not
violate any applicable law or regulation (including, without limitation,
Regulation T, U or X of the Board of Governors of the Federal Reserve System)
and (c) not subject such Purchaser to any tax, penalty or liability under or
pursuant to any applicable law or regulation, which law or regulation was not in
effect on the date hereof. If requested by such Purchaser, such
Purchaser shall have received an Officer’s Certificate certifying as to such
matters of fact as such Purchaser may reasonably specify to enable such
Purchaser to determine whether such purchase is so permitted.
Section
4.6
Sale of Other
Notes
.
Contemporaneously
with the Closing, the Company shall sell to each other Purchaser, and each other
Purchaser shall purchase, the Notes to be purchased by it at the Closing as
specified in Schedule A.
Section
4.7
Payment of Special Counsel
Fees
.
Without
limiting the provisions of Section 15.1, the Company shall have paid on or
before the Closing the fees, charges and disbursements of the Purchasers’
special counsel referred to in Section 4.4 to the extent reflected in a
statement of such counsel rendered to the Company at least one Business Day
prior to the Closing.
Section
4.8
Private Placement
Number
.
A Private
Placement Number issued by Standard & Poor’s CUSIP Service Bureau (in
cooperation with the SVO) shall have been obtained for each Series of the
Notes.
Section
4.9
Changes in Corporate
Structure
.
The
Company shall not have changed its jurisdiction of incorporation or been a party
to any merger or consolidation, or succeeded to all or any substantial part of
the liabilities of any other entity, at any time following the date of the most
recent financial statements referred to in Schedule 5.5.
Section
4.10
Amendment
of 2008 Note Purchase Agreement.
The
Company shall have delivered to the Purchasers’ special counsel on or before the
date of the Closing a fully executed copy of Amendment No. 1 to the 2008 Note
Purchase Agreement certified by a Responsible Officer as being true, correct and
complete.
Section
4.11
Funding
Instructions
.
At least
three Business Days prior to the date of the Closing, each Purchaser shall have
received written instructions, signed by a Responsible Officer on letterhead of
the Company confirming the information specified in the second sentence of
Section 3 including (i) the name and address of the transferee bank, (ii) such
transferee bank’s ABA number, and (iii) the account name and number into which
the purchase price for the Notes is to be deposited.
Section
4.12
Proceedings and
Documents
.
All
corporate and other proceedings in connection with the transactions contemplated
by this Agreement and all documents and instruments incident to such
transactions shall be satisfactory to such Purchaser and its special counsel,
and such Purchaser and its special counsel shall have received all such
counterpart originals or certified or other copies of such documents as such
Purchaser or such special counsel may reasonably request.
|
SECTION 5.
|
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
|
The
Company represents and warrants to each Purchaser that:
Section
5.1
Organization; Power and
Authority
.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation, and is duly qualified as a
foreign corporation and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect. The Company has the corporate power and authority to own or
hold under lease the properties it purports to own or hold under lease, to
transact the business it transacts and proposes to transact, to execute and
deliver this Agreement and the Notes and to perform the provisions hereof and
thereof.
Section
5.2
Authorization,
Etc
.
This
Agreement and the Notes have been duly authorized by all necessary corporate
action on the part of the Company, and this Agreement constitutes, and upon
execution and delivery thereof each Note will constitute, a legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors’ rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
Section
5.3
Disclosure
.
This
Agreement, the documents, certificates or other writings delivered to the
Purchasers by or on behalf of the Company in connection with the transactions
contemplated hereby and identified in Schedule 5.3, and the financial statements
listed in Schedule 5.5, in each case, delivered to the Purchasers prior to
July 13, 2009 (this Agreement and such documents, certificates or other writings
and such financial statements being referred to, collectively, as the “
Disclosure Documents
”), taken
as a whole, do not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not misleading
in light of the circumstances under which they were made, it being understood
that no representation or warranty is made with respect to the projections
included therein other than that they are based on assumptions and calculated in
a manner the Company believed and believes as of the date thereof and hereof to
be reasonable. Except as disclosed in the Disclosure Documents, since
March 31, 2009, there has been no change in the financial condition, operations,
business, properties or prospects of the Company or any Subsidiary except
changes that individually or in the aggregate could not reasonably be expected
to have a Material Adverse Effect. To the best knowledge and belief
of senior management of the Company, there is no fact known to the Company that
could reasonably be expected to have a Material Adverse Effect that has not been
set forth herein or in the Disclosure Documents.
Section
5.4
Organization and Ownership of Shares
of Subsidiaries; Affiliates
.
(a)
Schedule 5.4
contains (except as noted therein) complete and correct lists (i) of the
Company’s Subsidiaries, showing, as to each Subsidiary, the correct name
thereof, the jurisdiction of its organization, and the percentage of shares of
each class of its capital stock or similar equity interests outstanding owned by
the Company and each other Subsidiary, (ii) of the Company’s Affiliates,
other than Subsidiaries, and (iii) of the Company’s directors and senior
officers.
(b)
All of
the outstanding shares of capital stock or similar equity interests of each
Subsidiary shown in Schedule 5.4 as being owned by the Company and its
Subsidiaries have been validly issued, are fully paid and nonassessable and are
owned by the Company or another Subsidiary free and clear of any Lien (except as
otherwise disclosed in Schedule 5.4).
(c)
Each
Subsidiary identified in Schedule 5.4 is a corporation or other legal
entity duly organized, validly existing and in good standing under the laws of
its jurisdiction of organization, and is duly qualified as a foreign corporation
or other legal entity and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect. Each such Subsidiary has the corporate or other power and
authority to own or hold under lease the properties it purports to own or hold
under lease and to transact the business it transacts and proposes to
transact.
(d)
No
Subsidiary is a party to, or otherwise subject to any legal, regulatory,
contractual or other restriction (other than the agreements listed on
Schedule 5.4 and customary limitations imposed by corporate law or similar
statutes) restricting the ability of such Subsidiary to pay dividends out of
profits or make any other similar distributions of profits to the Company or any
of its Subsidiaries that owns outstanding shares of capital stock or similar
equity interests of such Subsidiary.
Section
5.5
Financial
Statements
.
The
Company has delivered to each Purchaser copies of the financial statements of
the Company and its Subsidiaries listed on Schedule 5.5. All of
said financial statements (including in each case the related schedules and
notes) fairly present in all material respects the consolidated financial
position of the Company and its Subsidiaries as of the respective dates
specified in such Schedule and the consolidated results of their operations and
cash flows for the respective periods so specified and have been prepared in
accordance with GAAP consistently applied throughout the periods involved except
as set forth in the notes thereto (subject, in the case of any interim financial
statements, to normal year-end adjustments). The Company and its
Subsidiaries do not have any Material liabilities that are not disclosed on such
financial statements or otherwise disclosed in the Disclosure
Documents.
Section
5.6
Compliance with Laws, Other
Instruments, Etc
.
The
execution, delivery and performance by the Company of this Agreement and the
Notes will not (i) contravene, result in any breach of, or constitute a
default under, or result in the creation of any Lien in respect of any property
of the Company or any Subsidiary under, any indenture, mortgage, deed of trust,
loan, purchase or credit agreement, lease, corporate charter or by-laws, or any
other agreement or instrument to which the Company or any Subsidiary is bound or
by which the Company or any Subsidiary or any of their respective properties may
be bound or affected, (ii) conflict with or result in a breach of any of the
terms, conditions or provisions of any order, judgment, decree, or ruling of any
court, arbitrator or Governmental Authority applicable to the Company or any
Subsidiary or (iii) violate any provision of any statute or other rule or
regulation of any Governmental Authority applicable to the Company or any
Subsidiary.
Section
5.7
Governmental Authorizations,
Etc
.
No
consent, approval or authorization of, or registration, filing or declaration
with, any Governmental Authority is required in connection with the execution,
delivery or performance by the Company of this Agreement or the
Notes.
Section
5.8
Litigation; Observance of Agreements,
Statutes and Orders
.
(a)
There are
no actions, suits, investigations or proceedings pending or, to the knowledge of
the Company, threatened against or affecting the Company or any Subsidiary or
any property of the Company or any Subsidiary in any court or before any
arbitrator of any kind or before or by any Governmental Authority that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(b)
Neither
the Company nor any Subsidiary is in default under any term of any agreement or
instrument to which it is a party or by which it is bound, or any order,
judgment, decree or ruling of any court, arbitrator or Governmental Authority or
is in violation of any applicable law, ordinance, rule or regulation (including
without limitation Environmental Laws or the USA Patriot Act) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse
Effect.
Section
5.9
Taxes
.
The
Company and its Subsidiaries have filed all tax returns that are required to
have been filed in any jurisdiction, and have paid all taxes shown to be due and
payable on such returns and all other taxes and assessments levied upon them or
their properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent,
except for any taxes and assessments (a) the amount of which is not individually
or in the aggregate Material or (b) the amount, applicability or validity of
which is currently being contested in good faith by appropriate proceedings and
with respect to which the Company or a Subsidiary, as the case may be, has
established adequate reserves in accordance with GAAP. The Company
knows of no basis for any other tax or assessment that could reasonably be
expected to have a Material Adverse Effect. The charges, accruals and
reserves on the books of the Company and its Subsidiaries in respect of federal,
state or other taxes for all fiscal periods are adequate. The federal
income tax liabilities of the Company and its Subsidiaries have been finally
determined (whether by reason of completed audits or the statute of limitations
having run) for all fiscal years up to and including the fiscal year ended June
30, 2004.
Section
5.10
Title to Property;
Leases
.
The
Company and its Subsidiaries have good and sufficient title to their respective
properties that individually or in the aggregate are Material, including all
such properties reflected in the most recent audited balance sheet referred to
in Section 5.5 or purported to have been acquired by the Company or any
Subsidiary after said date (except as sold or otherwise disposed of in the
ordinary course of business), in each case free and clear of Liens prohibited by
this Agreement. All leases that individually or in the aggregate are
Material are valid and subsisting and are in full force and effect in all
material respects.
Section
5.11
Licenses, Permits,
Etc
.
(a)
The
Company and its Subsidiaries own or possess all licenses, permits, franchises,
authorizations, patents, copyrights, proprietary software, service marks,
trademarks and trade names, or rights thereto, that individually or in the
aggregate are Material, without known conflict with the rights of others which
could reasonably be expected to have a Material Adverse Effect.
(b)
To the
best knowledge of the Company, no product or service of the Company or any of
its Subsidiaries infringes in any material respect any license, permit,
franchise, authorization, patent, copyright, proprietary software, service mark,
trademark, trade name or other right owned by any other Person which
infringement could reasonably be expected to have a Material Adverse
Effect.
(c)
To the
best knowledge of the Company, there is no Material violation by any Person of
any right of the Company or any of its Subsidiaries with respect to any patent,
copyright, proprietary software, service mark, trademark, trade name or other
right owned or used by the Company or any of its Subsidiaries which violation
could reasonably be expected to have a Material Adverse Effect.
Section
5.12
Compliance with
ERISA
.
(a)
The
Company and each ERISA Affiliate have operated and administered each Plan in
compliance with all applicable laws except for such instances of non-compliance
as have not resulted in and could not reasonably be expected to result in a
Material Adverse Effect. Neither the Company nor any ERISA Affiliate
has incurred any liability pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit plans (as defined
in section 3 of ERISA), and no event, transaction or condition has occurred
or exists that could reasonably be expected to result in the incurrence of any
such liability by the Company or any ERISA Affiliate, or in the imposition of
any Lien on any of the rights, properties or assets of the Company or any ERISA
Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty
or excise tax provisions or to the Pension Funding Rules or section 4068 of
ERISA, other than such liabilities or Liens as would not be individually or in
the aggregate Material.
(b)
The
present value of the aggregate benefit liabilities under each of the Plans
subject to Title IV of ERISA (other than Multiemployer Plans), determined as of
the end of such Plan’s most recently ended plan year on the basis of the
actuarial assumptions specified for funding purposes in such Plan’s most recent
actuarial valuation report, did not exceed the aggregate current value of the
assets of such Plan allocable to such benefit liabilities by more than
$1,000,000 in the case of any single Plan and by more than $1,000,000 in the
aggregate for all Plans. The term “benefit liabilities” has the
meaning specified in section 4001 of ERISA and the terms “current value”
and “present value” have the meaning specified in section 3 of
ERISA.
(c)
The
Company and its ERISA Affiliates have not incurred withdrawal liabilities (and
are not subject to contingent withdrawal liabilities) under section 4201 or
4204 of ERISA in respect of Multiemployer Plans that individually or in the
aggregate are Material.
(d)
The
expected postretirement benefit obligation (determined as of the last day of the
Company’s most recently ended fiscal year in accordance with Financial
Accounting Standards Board Statement No. 106, without regard to liabilities
attributable to continuation coverage mandated by section 4980B of the
Code) of the Company and its Subsidiaries is not Material or has otherwise been
disclosed in footnote 7 of the Company’s most recent audited financial
statements.
(e)
The
execution and delivery of this Agreement and the issuance and sale of the Notes
hereunder will not involve any transaction that is subject to the prohibitions
of section 406 of ERISA or in connection with which a tax could be imposed
pursuant to section 4975(c)(1)(A)-(D) of the Code. The
representation by the Company to each Purchaser in the first sentence of this
Section 5.12(e) is made in reliance upon and subject to the accuracy of
such Purchaser’s representation in Section 6.2 as to the sources of the
funds used to pay the purchase price of the Notes to be purchased by such
Purchaser.
(f)
Neither
the Company nor any Subsidiary maintains any Non-U.S. Pension Plan.
Section
5.13
Private Offering by the
Company
.
Neither
the Company nor anyone acting on its behalf has offered the Notes or any similar
Securities for sale to, or solicited any offer to buy any of the same from, or
otherwise approached or negotiated in respect thereof with, any Person other
than the Purchasers and not more than two other Institutional Investors (as
defined in clause (c) of the definition of such term), each of which has been
offered the Notes at a private sale for investment. Neither the
Company nor anyone acting on its behalf has taken, or will take, any action that
would subject the issuance or sale of the Notes to the registration requirements
of section 5 of the Securities Act or the registration requirements of any
securities or blue sky laws of any applicable jurisdiction.
Section
5.14
Use of Proceeds; Margin
Regulations
.
The
Company will apply the proceeds of the sale of the Notes as set forth in
Schedule 5.14. No part of the proceeds from the sale of the
Notes hereunder will be used, directly or indirectly, for the purpose of buying
or carrying any margin stock within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System (12 CFR 221), or for the purpose of
buying or carrying or trading in any Securities under such circumstances as to
involve the Company in a violation of Regulation X of said Board (12 CFR 224) or
to involve any broker or dealer in a violation of Regulation T of said Board (12
CFR 220). Margin stock does not constitute more than 5.0% of the
value of the consolidated assets of the Company and its Subsidiaries and the
Company does not have any present intention that margin stock will constitute
more than 5.0% of the value of such assets. As used in this Section,
the terms “margin stock” and “purpose of buying or carrying” shall have the
meanings assigned to them in said Regulation U.
Section
5.15
Existing Debt; Future
Liens
.
(a)
Except as
described therein, Schedule 5.15 sets forth a complete and correct list of
all outstanding Debt of the Company and its Subsidiaries as of June 30, 2009
(including a description of the obligors and obligees, principal amount
outstanding and collateral therefor, if any, and Guaranty therefor, if any),
since which date there has been no material change in the amounts, interest
rates, sinking funds, installment payments or maturities of the Debt of the
Company or its Subsidiaries, except to the extent described in such
schedule. Neither the Company nor any Subsidiary is in default and no
waiver of default is currently in effect, in the payment of any principal or
interest on any Debt of the Company or such Subsidiary and no event or condition
exists with respect to any such Debt of the Company or any Subsidiary that would
permit (or that with notice or the lapse of time, or both, would permit) one or
more Persons to cause such Debt to become due and payable before its stated
maturity or before its regularly scheduled dates of payment.
(b)
Except as
disclosed in Schedule 5.15, neither the Company nor any Subsidiary has
agreed or consented to cause or permit in the future (upon the happening of a
contingency or otherwise) any of its property, whether now owned or hereafter
acquired, to be subject to a Lien not permitted by
Section 10.4.
(c)
Neither
the Company nor any Subsidiary is a party to, or otherwise subject to any
provision contained in any instrument evidencing Debt of the Company or such
Subsidiary, any agreement relating thereto or any other agreement (including,
but not limited to, its charter or other organizational document) which limits
the amount of, or otherwise imposes restrictions on the incurring of, Debt of
the Company, except as specifically indicated in Schedule 5.15.
Section
5.16
Foreign Assets Control Regulations,
Etc
.
(a)
Neither
the sale of the Notes by the Company hereunder nor its use of the proceeds
thereof will violate the Trading with the Enemy Act, as amended, or any of the
foreign assets control regulations of the United States Treasury Department (31
CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive
order relating thereto.
(b)
Neither
the Company nor any Subsidiary (i) is a Person described or designated in the
Specially Designated Nationals and Blocked Persons List of the Office of Foreign
Assets Control or in section 1 of the Anti-Terrorism Order or (ii) engages in
any dealings or transactions with any such Person. The Company and
its Subsidiaries are in compliance, in all material respects, with the USA
Patriot Act.
(c)
No part
of the proceeds from the sale of the Notes hereunder will be used, directly or
indirectly, for any payments to any governmental official or employee, political
party, official of a political party, candidate for political office, or anyone
else acting in an official capacity, in order to obtain, retain or direct
business or obtain any improper advantage, in violation of the United States
Foreign Corrupt Practices Act of 1977, as amended, assuming in all cases that
such Act applies to the Company.
Section
5.17
Status under Certain
Statutes
.
Neither
the Company nor any Subsidiary is subject to regulation under the Investment
Company Act of 1940, as amended, the Public Utility Holding Company Act of 2005,
as amended, the ICC Termination Act of 1995, as amended, or the Federal Power
Act, as amended.
Section
5.18
Notes Rank Pari
Passu
.
The
obligations of the Company under this Agreement and the Notes rank at least
pari passu
in right of
payment with all other senior unsecured Debt (actual or contingent) of the
Company, including, without limitation, all senior unsecured Debt of the Company
described in Schedule 5.15 hereto.
Section
5.19
Environmental
Matters
.
(a)
Neither
the Company nor any Subsidiary has knowledge of any claim or has received any
notice of any claim, and no proceeding has been instituted raising any claim
against the Company or any of its Subsidiaries or any of their respective real
properties now or formerly owned, leased or operated by any of them or other
assets, alleging any damage to the environment or violation of any Environmental
Laws, except, in each case, such as could not reasonably be expected to result
in a Material Adverse Effect.
(b)
Neither
the Company nor any Subsidiary has knowledge of any facts which would give rise
to any claim, public or private, of violation of Environmental Laws or damage to
the environment emanating from, occurring on or in any way related to real
properties now or formerly owned, leased or operated by any of them or to other
assets or their use, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect.
(c)
Neither
the Company nor any Subsidiary has stored any Hazardous Materials on real
properties now or formerly owned, leased or operated by any of them and has not
disposed of any Hazardous Materials in a manner contrary to any Environmental
Laws in each case in any manner that could reasonably be expected to result in a
Material Adverse Effect.
(d)
All
buildings on all real properties now owned, leased or operated by the Company or
any Subsidiary are in compliance with applicable Environmental Laws, except
where failure to comply could not reasonably be expected to result in a Material
Adverse Effect.
|
SECTION 6.
|
REPRESENTATIONS
OF THE PURCHASER.
|
Section
6.1
Purchase for
Investment
.
Each
Purchaser severally represents that it is purchasing the Notes for its own
account or for one or more separate accounts maintained by such Purchaser or for
the account of one or more pension or trust funds and not with a view to the
distribution thereof,
provided
that the disposition
of such Purchaser’s or their property shall at all times be within such
Purchaser’s or their control. Each Purchaser understands that the
Notes have not been registered under the Securities Act and may be resold only
if registered pursuant to the provisions of the Securities Act or if an
exemption from registration is available, except under circumstances where
neither such registration nor such an exemption is required by law, and that the
Company is not required to register the Notes.
Section
6.2
Source of Funds
.
Each
Purchaser severally represents that at least one of the following statements is
an accurate representation as to each source of funds (a “
Source
”) to be used by such
Purchaser to pay the purchase price of the Notes to be purchased by such
Purchaser hereunder:
(a)
the
Source is an “insurance company general account” (as the term is defined in the
United States Department of Labor’s Prohibited Transaction Exemption (as further
defined in Schedule B, “
PTE
”) 95-60) in respect of
which the reserves and liabilities (as defined by the annual statement for life
insurance companies approved by the NAIC (the “
NAIC Annual Statement
”)) for
the general account contract(s) held by or on behalf of any employee benefit
plan together with the amount of the reserves and liabilities for the general
account contract(s) held by or on behalf of any other employee benefit plans
maintained by the same employer (or affiliate thereof as defined in PTE 95-60)
or by the same employee organization in the general account do not exceed 10% of
the total reserves and liabilities of the general account (exclusive of separate
account liabilities) plus surplus as set forth in the NAIC Annual Statement
filed with such Purchaser’s state of domicile; or
(b)
the
Source is a separate account that is maintained solely in connection with such
Purchaser’s fixed contractual obligations under which the amounts payable, or
credited, to any employee benefit plan (or its related trust) that has any
interest in such separate account (or to any participant or beneficiary of such
plan (including any annuitant)) are not affected in any manner by the investment
performance of the separate account; or
(c)
the
Source is either (i) an insurance company pooled separate account, within
the meaning of PTE 90-1, or (ii) a bank collective investment fund, within
the meaning of PTE 91-38 and, except as disclosed by such Purchaser to the
Company in writing pursuant to this clause (c), no employee benefit plan or
group of plans maintained by the same employer or employee organization
beneficially owns more than 10% of all assets allocated to such pooled separate
account or collective investment fund; or
(d)
the
Source constitutes assets of an “investment fund” (within the meaning of Part V
of PTE 84-14 (the “
QPAM
Exemption
”)) managed by a “qualified professional asset manager” or
“QPAM” (within the meaning of Part V of the QPAM Exemption), no employee benefit
plan’s assets that are included in such investment fund, when combined with the
assets of all other employee benefit plans established or maintained by the same
employer or by an affiliate (within the meaning of section V(c)(1) of the
QPAM Exemption) of such employer or by the same employee organization and
managed by such QPAM, exceed 20% of the total client assets managed by such
QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied,
neither the QPAM nor a person controlling or controlled by the QPAM (applying
the definition of “control” in section V(e) of the QPAM Exemption) owns a
5% or more interest in the Company and (i) the identity of such QPAM and
(ii) the names of all employee benefit plans whose assets are included in
such investment fund have been disclosed to the Company in writing pursuant to
this clause (d); or
(e)
the
Source constitutes assets of a “plan(s)” (within the meaning of section IV of
PTE 96-23 (the “
INHAM
Exemption
”)) managed by an “in-house asset manager” or “INHAM” (within
the meaning of Part IV of the INHAM Exemption), the conditions of Part I(a), (g)
and (h) of the INHAM Exemption are satisfied, neither the INHAM nor a person
controlling or controlled by the INHAM (applying the definition of “control” in
section IV(d) of the INHAM Exemption) owns a 5% or more interest in the Company
and (i) the identity of such INHAM and (ii) the name(s) of the employee benefit
plan(s) whose assets constitute the Source have been disclosed to the Company in
writing pursuant to this clause (e); or
(f)
the
Source is a governmental plan; or
(g)
the
Source is one or more employee benefit plans, or a separate account or trust
fund comprised of one or more employee benefit plans, each of which has been
identified to the Company in writing pursuant to this clause (g);
or
(h)
the
Source does not include assets of any employee benefit plan (within the meaning
of ERISA) or plan (within the meaning of section 4975 of the Code), other than
an employee benefit plan or plan exempt from the coverage of ERISA and section
4975 of the Code.
As used
in this Section 6.2, the terms “employee benefit plan,” “governmental
plan,” and “separate account” shall have the respective meanings assigned to
such terms in section 3 of ERISA.
|
SECTION 7.
|
INFORMATION
AS TO THE COMPANY.
|
Section
7.1
Financial and Business
Information
.
The
Company shall deliver to each holder of Notes that is an Institutional
Investor:
(a)
Quarterly Statements
- within
60 days (or such shorter period as is 15 days greater than the period applicable
to the filing of the Company’s Quarterly Report of Form 10-Q (the “
Form 10-Q
”) with the SEC)
after the end of each quarterly fiscal period in each fiscal year of the Company
(other than the last quarterly fiscal period of each such fiscal year),
duplicate copies of:
(1)
a
consolidated balance sheet of the Company and its Subsidiaries as at the end of
such quarter, and
(2)
consolidated
statements of income, changes in shareholders’ equity and cash flows of the
Company and its Subsidiaries for such quarter and (in the case of the second and
third quarters) for the portion of the fiscal year ending with such
quarter,
setting
forth in each case in comparative form the figures for the corresponding periods
in the previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP applicable to quarterly financial statements generally, and certified
by a Senior Financial Officer as fairly presenting, in all material respects,
the financial position of the companies being reported on and their results of
operations and cash flows, subject to changes resulting from year-end
adjustments,
provided
that delivery within the time period specified above of copies of the Company’s
Form 10-Q prepared in compliance with the requirements therefor and filed with
the SEC shall be deemed to satisfy the requirements of this Section 7.1(a),
provided, further
, that
the Company shall be deemed to have made such delivery of such Form 10-Q if it
shall have timely made such Form 10-Q available on “EDGAR” and on its home page
on the worldwide web (at the date of this Agreement located
at: http//www.meredith.com) and shall have given each Purchaser prior
notice of such availability on EDGAR and on its home page in connection with
each delivery (such availability and notice thereof being referred to as “
Electronic
Delivery
”);
(b)
Annual Statements
- within
105 days (or such shorter period as is 15 days greater than the period
applicable to the filing of the Company’s Annual Report on Form 10-K (the “
Form 10-K
”) with the SEC)
after the end of each fiscal year of the Company, duplicate copies
of:
(1)
a
consolidated balance sheet of the Company and its Subsidiaries, as at the end of
such year, and
(2)
consolidated
statements of income, changes in shareholders’ equity and cash flows of the
Company and its Subsidiaries, for such year,
setting
forth in each case in comparative form the figures for the previous fiscal year,
all in reasonable detail, prepared in accordance with GAAP, and accompanied
by:
(A) an
opinion thereon of independent public accountants of recognized national
standing, which opinion shall state that such financial statements present
fairly, in all material respects, the financial position of the companies being
reported upon and their results of operations and cash flows and have been
prepared in conformity with GAAP, and that the examination of such accountants
in connection with such financial statements has been made in accordance with
generally accepted auditing standards, and that such audit provides a reasonable
basis for such opinion in the circumstances, and
(B) a
certificate of such accountants stating that they have reviewed this Agreement
and stating further whether, in making their audit, they have become aware of
any condition or event that then constitutes a Default or an Event of Default,
and, if they are aware that any such condition or event then exists, specifying
the nature and period of the existence thereof (it being understood that such
accountants shall not be liable, directly or indirectly, for any failure to
obtain knowledge of any Default or Event of Default unless such accountants
should have obtained knowledge thereof in making an audit in accordance with
generally accepted auditing standards or did not make such an
audit),
provided
that the delivery
within the time period specified above of the Company’s Form 10-K for such
fiscal year (together with the Company’s annual report to shareholders, if any,
prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance
with the requirements therefor and filed with the SEC, together with the
accountant’s certificate described in clause (B) above (the “
Accountants’ Certificate
”),
shall be deemed to satisfy the requirements of this
Section 7.1(b),
provided, further,
that
the Company shall be deemed to have made such delivery of such Form 10-K if it
shall have timely made Electronic Delivery thereof, in which event the Company
shall separately deliver, concurrently with such Electronic Delivery, the
Accountants’ Certificate;
(c)
SEC and Other Reports
-
promptly upon their becoming available, one copy of (i) each financial
statement, report, notice or proxy statement sent by the Company or any
Subsidiary to its principal lending banks as a whole (excluding information sent
to such banks in the ordinary course of administration of a bank facility, such
as information relating to pricing and borrowing availability) or to its public
Securities holders generally, and (ii) each regular or periodic report,
each registration statement (without exhibits except as expressly requested by
such holder), and each prospectus and all amendments thereto filed by the
Company or any Subsidiary with the SEC and of all press releases and other
statements made available generally by the Company or any Subsidiary to the
public concerning developments that are Material;
(d)
Notice of Default or Event of
Default
- promptly, and in any event within five days after a Responsible
Officer becoming aware of the existence of any Default or Event of Default or
that any Person has given any notice or taken any action with respect to a
claimed default hereunder or that any Person has given any notice or taken any
action with respect to a claimed default of the type referred to in
Section 11(f), a written notice specifying the nature and period of
existence thereof and what action the Company is taking or proposes to take with
respect thereto;
(e)
ERISA Matters
- promptly, and
in any event within five days after a Responsible Officer becoming aware of any
of the following, a written notice setting forth the nature thereof and the
action, if any, that the Company or an ERISA Affiliate proposes to take with
respect thereto:
(1)
with
respect to any Plan, any reportable event, as defined in section 4043(c) of
ERISA and the regulations thereunder, for which notice thereof has not been
waived pursuant to such regulations as in effect on the date hereof;
or
(2)
the
taking by the PBGC of steps to institute, or the threatening by the PBGC of the
institution of, proceedings under section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Plan, or the receipt by
the Company or any ERISA Affiliate of a notice from a Multiemployer Plan that
such action has been taken by the PBGC with respect to such Multiemployer Plan;
or
(3)
any
event, transaction or condition that could result in the incurrence of any
liability by the Company or any ERISA Affiliate pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the Code relating to employee
benefit plans, or in the imposition of any Lien on any of the rights, properties
or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of
ERISA, the Pension Funding Rules, or such penalty or excise tax provisions, if
such liability or Lien, taken together with any other such liabilities or Liens
then existing, could reasonably be expected to have a Material Adverse
Effect;
(f)
Notices from Governmental
Authority
- promptly, and in any event within 30 days of receipt thereof,
copies of any notice to the Company or any Subsidiary from any federal or state
Governmental Authority relating to any order, ruling, statute or other law or
regulation that could reasonably be expected to have a Material Adverse Effect;
and
(g)
Requested Information
— with
reasonable promptness, such other data and information relating to the business,
operations, affairs, financial condition, assets or properties of the Company or
any of its Subsidiaries (including, but without limitation, actual copies of the
Company’s Form 10-Q and Form 10-K) or relating to the ability of the Company to
perform its obligations hereunder and under the Notes as from time to time may
be reasonably requested by any such holder of Notes.
Section
7.2
Officer’s
Certificate
.
Each set
of financial statements delivered to a holder of Notes pursuant to
Section 7.1(a) or Section 7.1(b) shall be accompanied by a certificate
of a Senior Financial Officer setting forth (which, in the case of Electronic
Delivery of any such financial statements, shall be by separate concurrent
delivery of such certificate to each holder of Notes):
(a)
Covenant Compliance
- the
information (including detailed calculations) required in order to establish
whether the Company was in compliance with the requirements of Section 10.2
through Section 10.6 hereof, inclusive, during the quarterly or annual
period covered by the statements then being furnished (including with respect to
each such Section, where applicable, the calculations of the maximum or minimum
amount, ratio or percentage, as the case may be, permissible under the terms of
such Sections, and the calculation of the amount, ratio or percentage then in
existence); and
(b)
Event of Default
- a
statement that such Senior Financial Officer has reviewed the relevant terms
hereof and has made, or caused to be made, under his or her supervision, a
review of the transactions and conditions of the Company and its Subsidiaries
from the beginning of the quarterly or annual period covered by the statements
then being furnished to the date of the certificate and that such review shall
not have disclosed the existence during such period of any condition or event
that constitutes a Default or an Event of Default or, if any such condition or
event existed or exists (including, without limitation, any such event or
condition resulting from the failure of the Company or any Subsidiary to comply
with any Environmental Law), specifying the nature and period of existence
thereof and what action the Company shall have taken or proposes to take with
respect thereto.
Section
7.3
Visitation
.
The
Company shall permit the representatives of each holder of Notes that is an
Institutional Investor:
(a)
No Default
- if no Default or
Event of Default then exists, at the expense of such holder and upon reasonable
prior notice to the Company, to visit the principal executive office of the
Company, to discuss the affairs, finances and accounts of the Company and its
Subsidiaries with the Company’s officers, and (with the consent of the Company,
which consent will not be unreasonably withheld) its independent public
accountants, and (with the consent of the Company, which consent will not be
unreasonably withheld) to visit the other offices and properties of the Company
and each Subsidiary, all at such reasonable times and as often as may be
reasonably requested in writing, but not more frequently than twice in any
twelve month period; and
(b)
Default
- if a Default or
Event of Default then exists, at the expense of the Company, to visit and
inspect any of the offices or properties of the Company or any Subsidiary, to
examine all their respective books of account, records, reports and other
papers, to make copies and extracts therefrom, and to discuss their respective
affairs, finances and accounts with their respective officers and independent
public accountants (and by this provision the Company authorizes said
accountants to discuss the affairs, finances and accounts of the Company and its
Subsidiaries), all at such times and as often as may be requested.
|
SECTION 8.
|
PAYMENT
AND PREPAYMENT OF THE NOTES.
|
Section
8.1
Required Payment
.
(a)
Series L
Notes
. The Series L Notes shall not be subject to scheduled
principal prepayments. The entire unpaid principal amount of the
Series L Notes shall be paid by the Company on July 13, 2013 at par, together
with accrued interest thereon, but without payment of the Make-Whole Amount or
any premium.
(b)
Series M
Notes
. The Series M Notes shall not be subject to scheduled
principal prepayments. The entire unpaid principal amount of the
Series M Notes shall be paid by the Company on July 13, 2014 at par, together
with accrued interest thereon, but without payment of the Make-Whole Amount or
any premium.
Section
8.2
Optional Prepayments with Make-Whole
Amount
.
The
Company may, at its option, upon notice as provided below, prepay at any time
all, or from time to time any part of, any Series of Notes (if no Event of
Default then exists) or the Notes without regard to Series (if an Event of
Default then exists), in an amount not less than 10% of the aggregate principal
amount of the Notes then outstanding (or the entire outstanding amount of any
Series being prepaid in full if such amount is less than 10% of the aggregate
principal amount of the Notes then outstanding) in the case of a partial
prepayment, at 100% of the principal amount so prepaid, together with interest
accrued thereon to the date of such prepayment, and the Make-Whole Amount
determined for the prepayment date with respect to such principal
amount. The Company will give each holder of Notes written notice of
each optional prepayment under this Section 8.2 not less than 30 days and
not more than 60 days prior to the date fixed for such
prepayment. Each such notice shall specify such date, the aggregate
principal amount and the Series of the Notes to be prepaid on such date, the
principal amount of each Note held by such holder to be prepaid (determined in
accordance with Section 8.4), and the interest to be paid on the prepayment
date with respect to such principal amount being prepaid, and shall be
accompanied by a certificate of a Senior Financial Officer as to the estimated
Make-Whole Amount due in connection with such prepayment (calculated as if the
date of such notice were the date of the prepayment), setting forth the details
of such computation. Two Business Days prior to such prepayment, the
Company shall deliver to each holder of Notes of the Series to be prepaid a
certificate of a Senior Financial Officer specifying the calculation of such
Make-Whole Amount as of the specified prepayment date.
Section
8.3
Change in
Control
.
(a)
Notice of Change in Control or
Control Event
. The Company will, within five Business Days
after any Responsible Officer has knowledge of the occurrence of any Change in
Control or Control Event, give written notice of such Change in Control or
Control Event to each holder of Notes unless notice in respect of such Change in
Control (or the Change in Control contemplated by such Control Event) shall have
been given pursuant to subparagraph (b) of this Section 8.3. If a
Change in Control has occurred, such notice shall contain and constitute an
offer to prepay the Notes, on a pro rata basis in respect of all Notes of all
Series outstanding at such time, as described in subparagraph (c) of this
Section 8.3 and shall be accompanied by the certificate described in
subparagraph (g) of this Section 8.3.
(b)
Condition to Company
Action
. The Company will not take any action that consummates
or finalizes a Change in Control unless (i) at least 30 days prior to such
action it shall have given to each holder of Notes written notice containing and
constituting an offer to prepay the Notes, on a
pro rata
basis in respect of
all Notes of all Series outstanding at such time, as described in
subparagraph (c) of this Section 8.3, accompanied by the certificate
described in subparagraph (g) of this Section 8.3, and
(ii) contemporaneously with such action, it prepays all Notes required to
be prepaid in accordance with this Section 8.3.
(c)
Offer to Prepay
Notes
. The offer to prepay Notes contemplated by subparagraphs
(a) and (b) of this Section 8.3 shall be an offer to prepay, in accordance
with and subject to this Section 8.3, all, but not less than all, of the
Notes of each Series held by each holder (in this case only, “
holder
” in respect of any Note
registered in the name of a nominee for a disclosed beneficial owner shall mean
such beneficial owner) on a date specified in such offer (the “
Proposed Prepayment
Date
”). If such Proposed Prepayment Date is in connection with
an offer contemplated by subparagraph (a) of this Section 8.3, such date
shall be not less than 30 days and not more than 120 days after the
date of such offer (if the Proposed Prepayment Date shall not be specified in
such offer, the Proposed Prepayment Date shall be the first Business Day after
the 45th day after the date of such offer).
(d)
Acceptance
. A
holder of Notes may accept the offer to prepay made pursuant to this Section 8.3
by causing a notice of such acceptance to be delivered to the Company not later
than 15 days after receipt by such holder of the most recent offer of
prepayment. A failure by a holder of Notes to respond to an offer to
prepay made pursuant to this Section shall be deemed to constitute a rejection
of such offer by such holder.
(e)
Prepayment
. Prepayment
of the Notes to be prepaid pursuant to this Section 8.3 shall be at 100% of
the principal amount of such Notes, together with interest on such Notes accrued
to the date of prepayment. The prepayment shall be made on the
Proposed Prepayment Date except as provided in subparagraph (f) of this Section
8.3.
(f)
Deferral Pending Change in
Control
. The obligation of the Company to prepay Notes
pursuant to the offers required by subparagraph (c) and accepted in
accordance with subparagraph (d) of this Section 8.3 is subject to the
occurrence of the Change in Control in respect of which such offers and
acceptances shall have been made. In the event that such Change in
Control has not occurred on the Proposed Prepayment Date in respect thereof, the
prepayment shall be deferred until, and shall be made on, the date on which such
Change in Control occurs. The Company shall keep each holder of Notes
reasonably and timely informed of (i) any such deferral of the date of
prepayment, (ii) the date on which such Change in Control and the
prepayment are expected to occur, and (iii) any determination by the
Company that efforts to effect such Change in Control have ceased or been
abandoned (in which case the offers and acceptances made pursuant to this
Section 8.3 in respect of such Change in Control shall be deemed
rescinded).
(g)
Officer’s
Certificate
. Each offer to prepay the Notes pursuant to this
Section 8.3 shall be accompanied by a certificate, executed by a Senior
Financial Officer of the Company and dated the date of such offer, specifying:
(i) the Proposed Prepayment Date; (ii) that such offer is made
pursuant to this Section 8.3; (iii) the principal amount and Series of
each Note offered to be prepaid; (iv) the interest that would be due on
each Note offered to be prepaid, accrued to the Proposed Prepayment Date;
(v) that the conditions of this Section 8.3 have been fulfilled; and
(vi) in reasonable detail, the nature and date or proposed date of the
Change in Control.
(h)
Certain
Definitions
. “
Change in Control
” shall be
deemed to have occurred if any person (as such term is used in
section 13(d) and section 14(d)(2) of the Exchange Act as in effect on
the date of the Closing) or related persons constituting a group (as such term
is used in Rule 13d-5 under the Exchange Act as in effect on the date of
the Closing), other than members of the Meredith Family,
(1) become
the “beneficial owners” (as such term is used in Rule 13d-3 under the
Exchange Act as in effect on the date of the Closing), directly or indirectly,
of more than 50% of the total voting power of all classes then outstanding of
the Company’s Voting Stock, or
(2) acquire
after the date of the Closing (x) the power to elect, appoint or cause the
election or appointment of at least a majority of the members of the board of
directors of the Company, through beneficial ownership of the capital stock of
the Company or otherwise, or (y) all or substantially all of the properties and
assets of the Company.
“Control Event”
means:
(i) the
execution by the Company or any of its Subsidiaries or Affiliates of any
agreement or letter of intent with respect to any proposed transaction or event
or series of transactions or events which, individually or in the aggregate, may
reasonably be expected to result in a Change in Control,
(ii) the
execution of any written agreement which, when fully performed by the parties
thereto, would result in a Change in Control, or
(iii) the
making of any written offer by any person (as such term is used in
section 13(d) and section 14(d)(2) of the Exchange Act as in effect on
the date of the Closing) or related persons constituting a group (as such term
is used in Rule 13d-5 under the Exchange Act as in effect on the date of the
Closing) to the holders of the common stock of the Company, which offer, if
accepted by the requisite number of holders, would result in a Change in
Control.
All
calculations contemplated in this Section 8.3 involving the capital stock
of any Person shall be made with the assumption that all convertible Securities
of such Person then outstanding and all convertible Securities issuable upon the
exercise of any warrants, options and other rights outstanding at such time were
converted at such time and that all options, warrants and similar rights to
acquire shares of capital stock of such Person were exercised at such
time.
Section
8.4
Allocation of Partial
Prepayments
.
In the
case of each partial prepayment of the Notes pursuant to Section 8.2, the
principal amount of the Notes to be prepaid shall be allocated among all such
Notes being prepaid at the time outstanding in proportion, as nearly as
practicable, to the respective unpaid principal amounts thereof not theretofore
called for prepayment. All partial prepayments made pursuant to
Section 8.3 shall be applied only to the Notes of the holders who have
elected to participate in such prepayment.
Section
8.5
Maturity; Surrender,
Etc
.
In the
case of each prepayment of Notes pursuant to this Section 8, the principal
amount of each Note to be prepaid shall mature and become due and payable on the
date fixed for such prepayment (which shall be a Business Day), together with
interest on such principal amount accrued to such date and the applicable
Make-Whole Amount, if any. From and after such date, unless the
Company shall fail to pay such principal amount when so due and payable,
together with the interest and Make-Whole Amount, if any, as aforesaid, interest
on such principal amount shall cease to accrue. Any Note paid or
prepaid in full shall be surrendered to the Company and cancelled and shall not
be reissued, and no Note shall be issued in lieu of any prepaid principal amount
of any Note.
Section
8.6
Purchase of
Notes
.
The
Company will not and will not permit any Affiliate to purchase, redeem, prepay
or otherwise acquire, directly or indirectly, any of the outstanding Notes
except (a) upon the payment or prepayment of the Notes in accordance with
the terms of this Agreement and the Notes or (b) pursuant to an offer to
purchase made by the Company or an Affiliate pro rata to the holders of all
Notes at the time outstanding upon the same terms and conditions. Any
such offer shall provide each holder with sufficient information to enable it to
make an informed decision with respect to such offer, and shall remain open for
at least 30 days. If the holders of more than 50% of the principal
amount of the Notes then outstanding accept such offer, the Company shall
promptly notify the remaining holders of such fact and the expiration date for
the acceptance by holders of Notes of such offer shall be extended by the number
of days necessary to give each such remaining holder at least 15 days from its
receipt of such notice to accept such offer. The Company will
promptly cancel all Notes acquired by it or any Affiliate pursuant to any
payment, prepayment or purchase of Notes pursuant to any provision of this
Agreement and no Notes may be issued in substitution or exchange for any such
Notes.
Section
8.7
Make-Whole
Amount
.
The term
“
Make-Whole Amount
”
means, with respect to any Note of any Series, an amount equal to the excess, if
any, of the Discounted Value of the Remaining Scheduled Payments with respect to
the Called Principal of such Note of such Series over the amount of such Called
Principal,
provided
that the Make-Whole Amount may in no event be less than
zero. For the purposes of determining the Make-Whole Amount, the
following terms have the following meanings:
“
Called Principal
” means, with
respect to any Note of any Series, the principal of such Note that is to be
prepaid pursuant to Section 8.2 or has become or is declared to be
immediately due and payable pursuant to Section 12.1, as the context
requires.
“
Discounted Value
” means, with
respect to the Called Principal of any Note of any Series, the amount obtained
by discounting all Remaining Scheduled Payments with respect to such Called
Principal from their respective scheduled due dates to the Settlement Date with
respect to such Called Principal, in accordance with accepted financial practice
and at a discount factor (applied on the same periodic basis as that on which
interest on such Series of the Notes is payable) equal to the Reinvestment Yield
with respect to such Called Principal.
“
Reinvestment Yield
” means,
with respect to the Called Principal of any Note of any Series, the sum of (a)
0.50% per annum plus (b) the yield to maturity implied by (i) the yields
reported, as of 10:00 a.m. (New York City time) on the second Business Day
preceding the Settlement Date with respect to such Called Principal, on the
display designated as “Page PX1” (or such other display as may replace Page
PX1) on Bloomberg Financial Markets for the most recently issued actively traded
U.S. Treasury securities having a maturity equal to the Remaining Average Life
of such Called Principal as of such Settlement Date, or (ii) if such yields
are not reported as of such time or the yields reported as of such time are not
ascertainable (including by way of interpolation), the Treasury Constant
Maturity Series Yields reported, for the latest day for which such yields have
been so reported as of the second Business Day preceding the Settlement Date
with respect to such Called Principal, in Federal Reserve Statistical Release
H.15 (519) (or any comparable successor publication) for actively traded U.S.
Treasury securities having a constant maturity equal to the Remaining Average
Life of such Called Principal as of such Settlement Date. Such
implied yield will be determined, if necessary, by (1) converting U.S.
Treasury bill quotations to bond-equivalent yields in accordance with accepted
financial practice and (2) interpolating linearly between (A) the
actively traded U.S. Treasury security with the maturity closest to and greater
than such Remaining Average Life and (B) the actively traded U.S. Treasury
security with the maturity closest to and less than such Remaining Average
Life. The Reinvestment Yield shall be rounded to the number of
decimal places as appears in the interest rate of the applicable
Note.
“
Remaining Average Life
” means,
with respect to any Called Principal of any Series of Notes, the number of years
(calculated to the nearest one-twelfth year) obtained by dividing (i) such
Called Principal into (ii) the sum of the products obtained by multiplying
(a) the principal component of each Remaining Scheduled Payment with
respect to such Called Principal by (b) the number of years (calculated to
the nearest one-twelfth year) that will elapse between the Settlement Date with
respect to such Called Principal and the scheduled due date of such Remaining
Scheduled Payment.
“
Remaining Scheduled Payments
”
means, with respect to the Called Principal of any Series of Notes, all payments
of such Called Principal and interest thereon that would be due after the
Settlement Date with respect to such Called Principal if no payment of such
Called Principal were made prior to its scheduled due date,
provided
that if such
Settlement Date is not a date on which interest payments are due to be made
under the terms of the Notes of such Series, then the amount of the next
succeeding scheduled interest payment will be reduced by the amount of interest
accrued to such Settlement Date and required to be paid on such Settlement Date
pursuant to Section 8.2 or 12.1.
“
Settlement Date
” means, with
respect to the Called Principal of any Note, the date on which such Called
Principal is to be prepaid pursuant to Section 8.2 or has become or is
declared to be immediately due and payable pursuant to Section 12.1, as the
context requires.
|
SECTION 9.
|
AFFIRMATIVE
COVENANTS.
|
The
Company covenants that so long as any of the Notes are outstanding:
Section
9.1
Compliance with
Law
.
Without
limiting Section 10.9, the Company will, and will cause each of its Subsidiaries
to, comply with all laws, ordinances or governmental rules or regulations to
which each of them is subject, including, without limitation, ERISA, the USA
Patriot Act, and applicable laws in respect of Non-U.S. Pension Plans and all
Environmental Laws, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental authorizations
necessary to the ownership of their respective properties or to the conduct of
their respective businesses, in each case to the extent necessary to ensure that
non-compliance with such laws, ordinances or governmental rules or regulations
or failures to obtain or maintain in effect such licenses, certificates,
permits, franchises and other governmental authorizations could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
Section
9.2
Insurance
.
The
Company will, and will cause each of its Subsidiaries to, maintain, with
financially sound and reputable insurers, insurance with respect to their
respective properties and businesses against such casualties and contingencies,
of such types, on such terms and in such amounts (including deductibles,
co-insurance and self-insurance, if adequate reserves are maintained with
respect thereto) as is customary in the case of entities of established
reputations engaged in the same or a similar business and similarly
situated.
Section
9.3
Maintenance of
Properties
.
The
Company will, and will cause each of its Subsidiaries to, maintain and keep, or
cause to be maintained and kept, their respective properties in good repair,
working order and condition (other than ordinary wear and tear), so that the
business carried on in connection therewith may be properly conducted at all
times;
provided
that
this Section shall not prevent the Company or any Subsidiary from discontinuing
the operation and the maintenance of any of its properties if such
discontinuance is desirable in the conduct of its business and the Company has
concluded that such discontinuance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
Section
9.4
Payment of Taxes and
Claims
.
The
Company will, and will cause each of its Subsidiaries to, file all tax returns
required to be filed in any jurisdiction and to pay and discharge all taxes
shown to be due and payable on such returns and all other taxes, assessments,
governmental charges, or levies imposed on them or any of their properties,
assets, income or franchises, to the extent the same have become due and payable
and before they have become delinquent and all claims for which sums have become
due and payable that have or might become a Lien on properties or assets of the
Company or any Subsidiary,
provided
that neither the
Company nor any Subsidiary need pay any such tax, assessment, charge, levy or
claim if (i) the amount, applicability or validity thereof is contested by
the Company or such Subsidiary on a timely basis in good faith and in
appropriate proceedings, and the Company or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or such Subsidiary or (ii) the nonpayment of all such taxes, assessments,
charges, levies and claims in the aggregate could not reasonably be expected to
have a Material Adverse Effect.
Section
9.5
Corporate Existence,
Etc
.
Subject
to Section 10.5, the Company will at all times preserve and keep in full force
and effect its corporate existence. Subject to Section 10.5, the
Company will at all times preserve and keep in full force and effect the
corporate existence of each of its Subsidiaries (unless merged into the Company
or a Wholly-Owned Subsidiary) and all rights and franchises of the Company and
its Subsidiaries unless, in the good faith judgment of the Company, the
termination of or failure to preserve and keep in full force and effect such
corporate existence, right or franchise could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
Section
9.6
Notes to Rank Pari
Passu
.
The Notes
and all other obligations under this Agreement of the Company are and at all
times shall remain direct and unsecured obligations of the Company ranking
pari passu
as against the
assets of the Company with all other Notes from time to time issued and
outstanding hereunder without any preference among themselves and
pari passu
with all other
present and future unsecured Debt (actual or contingent) of the Company which is
not expressed to be subordinate or junior in rank to any other unsecured Debt of
the Company.
Section
9.7
Books and
Records
.
The
Company will, and will cause each of its Subsidiaries to, maintain proper books
of record and account in conformity with GAAP and all applicable requirements of
any Governmental Authority having legal or regulatory jurisdiction over the
Company or such Subsidiary, as the case may be.
Section
9.8
Guaranty by Subsidiaries;
Liens
.
(a)
If at any
time, pursuant to the terms and conditions of any Major Credit Facility, any
existing or newly acquired or formed Subsidiary of the Company becomes obligated
as a guarantor or obligor under such Major Credit Facility, the Company will, at
its sole cost and expense, cause such Subsidiary to, prior to or concurrently
therewith, become a Guarantor in respect of this Agreement and the Notes and
deliver to each of the holders of the Notes the following items:
(1)
an
executed guaranty in form and substance reasonably satisfactory to the Required
Holders;
(2)
such
documents and evidence with respect to such Subsidiary as the Required Holders
may reasonably request in order to establish the existence and good standing of
such Subsidiary and the authorization of the transactions contemplated by such
guaranty;
(3)
an
opinion letter of counsel to such Subsidiary in form and substance reasonably
satisfactory to the Required Holders which shall include, without limitation,
opinions to the effect, subject to customary assumptions, qualifications and
exceptions, that (x) such guaranty has been duly authorized, executed and
delivered by such Subsidiary, (y) such guaranty constitutes the legal, valid and
binding contract and agreement of such Subsidiary, enforceable in accordance
with its terms (except as enforcement of such terms may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
similar laws affecting the enforcement of creditors’ rights generally and by
general equitable principles) and (z) the execution, delivery and performance by
such Subsidiary of such guaranty do not (A) violate any law, rule or regulation
applicable to such Subsidiary, or (B) (1) require the creation or imposition of
any Lien not permitted by Section 10.4 or (2) conflict with or result in any
breach of any of the provisions of or constitute a default under (I) the
provisions of the charter, bylaws, certificate of formation, operating agreement
or other constitutive documents of such Subsidiary, or (II) any material
agreement or other instrument to which such Subsidiary is a party or by which
such Subsidiary may be bound; and
(4)
such
other certificates, resolutions, opinions, documents and instruments as may be
reasonably requested by the Required Holders to give effect to the undertaking
of such Subsidiary becoming a Guarantor.
(b)
If at any
time, pursuant to the terms and conditions of any Major Credit Facility, any
Guarantor is discharged and released from its Guaranty of Debt under such Major
Credit Facility and (i) such Guarantor is not a co-obligor under such Major
Credit Facility and (ii) the Company will have delivered to each holder of Notes
an Officer’s Certificate certifying that (x) the condition specified in clause
(i) above has been satisfied and (y) immediately preceding the release of such
Guarantor from its Guaranty of the Debt under this Agreement and the Notes and
after giving effect thereto, no Default or Event of Default will have existed or
would exist, then, upon receipt by the holders of Notes of such Officer’s
Certificate, such Guarantor will be discharged and released, automatically and
without the need for any further action, from its obligations under its Guaranty
of the Debt under this Agreement and the Notes; provided that, if in connection
with any release of a Guarantor from its Guaranty of Debt under such Major
Credit Facility any fee or other consideration (excluding, for the avoidance of
doubt, any repayment of the principal or interest or payment of any pre-existing
prepayment or similar repayment fee under such Major Credit Facility in
connection with such release) is paid or given to any holder of Debt under such
Major Credit Facility in connection with such release, each holder of a Note
shall receive equivalent consideration on a pro rata basis (determined, in
respect of revolving credit facilities, based upon the commitment in effect
thereunder rather than amounts outstanding thereunder) in connection with such
Guarantor’s release from its Guaranty of the Debt under this Agreement and the
Notes. Without limiting the foregoing, for purposes of further
assurance, each of the holders of the Notes agrees to provide to the Company and
such Guarantor, if reasonably requested by the Company or such Guarantor and at
the Company’s expense, written evidence of such discharge and release signed by
such holder.
(c)
If at any
time, pursuant to the terms and conditions of any Major Credit Facility, the
Company or any of its Subsidiaries are required to or elect to grant Liens on
any of their assets to secure the Debt evidenced by such Major Credit Facility,
the Company will, at its sole cost and expense, prior to or concurrently
therewith, grant, or cause such Subsidiary to grant, Liens on such assets in
favor of the holders of the Notes (or in favor of a collateral agent reasonably
acceptable to the Required Holders for the benefit of the holders of the Notes)
and deliver to each of the holders of the Notes the following
items:
(1)
such
security documents as the Required Holders deem necessary or advisable to grant
to the holders of Notes (or such collateral agent for the benefit of the holders
of Notes) a perfected security interest having priority on a pari passu basis
with such Major Credit Facility to (or for the benefit of) the holders of
Notes;
(2)
such
documents and evidence with respect to such Liens as the Required Holders may
reasonably request in order to establish the existence and priority of such
Liens and the authorization of the transactions contemplated by such security
documents;
(3)
an
opinion letter of counsel to the Company or such Subsidiary in form and
substance reasonably satisfactory to the Required Holders which shall include,
without limitation, opinions to the effect, subject to customary assumptions,
qualifications and exceptions, that (w) such security documents have been duly
authorized, executed and delivered by the Company or such Subsidiary, (x) such
security documents constitute the legal, valid and binding contract and
agreement of the Company or such Subsidiary, enforceable in accordance with
their terms (except as enforcement of such terms may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and similar laws
affecting the enforcement of creditors’ rights generally and by general
equitable principles), (y) the execution, delivery and performance by the
Company or such Subsidiary of such security documents do not (A) violate any
law, rule or regulation applicable to the Company or such Subsidiary, or (B)(1)
require the creation or imposition of any Lien not permitted by Section 10.4 or
(2) conflict with or result in any breach of any of the provisions of or
constitute a default under (I) the provisions of the charter, bylaws,
certificate of formation, operating agreement or other constitutive documents of
the Company or such Subsidiary, or (II) any material agreement or other
instrument to which the Company or such Subsidiary is a party or by which such
Subsidiary may be bound, and (z) such security documents create a perfected
security interest in such assets; and
(4)
such
other certificates, resolutions, opinions, documents and instruments as may be
reasonably requested by the Required Holders to give effect to the granting of
such Liens by such Subsidiary.
(d)
If at any
time, pursuant to the terms and conditions of any Major Credit Facility, Liens
granted by the Company or any Subsidiary are released under such Major Credit
Facility and the Company will have delivered to each holder of Notes an
Officer’s Certificate certifying that immediately preceding the release of such
Liens and after giving effect thereto, no Default or Event of Default will have
existed or would exist, then, upon receipt by the holders of Notes of such
Officer’s Certificate, such Liens in favor of the holders of Notes will be
discharged and released, automatically and without the need for any further
action; provided that, if in connection with any release of such Liens under
such Major Credit Facility any fee or other consideration (excluding, for the
avoidance of doubt, any repayment of the principal or interest or payment of any
pre-existing prepayment or similar repayment fee under such Major Credit
Facility in connection with such release) is paid or given to any holder of Debt
under such Major Credit Facility in connection with such release, each holder of
a Note shall receive equivalent consideration on a pro rata basis (determined,
in respect of revolving credit facilities, based upon the commitment in effect
thereunder rather than amounts outstanding thereunder) in connection with such
release of Liens securing the Debt evidenced by this Agreement and the
Notes. Without limiting the foregoing, for purposes of further
assurance, each of the holders of the Notes agrees to provide to the Company, if
reasonably requested by the Company and at the Company’s expense, written
evidence of such discharge and release signed by such holder (or the collateral
agent appointed by the holders of Notes).
Section
9.9
Intercreditor
Agreement
.
If at any
time, pursuant to the terms and conditions of any Major Credit Facility, the
Company or any of its Subsidiaries are required to grant Liens on any of their
assets to secure the Debt evidenced by such Major Credit Facility, and the
Company or such Subsidiaries are required to grant Liens to secure the Debt
evidenced by this Agreement and the Notes, then the Company will, concurrently
with the execution thereof or the granting of such Guaranties and/or Liens,
cause the lenders under such Major Credit Facility to enter into, and the
holders of Notes hereby agree to enter into, an intercreditor agreement in form
and substance (including, without limitation, as to the sharing of recoveries
and set offs) reasonably satisfactory to the Required Holders (the “
Intercreditor Agreement
”) with
the holders of Notes, or enter into a joinder agreement to such Intercreditor
Agreement in form and substance reasonably satisfactory to the Required
Holders. Within ten (10) Business Days following the execution of any
such Intercreditor Agreement (or any joinder thereto), the Company will deliver
an executed copy thereof to each holder of Notes.
|
SECTION 10.
|
NEGATIVE
COVENANTS.
|
The
Company covenants that so long as any of the Notes are outstanding:
Section
10.1
Transactions with
Affiliates
.
The
Company will not and will not permit any Subsidiary to enter into directly or
indirectly any Material transaction or Material group of related transactions
(including without limitation the purchase, lease, sale or exchange of
properties of any kind or the rendering of any service) with any Affiliate
(other than the Company or another Subsidiary), except in the ordinary course
and pursuant to the reasonable requirements of the Company’s or such
Subsidiary’s business and upon fair and reasonable terms no less favorable to
the Company or such Subsidiary than would be obtainable in a comparable
arm’s-length transaction with a Person not an Affiliate.
Section
10.2
Interest Coverage
Ratio
.
The
Company will not at any time permit the ratio of (a) Consolidated EBITDA to
(b) Consolidated Interest Expense for each period of four consecutive
fiscal quarters to be less than 2.75 to 1.0.
Section
10.3
Limitations on
Debt
.
(a)
The
Company will not at any time permit the ratio of (i) Consolidated Total
Debt at such time to (ii) Consolidated EBITDA for the period of the four
consecutive fiscal quarters then most recently ended to exceed 3.75 to
1.0. The maximum amount of Consolidated Total Debt permitted pursuant
to the terms of this Section 10.3(a) is hereafter referred to as “
Maximum Permitted Total
Debt
”.
(b)
The
Company will not at any time permit Priority Debt to exceed an amount equal to
25% of Maximum Permitted Total Debt.
Section
10.4
Liens
.
The
Company will not, and will not permit any of its Subsidiaries to, directly or
indirectly create, incur, assume or permit to exist (upon the happening of a
contingency or otherwise) any Lien on or with respect to any property or asset
(including, without limitation, any document or instrument in respect of goods
or accounts receivable) of the Company or any such Subsidiary, whether now owned
or held or hereafter acquired, or any income or profits therefrom, or assign or
otherwise convey any right to receive income or profits (unless it makes, or
causes to be made, effective provision whereby the Notes will be equally and
ratably secured with any and all other obligations thereby secured, such
security to be pursuant to an agreement reasonably satisfactory to the Required
Holders and, in any such case, (x) the Notes shall have the benefit, to the
fullest extent that, and with such priority as, the holders of the Notes may be
entitled under applicable law, of an equitable Lien on such property and (y) in
respect of any Lien securing any Major Credit Facility, the Company or such
Subsidiary has complied with Sections 9.8 and 9.9), except:
(a)
Liens for
taxes, assessments or other governmental charges which are not yet due and
payable or the payment of which is not at the time required by
Section 9.4;
(b)
statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen
and other similar Liens, in each case, incurred in the ordinary course of
business for sums not yet due and payable or the payment of which is not at the
time required by Section 9.1 or Section 9.4;
(c)
Liens
(other than any Lien imposed by ERISA) incurred or deposits made in the ordinary
course of business (i) in connection with workers’ compensation, unemployment
insurance and other types of social security or retirement benefits, or (ii) to
secure (or to obtain letters of credit that secure) the performance of tenders,
statutory obligations, surety bonds, appeal bonds (not in excess of
$15,000,000), bids, leases (other than Capital Leases), performance bonds,
purchase, construction or sales contracts and other similar obligations, in each
case not incurred or made in connection with the borrowing of money, the
obtaining of advances or credit or the payment of the deferred purchase price of
property;
(d)
any
attachment or judgment Lien, unless (i) the judgment it secures shall not,
within 60 days after the entry thereof, have been discharged or execution
thereof stayed pending appeal, or shall not have been discharged within 60 days
after the expiration of any such stay or (ii) the uninsured portion of the
judgment such Lien secures, including any portion for which the insurer has not
acknowledged responsibility, exceeds $15,000,000;
(e)
leases or
subleases granted to others, easements, rights-of-way, restrictions and other
similar charges or encumbrances, in each case incidental to, and not interfering
with, the ordinary conduct of the business of the Company or any of its
Subsidiaries,
provided
that such Liens do not, in the aggregate, materially detract from the value of
such property;
(f)
Liens on
property or assets of the Company or any of its Subsidiaries securing Debt owing
to the Company or to any of its Wholly-Owned Subsidiaries;
(g)
Liens on
all existing or hereafter acquired or arising Receivables of the Company or any
Subsidiary, the Related Security with respect thereto, the collections and
proceeds of such Receivables and Related Security, all lockboxes, lockbox
accounts, collection accounts or other deposit accounts into which such
collections are deposited and all other rights and payments relating to such
Receivables (collectively, “
Receivables Assets
”), which
are transferred to the Company, a Subsidiary or a Receivables Purchaser in
connection with Receivables Facility Attributed Indebtedness;
provided
such Receivables
Facility Attributed Indebtedness is permitted under
Section 10.3(b);
(h)
any Lien
created to secure all or any part of the purchase price, or to secure Debt
incurred or assumed to pay all or any part of the purchase price or cost of
construction, of property (or any improvement thereon) acquired or constructed
by the Company or a Subsidiary after the date of the Closing,
provided
that:
(1)
any such
Lien shall extend solely to the item or items of such property (or improvement
thereon) so acquired or constructed and, if required by the terms of the
instrument originally creating such Lien, other property (or improvement
thereon) which is an improvement to or is acquired for specific use in
connection with such acquired or constructed property (or improvement thereon)
or which is real property being improved by such acquired or constructed
property (or improvement thereon),
(2)
the
principal amount of the Debt secured by any such Lien shall at no time exceed an
amount equal to the lesser of (i) the cost to the Company or such
Subsidiary of the property (or improvement thereon) so acquired or constructed
and (ii) the fair market value (as determined in good faith by the board of
directors of the Company) of such property (or improvement thereon) at the time
of such acquisition or construction, and
(3)
any such
Lien shall be created contemporaneously with, or within 180 days after, the
acquisition or construction of such property;
(i)
any Lien
existing on property of a Person immediately prior to its being consolidated
with or merged into the Company or a Subsidiary or its becoming a Subsidiary, or
any Lien existing on any property acquired by the Company or any Subsidiary at
the time such property is so acquired (whether or not the Debt secured thereby
shall have been assumed),
provided
that (i) no
such Lien shall have been created or assumed in contemplation of such
consolidation or merger or such Person’s becoming a Subsidiary or such
acquisition of property, and (ii) each such Lien shall extend solely to the
item or items of property so acquired and, if required by the terms of the
instrument originally creating such Lien, other property which is an improvement
to or is acquired for specific use in connection with such acquired
property;
(j)
any Lien
renewing, extending or refunding any Lien permitted by paragraphs (h) or (i) of
this Section 10.4,
provided
that (i) the
principal amount of Debt secured by such Lien immediately prior to such
extension, renewal or refunding is not increased or the maturity thereof
reduced, (ii) such Lien is not extended to any other property, and
(iii) immediately after such extension, renewal or refunding no Default or
Event of Default would exist;
(k)
the
security interest contemplated by Section 18.3 of the Trademark License
Agreement among Meredith Corporation, as Licensor, Better Homes & Garden
Real Estate Licensee LLC, as the successor to Project Five TM LLC, as Licensee,
and Realogy Corporation, as Guarantor dated as of October 3, 2007, as amended
(so long as any such amendment does not provide for any change to the
obligations secured thereby as in effect on the date of Closing);
and
(l)
other
Liens not otherwise permitted by subparagraphs (a) through (k) securing Debt,
provided
that (x) all
Debt secured by such Liens shall have been incurred within the applicable
limitations of Section 10.3, including, without limitation, that after giving
effect thereto Priority Debt will not exceed 25% of Maximum Permitted Total Debt
and (y) no such Liens under this clause (l) shall secure the obligations under
any Major Credit Facility.
Section
10.5
Mergers, Consolidations and Sales of
Assets
.
(a)
The
Company will not, and will not permit any of its Subsidiaries to, consolidate
with or be a party to a merger with any other Person, or sell, lease or
otherwise dispose of all or substantially all of its assets;
provided
that:
(1)
any
Subsidiary may merge or consolidate with or into the Company or any Subsidiary
so long as in (i) any merger or consolidation involving the Company, the Company
shall be the surviving or continuing corporation, and (ii) any merger or
consolidation involving a Wholly-Owned Subsidiary (and not the Company), the
Wholly-Owned Subsidiary shall be the surviving or continuing
Person;
(2)
the
Company may consolidate or merge with or into any other corporation if
(i) the corporation which results from such consolidation or merger (the
“
surviving corporation
”)
is organized under the laws of any state of the United States or the District of
Columbia, (ii) the due and punctual payment of the principal of and
premium, if any, and interest on all of the Notes, according to their tenor, and
the due and punctual performance and observation of all of the covenants in the
Notes and this Agreement to be performed or observed by the Company are
expressly assumed in writing by the surviving corporation and the surviving
corporation shall furnish to the holders of the Notes an opinion of counsel
satisfactory to the Required Holders to the effect that the instrument of
assumption has been duly authorized, executed and delivered and constitutes the
legal, valid and binding contract and agreement of the surviving corporation
enforceable in accordance with its terms, except as enforcement of such terms
may be limited by bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting the enforcement of creditors’ rights generally and by general
equitable principles, (iii) at the time of such consolidation or merger and
immediately after giving effect thereto, no Default or Event of Default would
exist, and (iv) the Company or such surviving corporation shall have complied
with all obligations under this Agreement with respect to any Change in Control
resulting from such transaction;
(3)
the
Company may sell or otherwise dispose of all or substantially all of its assets
to any Person for consideration which represents the fair market value of such
assets (as determined in good faith by the Board of Directors of the Company) at
the time of such sale or other disposition if (i) the Person which is
acquiring all or substantially all of the assets of the Company is a corporation
organized under the laws of any state of the United States or the District of
Columbia, (ii) the due and punctual payment of the principal of and
premium, if any, and interest on all the Notes, according to their tenor, and
the due and punctual performance and observance of all of the covenants in the
Notes and in this Agreement to be performed or observed by the Company are
expressly assumed in writing by the acquiring corporation and the acquiring
corporation shall furnish to the holders of the Notes an opinion of counsel
satisfactory to the Required Holders to the effect that the instrument of
assumption has been duly authorized, executed and delivered and constitutes the
legal, valid and binding contract and agreement of such acquiring corporation
enforceable in accordance with its terms, except as enforcement of such terms
may be limited by bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting the enforcement of creditors’ rights generally and by general
equitable principles, (iii) at the time of such sale or disposition and
immediately after giving effect thereto, no Default or Event of Default would
exist, and (iv) the Company or such acquiring corporation shall have complied
with all obligations under this Agreement with respect to any Change in Control
resulting from such transaction; and
(4)
the
Company or any Subsidiary may sell or otherwise dispose of assets as part of any
Permitted Receivables Transaction so long as the aggregate amount of Priority
Debt (including Receivables Facility Attributed Indebtedness) does not exceed
25% of Maximum Permitted Total Debt.
(b)
The
Company will not, and will not permit any of its Subsidiaries to, sell, lease,
transfer, abandon or otherwise dispose of assets (except assets sold in the
ordinary course of business for fair market value and except as provided in
Section 10.5 (a)(3));
provided
that the foregoing
restrictions do not apply to:
(1)
(i) the
sale, lease, transfer or other disposition of assets of a Subsidiary to the
Company or another Subsidiary or by the Company to a Wholly-Owned Subsidiary or
(ii) the sale, lease, transfer or other disposition of assets (valued at net
book value) of the Company to another Subsidiary not to exceed in any 12-month
period 10% of Consolidated Total Assets as of the last day of the fiscal quarter
immediately preceding such sale, lease, transfer or other disposition;
or
(2)
the sale
or other disposition of assets as part of any Permitted Receivables Transaction
so long as the aggregate amount of Priority Debt (including Receivables Facility
Attributed Indebtedness) does not exceed 25% of Maximum Permitted Total Debt;
or
(3)
the sale
of inventory in the ordinary course of business; or
(4)
the sale
of assets for cash or other property to a Person or Persons other than an
Affiliate if all of the following conditions are met:
(i) such
assets (valued at net book value) do not, together with all other assets of the
Company and its Subsidiaries previously disposed of during the immediately
preceding 36 calendar month period (other than in the ordinary course of
business), exceed 30% of the average of Consolidated Total Assets as of the last
day of each of the 12 consecutive fiscal quarters then most recently
ended;
(ii) in
the opinion of the Board of Directors of the Company, the sale is for fair value
and is in the best interests of the Company and its Subsidiaries;
and
(iii) immediately
after the consummation of the transaction and after giving effect thereto, no
Default or Event of Default would exist;
provided, however
, that for
purposes of the foregoing calculation, there shall not be included any assets
the proceeds of which were or are applied either (A) within 12 months
before or 12 months after the effective date of such asset disposition to the
acquisition of assets useful and intended to be used in the operation of the
business of the Company and its Subsidiaries as described in Section 10.8 and
having a fair market value (as determined in good faith by the Board of
Directors of the Company) at least equal to that of the assets so disposed of or
(B) within 180 days after the effective date of such asset disposition to
the prepayment at any applicable prepayment premium of all Senior Debt of the
Company on a pro rata basis (other than (x) Senior Debt owing to the Company,
any of its Subsidiaries or any Affiliate and (y) Senior Debt in respect of any
revolving credit or similar facility providing the Company or any such
Subsidiary with the right to obtain loans or other extensions of credit from
time to time, unless in connection with such payment of Senior Debt, the
availability of credit under such credit facility is permanently reduced by an
amount not less than the amount of such proceeds applied to the payment of such
Senior Debt), based upon principal amount then outstanding. It is
understood and agreed by the Company that, to the extent any such proceeds are
applied to the prepayment of the Notes, such prepayment will be made on a pro
rata basis in respect of all Notes of all Series outstanding at such time in the
manner and with the premium, if any, then required pursuant to the optional
prepayment provisions provided in Section 8.2.
Section
10.6
Limitation on Sale-and-Leaseback
Transactions
.
The
Company will not, and will not permit any Subsidiary to, enter into any
Sale-and-Leaseback Transaction unless immediately after giving effect thereto,
the aggregate amount of Priority Debt (including the Attributable Debt to be
incurred in connection with such Sale-and-Leaseback Transaction) does not exceed
25% of Maximum Permitted Total Debt.
Section
10.7
Termination of Pension
Plans
.
The
Company will not and will not permit any Subsidiary to, withdraw from any
Multiemployer Plan or permit any employee benefit plan maintained by it to be
terminated if such withdrawal or termination could result in withdrawal
liability (as described in Part 1 of Subtitle E of Title IV of
ERISA) or the imposition of a Lien on any property of the Company or any
Subsidiary pursuant to section 4068 of ERISA, which withdrawal liability or
Lien could reasonably be expected to have a Material Adverse
Effect.
Section
10.8
Nature of
Business
.
The
Company will not, and will not permit any Subsidiary to, engage in any business
if, as a result, the general nature of the business, in which the Company and
its Subsidiaries, taken as a whole, would then be engaged would be substantially
changed from the general nature of the business in which the Company and its
Subsidiaries, taken as a whole, are engaged on the date of this Agreement (it
being understood that this covenant shall not require the Company to remain in
any current business if it remains in one or more current businesses of the
Company or its Subsidiaries).
Section
10.9
Terrorism Sanctions
Regulations
.
The
Company will not, and will not permit any Subsidiary to, (i) become a Person
described or designated in the Specially Designated Nationals and Blocked
Persons List of the Office of Foreign Assets Control or in section 1 of the
Anti-Terrorism Order or (ii) engage in any dealings or transactions with any
such Person.
|
SECTION 11.
|
EVENTS
OF DEFAULT.
|
An “
Event of Default
” shall exist
if any of the following conditions or events shall occur and be
continuing:
(a)
the
Company defaults in the payment of any principal or Make-Whole Amount, if any,
on any Note when the same becomes due and payable, whether at maturity or at a
date fixed for prepayment or by declaration or otherwise; or
(b)
the
Company defaults in the payment of any interest on any Note for more than five
Business Days after the same becomes due and payable; or
(c)
the
Company defaults in the performance of or compliance with any term contained in
Sections 10.1 through 10.6 and such default is not remedied within 10 days after
the earlier of (i) a Responsible Officer obtaining actual knowledge of such
default and (ii) the Company receiving written notice of such default from
any holder of a Note (any such written notice to be identified as a “notice of
default” and to refer specifically to this paragraph (c) of Section 11);
or
(d)
the
Company defaults in the performance of or compliance with any term contained
herein (other than those referred to in Sections 11(a), (b) and (c)) and such
default is not remedied within 30 days after the earlier of (i) a
Responsible Officer obtaining actual knowledge of such default and (ii) the
Company receiving written notice of such default from any holder of a Note (any
such written notice to be identified as a “notice of default” and to refer
specifically to this Section 11(d)); or
(e)
any
representation or warranty made in writing by or on behalf of the Company or by
any officer of the Company in this Agreement or in any writing furnished in
connection with the transactions contemplated hereby proves to have been false
or incorrect in any material respect on the date as of which made;
or
(f)
(i) the
Company or any Subsidiary is in default (as principal or as guarantor or other
surety) in the payment of any principal of or premium or make-whole amount or
interest on any Debt that is outstanding in an aggregate principal amount of at
least $25,000,000 (or the equivalent in other applicable currencies) beyond any
period of grace provided with respect thereto, or (ii) the Company or any
Subsidiary is in default in the performance of or compliance with any term of
any evidence of any Debt in an aggregate outstanding principal amount of at
least $25,000,000 (or the equivalent in other applicable currencies) or of any
mortgage, indenture or other agreement relating thereto or any other condition
exists, and as a consequence of such default or condition such Debt has become,
or has been declared, due and payable before its stated maturity or before its
regularly scheduled dates of payment, or (iii) as a consequence of the
occurrence or continuation of any event or condition (other than the passage of
time or the right of the holder of Debt to convert such Debt into equity
interests), the Company or any Subsidiary has become obligated to purchase or
repay Debt before its regular maturity or before its regularly scheduled dates
of payment in an aggregate outstanding principal amount of at least $25,000,000,
or (iv) the occurrence of any “Amortization Event” under any Permitted
Receivables Transaction which event has not been cured, waived or rescinded, or
(v) the Company shall be removed as the “Servicer” under any Permitted
Receivables Transaction; or
(g)
the
Company or any Material Subsidiary (i) is generally not paying, or admits
in writing its inability to pay, its debts as they become due, (ii) files,
or consents by answer or otherwise to the filing against it of, a petition for
relief or reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy, insolvency, reorganization,
moratorium or other similar law of any jurisdiction, (iii) makes an
assignment for the benefit of its creditors, (iv) consents to the
appointment of a custodian, receiver, trustee or other officer with similar
powers with respect to it or with respect to any substantial part of its
property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes
corporate action for the purpose of any of the foregoing; or
(h)
a court
or other Governmental Authority of competent jurisdiction enters an order
appointing, without consent by the Company or any of its Material Subsidiaries,
a custodian, receiver, trustee or other officer with similar powers with respect
to the Company or any Material Subsidiary or with respect to any substantial
part of the property of the Company or any Material Subsidiary, or constituting
an order for relief or approving a petition for relief or reorganization or any
other petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution,
winding-up or liquidation of the Company or any of its Material Subsidiaries, or
any such petition shall be filed against the Company or any of its Material
Subsidiaries and such petition shall not be dismissed within 60 days;
or
(i)
a final
judgment or judgments for the payment of money aggregating in excess of
$25,000,000 (or the equivalent in other applicable currencies) are rendered
against one or more of the Company and its Subsidiaries and which judgments are
not, within 60 days after entry thereof, bonded, discharged or stayed pending
appeal, or are not discharged within 60 days after the expiration of such stay;
or
(j)
if
(i) any Plan shall fail to satisfy the minimum funding standards of the
Pension Funding Rules for any plan year or part thereof or a waiver of such
standards or extension of any amortization period is sought or granted under the
Pension Funding Rules, (ii) a notice of intent to terminate any Plan shall have
been or is reasonably expected to be filed with the PBGC or the PBGC shall have
instituted proceedings under ERISA section 4042 to terminate or appoint a
trustee to administer any Plan or the PBGC shall have notified the Company or
any ERISA Affiliate that a Plan may become a subject of any such proceedings,
(iii) the aggregate “amount of unfunded benefit liabilities” (within the
meaning of section 4001(a)(18) of ERISA) under all Plans, determined in
accordance with Title IV of ERISA, shall exceed $25,000,000, (iv) the Company or
any ERISA Affiliate shall have incurred or is reasonably expected to incur any
liability pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, (v) the Company or
any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the Company
or any Subsidiary establishes or amends any employee welfare benefit plan that
provides post-employment welfare benefits in a manner that would increase the
liability of the Company or any Subsidiary thereunder; and any such event or
events described in clauses (i) through (vi) above, either individually or
together with any other such event or events, could reasonably be expected to
have a Material Adverse Effect; or
(k)
(i) a
default shall occur under any Guaranty by a Subsidiary of the Debt under this
Agreement and the Notes granted pursuant to Section 9.8 and such default shall
continue beyond the period of grace, if any, allowed with respect thereto or
(ii) except as expressly permitted under Section 9.8(b), such Guaranty shall
cease to be in full force and effect for any reason whatsoever with respect to
one or more Guarantors, including, without limitation, a determination by any
Governmental Authority or court that such agreement is invalid, void or
unenforceable with respect to one or more Guarantors or any Guarantor shall
contest or deny in writing the validity or enforceability of any of its
obligations under any such Guaranty.
As used
in Section 11(j), the terms “employee benefit plan” and “employee welfare
benefit plan” shall have the respective meanings assigned to such terms in
section 3 of ERISA.
|
SECTION 12.
|
REMEDIES
ON DEFAULT, ETC.
|
Section
12.1
Acceleration
.
(a)
If an
Event of Default with respect to the Company described in Section 11(g) or (h)
(other than an Event of Default described in clause (i) of Section 11(g) or
described in clause (vi) of Section 11(g) by virtue of the fact that such clause
encompasses clause (i) of Section 11(g)) has occurred, all the Notes then
outstanding shall automatically become immediately due and payable.
(b)
If any
other Event of Default has occurred and is continuing, the Required Holders may
at any time at its or their option, by notice or notices to the Company, declare
all the Notes then outstanding to be immediately due and payable.
(c)
If any
Event of Default described in Section 11(a) or (b) has occurred and is
continuing, any holder or holders of Notes at the time outstanding affected by
such Event of Default may at any time, at its or their option, by notice or
notices to the Company, declare all the Notes held by it or them to be
immediately due and payable.
Upon any
Notes becoming due and payable under this Section 12.1, whether
automatically or by declaration, such Notes will forthwith mature and the entire
unpaid principal amount of such Notes, plus (x) all accrued and unpaid
interest thereon (including, but not limited to, any interest accrued thereon at
the Default Rate) and (y) the Make-Whole Amount determined in respect of
such principal amount (to the full extent permitted by applicable law), shall
all be immediately due and payable, in each and every case without presentment,
demand, protest or further notice, all of which are hereby
waived. The Company acknowledges, and the parties hereto agree, that
each holder of a Note has the right to maintain its investment in the Notes free
from repayment by the Company (except as herein specifically provided for), and
that the provision for payment of a Make-Whole Amount by the Company, in the
event that the Notes are prepaid or are accelerated as a result of an Event of
Default, is intended to provide compensation for the deprivation of such right
under such circumstances.
Section
12.2
Other Remedies
.
If any
Default or Event of Default has occurred and is continuing, and irrespective of
whether any Notes have become or have been declared immediately due and payable
under Section 12.1, the holder of any Note at the time outstanding may
proceed to protect and enforce the rights of such holder by an action at law,
suit in equity or other appropriate proceeding, whether for the specific
performance of any agreement contained herein or in any Note, or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law or
otherwise.
Section
12.3
Rescission
.
At any
time after any Notes have been declared due and payable pursuant to clause
Section 12.1(b) or (c), the Required Holders, by written notice to the Company,
may rescind and annul any such declaration and its consequences if (a) the
Company has paid all overdue interest on the Notes, all principal of and
Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid
other than by reason of such declaration, and all interest on such overdue
principal and Make-Whole Amount, if any, and (to the extent permitted by
applicable law) any overdue interest in respect of each Series of the Notes, at
the Default Rate for such Series, (b) neither the Company nor any other
Person shall have paid any amounts which have become due solely by reason of
such declaration, (c) all Events of Default and Defaults, other than non-payment
of amounts that have become due solely by reason of such declaration, have been
cured or have been waived pursuant to Section 17, and (d) no judgment
or decree has been entered for the payment of any monies due pursuant hereto or
to the Notes. No rescission and annulment under this
Section 12.3 will extend to or affect any subsequent Event of Default or
Default or impair any right consequent thereon.
Section
12.4
No Waivers or Election of Remedies,
Expenses, Etc
.
No course
of dealing and no delay on the part of any holder of any Note in exercising any
right, power or remedy shall operate as a waiver thereof or otherwise prejudice
such holder’s rights, powers or remedies. No right, power or remedy
conferred by this Agreement or by any Note upon any holder thereof shall be
exclusive of any other right, power or remedy referred to herein or therein or
now or hereafter available at law, in equity, by statute or
otherwise. Without limiting the obligations of the Company under
Section 15, the Company will pay to the holder of each Note on demand such
further amount as shall be sufficient to cover all costs and expenses of such
holder incurred in any enforcement or collection under this Section 12,
including, without limitation, reasonable attorneys’ fees, expenses and
disbursements.
|
SECTION 13.
|
REGISTRATION;
EXCHANGE; SUBSTITUTION OF NOTES.
|
Section
13.1
Registration of
Notes
.
The
Company shall keep at its principal executive office a register for the
registration and registration of transfers of Notes. The name and
address of each holder of one or more Notes, each transfer thereof and the name
and address of each transferee of one or more Notes shall be registered in such
register. Prior to due presentment for registration of transfer, the
Person in whose name any Note shall be registered shall be deemed and treated as
the owner and holder thereof for all purposes hereof, and the Company shall not
be affected by any notice or knowledge to the contrary. The Company
shall give to any holder of a Note that is an Institutional Investor promptly
upon request therefor, a complete and correct copy of the names and addresses of
all registered holders of Notes.
Section
13.2
Transfer and Exchange of
Notes
.
Upon
surrender of any Note to the Company at the address and to the attention of the
designated officer (all as specified in Section 18(c), for registration of
transfer or exchange (and in the case of a surrender for registration of
transfer, duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered holder of such Note or such holder’s attorney duly
authorized in writing and accompanied by the relevant name, address and other
information for notices of each transferee of such Note or part thereof), within
ten Business Days thereafter, the Company shall execute and deliver, at the
Company’s expense (except as provided below), one or more new Notes (as
requested by the holder thereof) of the same Series in exchange therefor, in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such Person
as such holder may request and shall be substantially in the form of Notes for
such Series set forth in Exhibits 1-A and 1-B, as the case may
be. Each such new Note shall be dated and bear interest from the date
to which interest shall have been paid on the surrendered Note or dated the date
of the surrendered Note if no interest shall have been paid
thereon. The Company may require payment of a sum sufficient to cover
any stamp tax or governmental charge imposed in respect of any such transfer of
Notes. Notes shall not be transferred in denominations of less than
$100,000;
provided
that
if necessary to enable the registration of transfer by a holder of its entire
holding of Notes of a Series, one Note of such Series may be in a denomination
of less than $100,000. Any transferee, by its acceptance of a Note
registered in its name (or the name of its nominee), shall be deemed to have
made the representation set forth in Section 6.2.
Section
13.3
Replacement of
Notes
.
Upon
receipt by the Company at the address and to the attention of the designated
officer (all as specified in Section 18(c)) of evidence reasonably satisfactory
to it of the ownership of and the loss, theft, destruction or mutilation of any
Note (which evidence shall be, in the case of an Institutional Investor, notice
from such Institutional Investor of such ownership and such loss, theft,
destruction or mutilation), and
(a)
in the
case of loss, theft or destruction, of indemnity reasonably satisfactory to it
(
provided
that if the
holder of such Note is, or is a nominee for, an original Purchaser or another
holder of a Note with a minimum net worth of at least $10,000,000 or a Qualified
Institutional Buyer, such Person’s own unsecured agreement of indemnity shall be
deemed to be satisfactory), or
(b)
in the
case of mutilation, upon surrender and cancellation thereof,
within
ten Business Days thereafter, the Company at its own expense shall execute and
deliver, in lieu thereof, a new Note of the same Series, dated and bearing
interest from the date to which interest shall have been paid on such lost,
stolen, destroyed or mutilated Note or dated the date of such lost, stolen,
destroyed or mutilated Note if no interest shall have been paid
thereon.
|
SECTION 14.
|
PAYMENTS
ON NOTES.
|
Section
14.1
Place of Payment
.
Subject
to Section 14.2, payments of principal, Make-Whole Amount, if any, and
interest becoming due and payable on the Notes shall be made in Des Moines, Iowa
at the principal office of the Company in such jurisdiction. The
Company may at any time, by notice to each holder of a Note, change the place of
payment of the Notes so long as such place of payment shall be either the
principal office of the Company in such jurisdiction or the principal office of
a bank or trust company in such jurisdiction.
Section
14.2
Home Office
Payment
.
So long
as any Purchaser or its nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Make-Whole Amount, if any, and interest by the method and at the address
specified for such purpose below such Purchaser’s name in Schedule A, or by
such other method or at such other address as such Purchaser shall have from
time to time specified to the Company in writing for such purpose, without the
presentation or surrender of such Note or the making of any notation thereon,
except that upon written request of the Company made concurrently with or
reasonably promptly after payment or prepayment in full of any Note, such
Purchaser shall surrender such Note for cancellation, reasonably promptly after
any such request, to the Company at its principal executive office or at the
place of payment most recently designated by the Company pursuant to
Section 14.1. Prior to any sale or other disposition of any Note
held by a Purchaser or its nominee, such Purchaser will, at its election, either
endorse thereon the amount of principal paid thereon and the last date to which
interest has been paid thereon or surrender such Note to the Company in exchange
for a new Note or Notes pursuant to Section 13.2. The Company
will afford the benefits of this Section 14.2 to any Institutional Investor
that is the direct or indirect transferee of any Note purchased by a Purchaser
under this Agreement and that has made the same agreement relating to such Note
as the Purchasers have made in this Section 14.2.
|
SECTION 15.
|
EXPENSES,
ETC.
|
Section
15.1
Transaction
Expenses
.
Whether
or not the transactions contemplated hereby are consummated, the Company will
pay all costs and expenses (including reasonable attorneys’ fees of a special
counsel and, if reasonably required by the Required Holders, local or other
counsel) incurred by the Purchasers and each other holder of a Note in
connection with such transactions and in connection with any amendments, waivers
or consents under or in respect of this Agreement or the Notes (whether or not
such amendment, waiver or consent becomes effective), including, without
limitation: (a) the costs and expenses incurred in enforcing or defending
(or determining whether or how to enforce or defend) any rights under this
Agreement or the Notes or in responding to any subpoena or other legal process
or informal investigative demand issued in connection with this Agreement or the
Notes, or by reason of being a holder of any Note, (b) the costs and
expenses, including financial advisors’ fees, incurred in connection with the
insolvency or bankruptcy of the Company or any Subsidiary or in connection with
any work-out or restructuring of the transactions contemplated hereby and by the
Notes and (c) the costs and expenses incurred in connection with the initial
filing of this Agreement and all related documents and financial information
with the SVO, provided that such costs and expenses shall not exceed
$2,500.00. The Company will pay, and will save each Purchaser and
each other holder of a Note harmless from, all claims in respect of any fees,
costs or expenses, if any, of brokers and finders (other than those, if any,
retained by a Purchaser or other holder in connection with its purchase of the
Notes).
Section
15.2
Survival
.
The
obligations of the Company under this Section 15 will survive the payment
or transfer of any Note, the enforcement, amendment or waiver of any provision
of this Agreement or the Notes, and the termination of this
Agreement.
|
SECTION 16.
|
SURVIVAL
OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT.
|
All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement and the Notes, the purchase or transfer by any
Purchaser of any Note or portion thereof or interest therein and the payment of
any Note, and may be relied upon by any subsequent holder of a Note, regardless
of any investigation made at any time by or on behalf of such Purchaser or any
other holder of a Note. All statements contained in any certificate
or other instrument delivered by or on behalf of the Company pursuant to this
Agreement shall be deemed representations and warranties of the Company under
this Agreement. Subject to the preceding sentence, this Agreement and
the Notes embody the entire agreement and understanding between each Purchaser
and the Company and supersede all prior agreements and understandings relating
to the subject matter hereof.
|
SECTION 17.
|
AMENDMENT
AND WAIVER.
|
Section
17.1
Requirements
.
This
Agreement and the Notes may be amended, and the observance of any term hereof or
of the Notes may be waived (either retroactively or prospectively), with (and
only with) the written consent of the Company and the Required Holders, except
that (a) no amendment or waiver of any of the provisions of Section 1,
2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it is used therein), will be
effective as to any Purchaser unless consented to by such Purchaser in writing,
and (b) no such amendment or waiver may, without the written consent of the
holder of each Note at the time outstanding affected thereby, (i) subject
to the provisions of Section 12 relating to acceleration or rescission,
change the amount or time of any prepayment or payment of principal of, or
reduce the rate or change the time of payment or method of computation of
interest or of the Make-Whole Amount on, any Series of the Notes,
(ii) change the percentage of the principal amount of the Notes the holders
of which are required to consent to any such amendment or waiver,
(iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20, or (iv)
release any Guarantor from its Guaranty of the Debt under this Agreement and the
Notes (other than in compliance with Section 9.8(b)).
Section
17.2
Solicitation of Holders of
Notes
.
(a)
Solicitation
. The
Company will provide each holder of the Notes (irrespective of the amount of
Notes then owned by it) with sufficient information, sufficiently far in advance
of the date a decision is required, to enable such holder to make an informed
and considered decision with respect to any proposed amendment, waiver or
consent in respect of any of the provisions hereof or of the
Notes. The Company will deliver executed or true and correct copies
of each amendment, waiver or consent effected pursuant to the provisions of this
Section 17 to each holder of outstanding Notes promptly following the date
on which it is executed and delivered by, or receives the consent or approval
of, the requisite holders of Notes.
(b)
Payment
. The
Company will not directly or indirectly pay or cause to be paid any
remuneration, whether by way of supplemental or additional interest, fee or
otherwise, or grant any security or provide other credit support, to any holder
of Notes as consideration for or as an inducement to the entering into by any
holder of Notes of any waiver or amendment of any of the terms and provisions
hereof unless such remuneration is concurrently paid, or security is
concurrently granted or other credit support concurrently provided, on the same
terms, ratably to each holder of Notes then outstanding even if such holder did
not consent to such waiver or amendment.
Section
17.3
Binding Effect,
etc
.
Any
amendment or waiver consented to as provided in this Section 17 applies
equally to all holders of Notes and is binding upon them and upon each future
holder of any Note and upon the Company without regard to whether such Note has
been marked to indicate such amendment or waiver. No such amendment
or waiver will extend to or affect any obligation, covenant, agreement, Default
or Event of Default not expressly amended or waived or impair any right
consequent thereon. No course of dealing between the Company and the
holder of any Note nor any delay in exercising any rights hereunder or under any
Note shall operate as a waiver of any rights of any holder of such
Note. As used herein, the term “
this Agreement
” and references
thereto shall mean this Agreement as it may from time to time be amended or
supplemented.
Section
17.4
Notes Held by Company,
etc
.
Solely
for the purpose of determining whether the holders of the requisite percentage
of the aggregate principal amount of Notes then outstanding approved or
consented to any amendment, waiver or consent to be given under this Agreement
or the Notes, or have directed the taking of any action provided herein or in
the Notes to be taken upon the direction of the holders of a specified
percentage of the aggregate principal amount of Notes then outstanding, Notes
directly or indirectly owned by the Company or any of its Affiliates shall be
deemed not to be outstanding.
All
notices and communications provided for hereunder shall be in writing and sent
(a) by telecopy if the sender on the same day sends a confirming copy of
such notice by a recognized overnight delivery service (charges prepaid), or
(b) by registered or certified mail with return receipt requested (postage
prepaid), or (c) by a recognized overnight delivery service (with charges
prepaid). Any such notice must be sent:
(a)
if to any
Purchaser or its nominee, to such Purchaser or nominee at the address specified
for such communications in Schedule A, or at such other address as such
Purchaser or nominee shall have specified to the Company in
writing,
(b)
if to any
other holder of any Note, to such holder at such address as such other holder
shall have specified to the Company in writing, or
(c)
if to the
Company, to the Company at its address set forth at the beginning hereof to the
attention of the Chief Financial Officer with a copy to the General Counsel, or
at such other address as the Company shall have specified to the holder of each
Note in writing.
Notices
under this Section 18 will be deemed given only when actually
received.
|
SECTION 19.
|
REPRODUCTION
OF DOCUMENTS.
|
This
Agreement and all documents relating thereto, including, without limitation,
(a) consents, waivers and modifications that may hereafter be executed,
(b) documents received by any Purchaser at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other
information previously or hereafter furnished to any Purchaser, may be
reproduced by such Purchaser by any photographic, photostatic, electronic,
digital or other similar process and such Purchaser may destroy any original
document so reproduced. The Company agrees and stipulates that, to
the extent permitted by applicable law, any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding (whether or not the original is in existence and whether or not such
reproduction was made by such Purchaser in the regular course of business) and
any enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. This Section 19 shall not
prohibit the Company or any other holder of Notes from contesting any such
reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such
reproduction.
|
SECTION 20.
|
CONFIDENTIAL
INFORMATION.
|
For the
purposes of this Section 20, “
Confidential Information
”
means information delivered to any Purchaser by or on behalf of the Company or
any Subsidiary in connection with the transactions contemplated by or otherwise
pursuant to this Agreement that is proprietary in nature and that was clearly
marked or labeled or otherwise adequately identified when received by such
Purchaser as being confidential information of the Company or such Subsidiary,
provided
that such term
does not include information that (a) was publicly known or otherwise known
to such Purchaser prior to the time of such disclosure, (b) subsequently
becomes publicly known through no act or omission by such Purchaser or any
Person acting on such Purchaser’s behalf, (c) otherwise becomes known to
such Purchaser other than through disclosure by the Company or any Subsidiary or
(d) constitutes financial statements delivered to such Purchaser under
Section 7.1 that are otherwise publicly available. Each
Purchaser will maintain the confidentiality of such Confidential Information in
accordance with procedures adopted by such Purchaser in good faith to protect
confidential information of third parties delivered to such Purchaser;
provided
that such Purchaser
may deliver or disclose Confidential Information to (i) its directors,
trustees, officers, employees, agents, attorneys and affiliates (to the extent
such disclosure reasonably relates to the administration of the investment
represented by its Notes), (ii) its financial advisors and other
professional advisors who agree to hold confidential the Confidential
Information substantially in accordance with the terms of this Section 20,
(iii) any other holder of any Note, (iv) any Institutional Investor to
which it sells or offers to sell such Note or any part thereof or any
participation therein (if such Person has agreed in writing prior to its receipt
of such Confidential Information to be bound by the provisions of this
Section 20), (v) any Person from which it offers to purchase any
security of the Company (if such Person has agreed in writing prior to its
receipt of such Confidential Information to be bound by the provisions of this
Section 20), (vi) any federal or state regulatory authority having
jurisdiction over such Purchaser, (vii) the NAIC or the SVO or, in each
case, any similar organization, or any nationally recognized rating agency that
requires access to information about such Purchaser’s investment portfolio, or
(viii) any other Person to which such delivery or disclosure may be
necessary or appropriate (w) to effect compliance with any law, rule,
regulation or order applicable to such Purchaser, (x) in response to any
subpoena or other legal process, (y) in connection with any litigation to
which such Purchaser is a party or (z) if an Event of Default has occurred
and is continuing, to the extent such Purchaser may reasonably determine such
delivery and disclosure to be necessary or appropriate in the enforcement or for
the protection of the rights and remedies under such Purchaser’s Notes and this
Agreement. Each holder of a Note, by its acceptance of a Note, will
be deemed to have agreed to be bound by and to be entitled to the benefits of
this Section 20 as though it were a party to this Agreement. On
reasonable request by the Company in connection with the delivery to any holder
of a Note of information required to be delivered to such holder under this
Agreement or requested by such holder (other than a holder that is a party to
this Agreement or its nominee), such holder will enter into an agreement with
the Company embodying the provisions of this Section 20.
|
SECTION 21.
|
SUBSTITUTION
OF PURCHASER.
|
Each
Purchaser shall have the right to substitute any one of its affiliates as the
purchaser of the Notes that it has agreed to purchase hereunder, by written
notice to the Company, which notice shall be signed by both such Purchaser and
such affiliate, shall contain such affiliate’s agreement to be bound by this
Agreement and shall contain a confirmation by such affiliate of the accuracy
with respect to it of the representations set forth in
Section 6. Upon receipt of such notice, any reference to such
Purchaser in this Agreement (other than in this Section 21), shall be
deemed to refer to such affiliate in lieu of such original
Purchaser. In the event that such affiliate is so substituted as a
Purchaser hereunder and such affiliate thereafter transfers to such original
Purchaser all of the Notes then held by such affiliate, upon receipt by the
Company of notice of such transfer, any reference to such affiliate as a
“Purchaser” in this Agreement (other than in this Section 21), shall no
longer be deemed to refer to such affiliate, but shall refer to such original
Purchaser, and such original Purchaser shall again have all the rights of an
original holder of the Notes under this Agreement.
|
SECTION 22.
|
MISCELLANEOUS.
|
Section
22.1
Successors and
Assigns
.
All
covenants and other agreements contained in this Agreement by or on behalf of
any of the parties hereto bind and inure to the benefit of their respective
successors and assigns (including, without limitation, any subsequent holder of
a Note) whether so expressed or not.
Section
22.2
Payments Due on Non-Business
Days
.
Anything
in this Agreement or the Notes to the contrary notwithstanding (but without
limiting the requirement in Section 8.5 that the notice of any optional
prepayment specify a Business Day as the date fixed for such prepayment), any
payment of principal of or Make-Whole Amount or interest on any Note that is due
on a date other than a Business Day shall be made on the next succeeding
Business Day without including the additional days elapsed in the computation of
the interest payable on such next succeeding Business Day,
provided
that if the maturity
date of any Note is a date other than a Business Day, the payment otherwise due
on such maturity date shall be made on the next succeeding Business Day and
shall include the additional days elapsed in the computation of interest payable
on such next succeeding Business Day.
Section
22.3
Accounting Terms
.
All
accounting terms used herein which are not expressly defined in this Agreement
have the meanings respectively given to them in accordance with
GAAP. Except as otherwise specifically provided herein, (i) all
computations made pursuant to this Agreement shall be made in accordance with
GAAP, and (ii) all financial statements shall be prepared in accordance with
GAAP. For purposes of determining compliance with the financial
covenants contained in this Agreement, any election by the Company or its
Subsidiaries to measure an item of its Debt using fair value (as may be
permitted by Statement of Financial Accounting Standards No. 159 or any similar
accounting standard) shall be disregarded and such determination shall be made
as if such election had not been made.
Section
22.4
Severability
.
Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
Section
22.5
Construction,
etc
.
Each
covenant contained herein shall be construed (absent express provision to the
contrary) as being independent of each other covenant contained herein, so that
compliance with any one covenant shall not (absent such an express contrary
provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by
any Person, or which such Person is prohibited from taking, such provision shall
be applicable whether such action is taken directly or indirectly by such
Person.
For the
avoidance of doubt, all Schedules and Exhibits attached to this Agreement shall
be deemed to be a part hereof.
Section
22.6
Counterparts
.
This
Agreement may be executed in any number of counterparts, each of which shall be
an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies
hereof, each signed by less than all, but together signed by all, of the parties
hereto. Delivery of an executed signature page by facsimile or e-mail
transmission shall be effective as delivery of a manually signed counterpart of
this Agreement.
Section
22.7
Governing Law
.
This
Agreement shall be construed and enforced in accordance with, and the rights of
the parties shall be governed by, the law of the State of New York, excluding
choice-of-law principles of the law of such State that would permit the
application of the laws of a jurisdiction other than such State.
Section
22.8
Jurisdiction and Process; Waiver of
Jury Trial
.
(a)
The
Company irrevocably submits to the non-exclusive jurisdiction of any New York
State or federal court sitting in the Borough of Manhattan, The City of New
York, over any suit, action or proceeding arising out of or relating to this
Agreement or the Notes. To the fullest extent permitted by applicable
law, the Company irrevocably waives and agrees not to assert, by way of motion,
as a defense or otherwise, any claim that it is not subject to the jurisdiction
of any such court, any objection that it may now or hereafter have to the laying
of the venue of any such suit, action or proceeding brought in any such court
and any claim that any such suit, action or proceeding brought in any such court
has been brought in an inconvenient forum.
(b)
The
Company consents to process being served by or on behalf of any holder of Notes
in any suit, action or proceeding of the nature referred to in Section 22.8(a)
by mailing a copy thereof by registered or certified mail (or any substantially
similar form of mail), postage prepaid, return receipt requested, to it at its
address specified in Section 18 or at such other address of which such holder
shall then have been notified pursuant to said Section. The Company
agrees that such service upon receipt (i) shall be deemed in every respect
effective service of process upon it in any such suit, action or proceeding and
(ii) shall, to the fullest extent permitted by applicable law, be taken and held
to be valid personal service upon and personal delivery to
it. Notices hereunder shall be conclusively presumed received as
evidenced by a delivery receipt furnished by the United States Postal Service or
any reputable commercial delivery service.
(c)
Nothing
in this Section 22.8 shall affect the right of any holder of a Note to serve
process in any manner permitted by law, or limit any right that the holders of
any of the Notes may have to bring proceedings against the Company in the courts
of any appropriate jurisdiction or to enforce in any lawful manner a judgment
obtained in one jurisdiction in any other jurisdiction.
(d)
THE
PARTIES HERETO HEREBY WAIVE TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH
RESPECT TO THIS AGREEMENT, THE NOTES OR ANY OTHER DOCUMENT EXECUTED IN
CONNECTION HEREWITH OR THEREWITH.
[Remainder
of page intentionally left blank. Next page is a signature
page.]
If you
are in agreement with the foregoing, please sign the form of agreement on a
counterpart of this Agreement and return it to the Company, whereupon this
Agreement shall become a binding agreement between you and the
Company.
|
|
By:
|
/s/ Joseph H.
Ceryanec
|
|
|
|
Title: Vice
President-Chief Financial Officer
|
This
Agreement is hereby accepted and
agreed to
as of the date thereof.
METLIFE
INSURANCE COMPANY OF CONNECTICUT
By: Metropolitan
Life Insurance Company,
its Investment Manager
METLIFE
INVESTORS USA INSURANCE COMPANY
By: Metropolitan
Life Insurance Company,
its Investment Manager
By:
/s/ Judith A. Gulotta
Name: Judith
A. Gulotta
Title: Managing
Director
(executed
by Metropolitan Life Insurance Company (i) as to itself
as a
Purchaser and (ii) as investment manager to MetLife Insurance
Company
of
Connecticut as a Purchaser and MetLife Investors USA
Insurance
Company as a Purchaser)
SCHEDULE
B
DEFINED
TERMS
As used
herein, the following terms have the respective meanings set forth below or set
forth in the Section hereof following such term:
“
Accountants’ Certificate
” is
defined in Section 7.1(b).
“
Affiliate
” means, at any time,
and with respect to any Person, any other Person that at such time directly or
indirectly through one or more intermediaries Controls, or is Controlled by, or
is under common Control with, such first Person, and, with respect to the
Company, shall include any Person beneficially owning or holding, directly or
indirectly, 10% or more of voting or equity interests of the Company or any
Subsidiary or any Person of which the Company and its Subsidiaries beneficially
own or hold, in the aggregate, directly or indirectly, 10% or more of voting or
equity interests. As used in this definition, “
Control
” means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
Securities, by contract or otherwise. Unless the context otherwise
clearly requires, any reference to an “
Affiliate
” is a reference to
an Affiliate of the Company.
“
Agreement
” is defined in
Section 17.3.
“
Anti-Terrorism Order
”
means Executive Order
No. 13,224 of September 24, 2001, Blocking Property and Prohibiting Transactions
with Persons Who Commit, Threaten to Commit or Support Terrorism, 66 U.S. Fed.
Reg. 49, 079 (2001), as amended.
“
Attributable Debt
” means in
connection with any Sale-and-Leaseback Transaction entered into within the
limitations of Section 10.6, as of the date of any determination thereof,
the greater of (a) the fair market value of the property or assets which is
or are the subject of such Sale-and-Leaseback Transaction (as reasonably
determined in good faith by the Board of Directors of the Company at or about
the time of the consummation of such Sale-and-Leaseback Transaction) and
(b) the aggregate amount of Rentals due and to become due (discounted from
the respective due dates thereof at the interest rate implicit in such Rentals
and otherwise in accordance with GAAP) under the lease relating to such
Sale-and-Leaseback Transaction.
“
Business Day
” means
(a) for the purposes of Section 8.7 only, any day other than a
Saturday, a Sunday or a day on which commercial banks in New York City are
required or authorized to be closed, and (b) for the purposes of any other
provision of this Agreement, any day other than a Saturday, a Sunday or a day on
which commercial banks in Des Moines, Iowa or New York, New York are required or
authorized to be closed.
“
Capital Lease
” means, at any
time, a lease with respect to which the lessee is required concurrently to
recognize the acquisition of an asset and the incurrence of a liability in
accordance with GAAP.
“
Change in Control
” is defined
in Section 8.3(h).
“
Closing
” is defined in
Section 3.
“
Code
” means the Internal
Revenue Code of 1986, as amended from time to time, and the rules and
regulations promulgated thereunder from time to time.
“Company”
means Meredith
Corporation, an Iowa corporation or any successor that becomes such in the
manner prescribed in Section 10.5.
“Confidential Information”
is
defined in Section 20.
“Consolidated EBITDA”
for any
period means the sum of (a) Consolidated Net Income during such period plus
(to the extent deducted in determining Consolidated Net Income) (b) all
provisions for any federal, state or other income taxes made by the Company and
its Subsidiaries during such period, (c) all provisions for depreciation
and amortization (other than amortization of debt discount) made by the Company
and its Subsidiaries during such period, and (d) Consolidated Interest
Expense during such period.
“Consolidated Interest
Expense”
means all Interest Expense of the Company and its Subsidiaries
for any period after eliminating intercompany items. For purposes of
any determination of Consolidated Interest Expense pursuant to this Agreement,
the Company shall include, on a
pro forma
basis, “
interest expense
” (calculated
in a manner consistent with the computation of Interest Expense herein) of any
business entity acquired by the Company or any Subsidiary during the four fiscal
quarters immediately preceding any determination of Consolidated Interest
Expense and, concurrently with such determination, the Company shall furnish to
the holders of the Notes audited financial statements or other financial
information with respect to such business entity demonstrating to the reasonable
satisfaction of the Required Holders the basis for such computations; provided,
that the Company may elect not to compute Consolidated Interest Expense on a pro
forma basis for any period with respect to one or more business entities so
acquired so long as (i) the Company has elected not to include the net income of
such business entities on a pro forma basis for such period in the computation
of Consolidated Net Income for such period and (ii) such election by the Company
with respect to the computation of Consolidated Interest Expense for such period
does not cause the Consolidated Interest Expense of the Company for such period
to be less than 90% of what the Company’s Consolidated Interest Expense would
have been if such election had not been made.
“Consolidated Net Income”
for
any period means the gross revenues of the Company and its Subsidiaries for such
period less all expenses and other proper charges (including taxes on income),
determined on a consolidated basis after eliminating earnings or losses
attributable to outstanding Minority Interests, but excluding in any
event:
(a)
any gains
or losses on the sale or other disposition of investments or fixed or capital
assets, and any taxes on such excluded gains and any tax deductions or credits
on account of any such excluded losses;
(b)
the
proceeds of any life insurance policy;
(c)
net
earnings and losses of any Subsidiary accrued prior to the date it became a
Subsidiary;
(d)
net
earnings and losses of any business entity (other than a Subsidiary),
substantially all the assets of which have been acquired in any manner by the
Company or any Subsidiary, realized by such business entity prior to the date of
such acquisition;
(e)
net
earnings and losses of any business entity (other than a Subsidiary) with which
the Company or a Subsidiary shall have consolidated or which shall have merged
into or with the Company or a Subsidiary prior to the date of such consolidation
or merger;
(f)
net
earnings of any business entity (other than a Subsidiary) in which the Company
or any Subsidiary has an ownership interest unless such net earnings shall have
actually been received by the Company or such Subsidiary in the form of cash
distributions;
(g)
any
portion of the net earnings of any Subsidiary which for any reason is
unavailable for payment of dividends to the Company or any other
Subsidiary;
(h)
(i)
earnings resulting from any reappraisal, revaluation or write-up of assets or
losses resulting from writedowns of goodwill or other intangibles under
Statement of Financial Accounting Standards No. 142, Statement of Financial
Accounting Standards No. 144, or any successor statement or principle, (ii)
losses resulting from any exit or disposal activities under Statement of
Financial Accounting Standards No. 146 or any successor statement or principle
or (iii) non-cash expenses resulting from equity-based
compensation;
(i)
any
deferred or other credit representing any excess of the equity in any Subsidiary
at the date of acquisition thereof over the amount invested in such
Subsidiary;
(j)
any gain
arising from the acquisition of any Securities of the Company or any
Subsidiary;
(k)
any
reversal of any contingency reserve, except to the extent that provision for
such contingency reserve shall have been made from income arising during such
period; and
(l)
any other
extraordinary or nonrecurring gain or loss.
For
purposes of any determination of Consolidated Net Income pursuant to this
Agreement and notwithstanding clause (d) of this definition, the Company may
include, on a
pro forma
basis, “
net income
”
(calculated in a manner consistent with the computation of Consolidated Net
Income herein) earned by any business entity acquired (or whose assets have been
acquired) by the Company or any Subsidiary during the four fiscal quarters
immediately preceding any determination of Consolidated Net Income,
provided
that there shall be
a reasonable basis for the computation of such “
net income
” and, concurrently
with such determination, the Company shall have furnished to the holders of the
Notes audited financial statements or other financial information with respect
to such business entity (or such acquired assets) demonstrating to the
reasonable satisfaction of the Required Holders the basis for such
computations.
“Consolidated Total Assets”
means, as of the date of any determination thereof, total assets of the Company
and its Subsidiaries determined on a consolidated basis in accordance with
GAAP.
“Consolidated Total Debt”
means, as of the date of any determination thereof, all Debt of the Company and
its Subsidiaries, determined on a consolidated basis eliminating intercompany
items.
“Control Event”
is defined in
Section 8.3(h).
“Debt”
with respect to any
Person means, at any time, without duplication,
(a)
its
liabilities for borrowed money and its redemption obligations in respect of
mandatorily redeemable Preferred Stock;
(b)
its
liabilities for the deferred purchase price of property acquired by such Person
(excluding accounts payable arising in the ordinary course of business but
including all liabilities created or arising under any conditional sale or other
title retention agreement with respect to any such property);
(c)
all
liabilities appearing on its balance sheet in accordance with GAAP in respect of
Capital Leases;
(d)
all
liabilities for borrowed money secured by any Lien with respect to any property
owned by such Person (whether or not it has assumed or otherwise become liable
for such liabilities);
(e)
all its
liabilities in respect of letters of credit or instruments serving a similar
function issued or accepted for its account by banks and other financial
institutions (whether or not representing obligations for borrowed
money);
(f)
Swaps of
such Person;
(g)
any
Guaranty of such Person with respect to liabilities of a type described in any
of clauses (a) through (f) or (h) hereof; and
(h)
Receivables
Facility Attributed Indebtedness.
Debt of
any Person shall include all obligations of such Person of the character
described in clauses (a) through (h) to the extent such Person remains legally
liable in respect thereof notwithstanding that any such obligation is deemed to
be extinguished under GAAP.
“Default”
means an event or
condition the occurrence or existence of which would, with the lapse of time or
the giving of notice or both, become an Event of Default.
“Default Rate”
means the
Series L Default Rate and the Series M Default Rate, as applicable.
“Disclosure Documents”
is
defined in Section 5.3.
“Electronic Delivery”
is
defined in Section 7.1(a).
“Environmental Laws”
means any
and all federal, state, local, and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits, concessions, grants,
franchises, licenses, agreements or governmental restrictions relating to
pollution and the protection of the environment or the release of any materials
into the environment, including but not limited to those related to Hazardous
Materials.
“ERISA”
means the Employee
Retirement Income Security Act of 1974, as amended from time to time, and the
rules and regulations promulgated thereunder from time to time in
effect.
“ERISA Affiliate”
means any
trade or business (whether or not incorporated) that is treated as a single
employer together with the Company under section 414 of the
Code.
“Event of Default”
is defined
in Section 11.
“Exchange Act”
means the
Securities Exchange Act of 1934, as amended from time to time, and the rules and
regulations promulgated thereunder from time to time in effect.
“Finsub”
means any
bankruptcy-remote corporation or other Person that is a Wholly-Owned Subsidiary
organized solely for the purposes of engaging in a Permitted Receivables
Transaction.
“Form 10-K”
is defined in
Section 7.1(b).
“
Form 10-Q”
is defined in
Section 7.1(a).
“GAAP”
means generally
accepted accounting principles as in effect from time to time in the United
States of America.
“
Governmental Authority
”
means
(a)
the
government of
(1)
the
United States of America or any state or other political subdivision thereof,
or
(2)
any other
jurisdiction in which the Company or any Subsidiary conducts all or any part of
its business, or which asserts jurisdiction over any properties of the Company
or any Subsidiary, or
(b)
any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of, or pertaining to, any such government, including without
limitation the Federal Communications Commission of the United
States.
“Guarantor”
means each
Subsidiary required to guaranty the Notes pursuant to Section 9.8.
“Guaranty”
means, with respect
to any Person, any obligation (except the endorsement in the ordinary course of
business of negotiable instruments for deposit or collection) of such Person
guaranteeing or in effect guaranteeing any Debt, dividend or other obligation of
any other Person in any manner, whether directly or indirectly, including
(without limitation) obligations incurred through an agreement, contingent or
otherwise, by such Person:
(a)
to
purchase such indebtedness or obligation or any property constituting security
therefor;
(b)
to
advance or supply funds (i) for the purchase or payment of such
indebtedness or obligation, or (ii) to maintain any working capital or
other balance sheet condition or any income statement condition of any other
Person or otherwise to advance or make available funds for the purchase or
payment of such indebtedness or obligation;
(c)
to lease
properties or to purchase properties or services primarily for the purpose of
assuring the owner of such indebtedness or obligation of the ability of any
other Person to make payment of the indebtedness or obligation; or
(d)
otherwise
to assure the owner of such indebtedness or obligation against loss in respect
thereof.
In any
computation of the indebtedness or other liabilities of the obligor under any
Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
“Hazardous Material”
means any
and all pollutants, toxic or hazardous wastes or any other substances that might
pose a hazard to health and safety, the removal of which may be required or the
generation, manufacture, refining, production, processing, treatment, storage,
handling, transportation, transfer, use, disposal, release, discharge, spillage,
seepage, or filtration of which is or shall be restricted, prohibited or
penalized by any applicable law including, but not limited to, asbestos, urea
formaldehyde foam insulation, polychlorinated biphenyls, petroleum, petroleum
products, lead based paint, radon gas or similar restricted, prohibited or
penalized substances.
“holder”
means, with respect
to any Note, the Person in whose name such Note is registered in the register
maintained by the Company pursuant to Section 13.1.
“INHAM Exemption”
is defined
in Section 6.2(e).
“Institutional Investor”
means
(a) any Purchaser of a Note, (b) any holder of a Note holding
(together with one or more of its affiliates) more than 5% of the aggregate
principal amount of the Notes then outstanding, (c) any bank, trust
company, savings and loan association or other financial institution, any
pension plan, any investment company, any insurance company, any broker or
dealer, or any other similar financial institution or entity, regardless of
legal form, and (d) any Related Fund of any holder of any Note.
“Intercreditor Agreement”
is
defined in Section 9.9.
“Interest Expense”
of the
Company and its Subsidiaries for any period means all interest (including the
interest component included in Rentals on Capital Leases) and all amortization
of debt discount and expense on any particular Debt (including, without
limitation, payment-in-kind, zero coupon and other like Securities) for which
such calculations are being made.
“Lien”
means, with respect to
any Person, any mortgage, lien, pledge, charge, security interest or other
encumbrance, or any interest or title of any vendor, lessor, lender or other
secured party to or of such Person under any conditional sale or other title
retention agreement or Capital Lease, upon or with respect to any property or
asset of such Person (including in the case of stock, stockholder agreements,
voting trust agreements and all similar arrangements).
“Major Credit Facility”
means
(a) the Credit Agreement, dated as of April 5, 2002, providing for revolving
loans in an aggregate principal amount of up to $150,000,000, among the Company,
the lenders listed therein, Bank of America, N.A., as Administrative Agent and
Issuing Lender and the other agents listed therein, and (b) any other facility
(other than any Receivables Program Documents or Receivables Purchase
Agreements) providing credit availability in excess of $75,000,000 to any one or
more of the Company and its Subsidiaries, in each case under clauses (a) and
(b), as such agreement or facility may be amended, restated, supplemented or
otherwise modified and together with increases, refinancings and replacements
thereof.
“Make-Whole Amount”
is defined
in Section 8.7.
“Material”
means material in
relation to the business, operations, affairs, financial condition, assets,
properties, or prospects of the Company and its Subsidiaries taken as a
whole.
“Material Adverse Effect”
means a material adverse effect on (a) the business, operations, affairs,
financial condition, assets, properties or prospects of the Company and its
Subsidiaries taken as a whole, or (b) the ability of the Company to perform
its obligations under this Agreement and the Notes, or (c) the validity or
enforceability of this Agreement or the Notes.
“Material Subsidiary”
means,
at any time, any Subsidiary if: (i) the portion of Consolidated
Net Income which was contributed by such Subsidiary during the immediately
preceding fiscal year of the Company exceeds 10% of Consolidated Net Income or
(ii) the portion of consolidated operating profit, as determined in
accordance with GAAP, which was contributed by such Subsidiary during the
immediately preceding fiscal year of the Company exceeds 10% of such
consolidated operating profit or (iii) the assets of such Subsidiary as at
the end of the immediately preceding fiscal year of the Company exceeds 10% of
Consolidated Total Assets.
“Maximum Permitted Total Debt”
is defined in Section 10.3(a).
“Meredith Family”
means
(a) the lineal descendants by blood or adoption of E.T. Meredith (“
descendants
”) and the spouses
and surviving spouses of such descendants; (b) any estate, trust,
guardianship, custodianship or other fiduciary arrangement for the primary
benefit of any one or more individuals described in (a) above; and (c) any
corporation, partnership, limited liability company or other business
organization so long as (i) one or more individuals or entities described
in clauses (a) and (b) above possess, directly or indirectly, the power to
direct or cause the direction of, the management and policies of such
corporation, partnership, limited liability company or other business
organization and (ii) substantially all of the ownership, beneficial or
other equity interests in such corporation, partnership, limited liability
company or other business organization are owned, directly or indirectly, by one
or more individuals or entities described in clauses (a) and (b)
above.
“Minority Interests”
means any
shares of stock of any class of a Subsidiary (other than directors’ qualifying
shares as required by law) that are not owned by the Company and/or one or more
of its Subsidiaries. Minority Interests shall be valued by valuing
Minority Interests constituting Preferred Stock at the voluntary or involuntary
liquidating value of such Preferred Stock, whichever is greater, and by valuing
Minority Interests constituting common stock at the book value of capital and
surplus applicable thereto adjusted, if necessary, to reflect any changes from
the book value of such common stock required by the foregoing method of valuing
Minority Interests in Preferred Stock.
“Multiemployer Plan”
means any
Plan that is a “multiemployer plan” (as such term is defined in
section 4001(a)(3) of ERISA).
“
NAIC”
means the National
Association of Insurance Commissioners or any successor thereto.
“NAIC Annual Statement”
is
defined in Section 6.2(a).
“Non-U.S. Pension Plan”
means
any plan, fund, or other similar program established or maintained outside the
United States of America by the Company or any one or more of its Subsidiaries
primarily for the benefit of employees of the Company or such Subsidiaries
residing outside the United States of America, which plan, fund or other similar
program provides for retirement income for such employees or a deferral of
income for such employees in contemplation of retirement and is not subject to
ERISA or the Code.
“Notes”
is defined in
Section 1.
“Officer’s Certificate”
means
a certificate of a Senior Financial Officer or of any other officer of the
Company whose responsibilities extend to the subject matter of such
certificate.
“PBGC”
means the Pension
Benefit Guaranty Corporation referred to and defined in ERISA or any successor
thereto.
“
Pension Funding Rules
” shall
mean the rules of the Code and ERISA regarding minimum required contributions
(including any installment payment thereof) to Plans and set forth in, with
respect to plan years ending prior to the effective date as to any such Plan of
the Pension Protection Act of 2006, Sections 401(a)(29) and 412 of the Code and
Part 3, Subtitle I, of Title I of ERISA each as in effect prior to the Pension
Protection Act of 2006 and, thereafter, Sections 412 and 430 through
436 of the Code and Part 3, Subtitle I, of Title I of ERISA each as in effect
from time to time.
“Permitted Receivables
Transaction”
means each of (a) the sale or other transfer, or
transfer of interest, by the Company or a Subsidiary of Receivables Assets to a
Subsidiary (including, without limitation, Finsub) or the Company in exchange
for consideration equal to the fair market value of the related Receivables,
(b) the entry by the Company or one or more Subsidiaries into one or more
Receivables Purchase Agreements, and (c) the entry by the Company and any
such Subsidiaries into such ancillary agreements, guarantees, documents or
instruments as are necessary or advisable in connection with Receivables Program
Documents.
“Person”
means an individual,
partnership, corporation, limited liability company, association, trust,
unincorporated organization, business entity or Governmental
Authority.
“Plan”
means an “employee
benefit plan” (as defined in section 3(3) of ERISA) subject to Title I of
ERISA that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any
liability.
“Preferred Stock”
means any
class of capital stock (or other equity interests) of a Person that is preferred
over any other class of capital stock (or other similar equity interests) of
such Person as to the payment of dividends or the payment of any amount upon
liquidation or dissolution of such Person.
“Priority Debt”
means, without
duplication, the sum of (i) all Debt of the Company secured by Liens
permitted by Sections 10.4(h), (i), (j), (k) and (l) plus (ii) all
Debt of Subsidiaries (excluding Debt held by the Company or a Wholly-Owned
Subsidiary), plus (iii) all Attributable Debt of the Company and its
Subsidiaries, plus (iv) all Receivables Facility Attributed Indebtedness of
the Company and its Subsidiaries.
“property”
or
“properties”
means, unless
otherwise specifically limited, real or personal property of any kind, tangible
or intangible, choate or inchoate.
“Proposed Prepayment Date”
is
defined in Section 8.3(c).
“PTE”
means a Prohibited
Transaction Exemption issued by the Department of Labor.
“
Purchaser”
is defined in the
first paragraph of this Agreement.
“QPAM Exemption”
is defined in
Section 6.2(d).
“
Qualified Institutional Buyer”
means any Person who is a “qualified institutional buyer” within the
meaning of such term as set forth in Rule 144A(a)(1) under the Securities
Act.
“Receivable”
means all
indebtedness and other obligations owed by a Person to the Company or any
Subsidiary or in which the Company or any Subsidiary has a security interest or
other interest, including, without limitation, any indebtedness, obligation or
interest constituting an account, chattel paper, instrument or general
intangible, arising in connection with the sale or lease of goods or the
rendering of services by the Company or such Subsidiary, including the
obligation to pay finance charges with respect thereto.
“Receivables Assets”
means all
the assets described in Section 10.4(g).
“Receivables Facility Attributed
Indebtedness”
means, on any date of determination, the amount of
obligations outstanding as of such date under a Receivables Purchase Agreement
that would be characterized as principal if such facility were structured as a
secured lending transaction rather than as a purchase.
“Receivables Program
Documents”
means (i) the Receivables Sale Agreement, dated April 9, 2002,
by and among Meredith Funding Corporation, the Company and the other originators
party thereto from time to time, as amended, (ii) the Receivables Purchase
Agreement, dated April 9, 2002, by and among Meredith Funding Corporation, the
Company, as servicer, Falcon Asset Securitization Corporation, the financial
institutions from time to time party thereto and JPMorgan Chase Bank, N.A.
(successor by merger to Bank One, NA (Main Office Chicago)), as agent, as
amended, and (iii) all receivable sale agreements, receivable purchase
agreements or other written agreements that may from time to time be entered
into by the Company or any of its Subsidiaries, including Finsub, in connection
with any receivables program, as such agreements may be amended, supplemented or
otherwise modified from time to time in accordance with the provisions
thereof.
“Receivables Purchase
Agreement”
means a receivables purchase agreement or other receivables
financing agreement with one or more Receivables Purchasers, pursuant to which
some or all of such Receivables Purchasers will purchase undivided interests in,
or otherwise finance, Receivables Assets.
“Receivables Purchaser”
means
any purchaser or investor which purchases undivided interests in or otherwise
finances Receivables Assets, and includes any agent of any such purchaser or
investor.
“
Related Fund”
means, with
respect to any holder of any Note, any fund or entity that (i) invests in
Securities or bank loans, and (ii) is advised or managed by such holder, the
same investment advisor as such holder or by an affiliate of such holder or such
investment advisor.
“Related Security”
means with
respect to any Receivable (i) the inventory and goods, the sale, financing
or lease of which gave rise to such Receivable and all insurance contracts with
respect thereto, (ii) all security interests or Liens and the property
subject thereto purporting to secure payment of such Receivable, together with
all financing statements and security agreements describing any collateral
securing such Receivable, (iii) all guaranties, letters of credit,
insurance and other agreements or arrangements supporting or securing the
payment of such Receivable, (iv) all invoices, agreements, contracts,
records, books and other information relating to such Receivable or the Person
obligated to pay such Receivable, (v) any rights of the Company or any
Subsidiary under any agreement, document or guaranty executed or delivered in
connection with a Permitted Receivables Transaction, and (vi) all proceeds
of the foregoing.
“Rentals”
means and includes
as of the date of any determination thereof all fixed payments (including as
such all payments which the lessee is obligated to make to the lessor on
termination of the lease or surrender of the property) payable by the Company or
a Subsidiary, as lessee or sublessee under a lease of real or personal property,
but shall be exclusive of any amounts required to be paid by the Company or a
Subsidiary (whether or not designated as rents or additional rents) on account
of maintenance, repairs, insurance, taxes and similar charges. Fixed
rents under any so-called “
percentage leases
” shall be
computed solely on the basis of the minimum rents, if any, required to be paid
by the lessee regardless of sales volume or gross revenues.
“Required Holders”
means, at
any time, the holders of a majority in principal amount of the Notes (without
regard to Series) at the time outstanding (exclusive of Notes then owned by the
Company or any of its Affiliates).
“Responsible Officer”
means
any Senior Financial Officer and any other officer of the Company with
responsibility for the administration of the relevant portion of this
Agreement.
“Sale-and-Leaseback
Transaction”
means a transaction or series of transactions pursuant to
which the Company or any Subsidiary shall sell or transfer to any Person (other
than the Company or a Subsidiary) any property, whether now owned or hereafter
acquired, and, as part of the same transaction or series of transactions, the
Company or any Subsidiary shall rent or lease as lessee (other than pursuant to
a Capital Lease), or similarly acquire the right to possession or use of, such
property or one or more properties which it intends to use for the same purpose
or purposes as such property.
“
SEC”
means the Securities and
Exchange Commission of the United States, or any successor thereto.
“Securities Act”
means the
Securities Act of 1933, as amended from time to time, and the rules and
regulations promulgated thereunder from time to time in effect.
“Securities”
or “Security” has the meaning specified in Section 2(1) of the Securities
Act.
“Senior Debt”
means any Debt
of the Company that is not in any manner subordinated in right of payment to the
Notes or to any other Debt of the Company.
“Senior Financial Officer”
means the chief financial officer, principal accounting officer,
treasurer or comptroller of the Company.
“Series”
means any of the
Series L Notes or the Series M Notes issued hereunder.
“Series L Default Rate”
means
the lesser of (a) the maximum rate of interest allowed by applicable law
and (b) the greater of (i) 8.70% and (ii) 2.0% per annum over the rate
of interest publicly announced from time to time by JPMorgan Chase Bank, N.A.
(or its successors) in New York, New York as its “base” or “prime”
rate.
“Series L Notes”
is defined in
Section 1.
“Series M Default Rate”
means
the lesser of (a) the maximum rate of interest allowed by applicable law
and (b) the greater of (i) 9.19% and (ii) 2.0% per annum over the rate
of interest publicly announced from time to time by JPMorgan Chase Bank, N.A.
(or its successors) in New York, New York as its “base” or “prime”
rate.
“Series M Notes”
is defined
in
Section
1.
“Source”
is defined in
Section 6.2.
“Subsidiary”
means, as to any
Person, any Person in which such first Person or one or more of its Subsidiaries
or such first Person and one or more of its Subsidiaries owns sufficient equity
or voting interests to enable it or them (as a group) ordinarily, in the absence
of contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such second Person, and any partnership or joint venture
if more than a 50% interest in the profits or capital thereof is owned by such
first Person or one or more of its Subsidiaries or such first Person and one or
more of its Subsidiaries (unless such partnership or joint venture can and does
ordinarily take major business actions without the prior approval of such first
Person or one or more of its Subsidiaries). Unless the context
otherwise clearly requires, any reference to a “Subsidiary” is a reference to a
Subsidiary of the Company.
“surviving corporation”
is
defined in Section 10.5(a)(2).
“
SVO”
means the Securities
Valuation Office of the NAIC or any successor to such Office.
“Swaps”
means, with respect to
any Person, payment obligations with respect to interest rate swaps, currency
swaps and similar obligations obligating such Person to make payments, whether
periodically or upon the happening of a contingency. For the purposes
of this Agreement, the amount of the obligation under any Swap shall be the
amount determined in respect thereof as of the end of the then most recently
ended fiscal quarter of such Person, based on the assumption that such Swap had
terminated at the end of such fiscal quarter, and in making such determination,
if any agreement relating to such Swap provides for the netting of amounts
payable by and to such Person thereunder or if any such agreement provides for
the simultaneous payment of amounts by and to such Person, then in each such
case, the amount of such obligation shall be the net amount so
determined.
“2008 Note Purchase Agreement”
means that certain Note Purchase Agreement, dated as of June 16, 2008, among the
Company and the purchasers listed in Schedule A attached thereto.
“
USA Patriot Act”
means United
States Public Law 107-56, Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT)
Act of 2001, as amended from time to time, and the rules and regulations
promulgated thereunder from time to time in effect.
“Voting Stock”
means
Securities of any class or classes, the holders of which are ordinarily, in the
absence of contingencies, entitled to elect a majority of the corporate
directors (or Persons performing similar functions).
“Wholly-Owned Subsidiary”
means, at any time, any Subsidiary one hundred percent of all of the equity
interests (except directors’ qualifying shares) and voting interests of which
are owned by any one or more of the Company and the Company’s other Wholly-Owned
Subsidiaries at such time.
EXHIBIT
1-A
[FORM
OF SERIES L NOTE]
MEREDITH
CORPORATION
6.70%
Senior Note, Series L, due July 13, 2013
No.
RL-[____] [Date]
$[____________] PPN: 589433
E#4
FOR VALUE
RECEIVED, the undersigned, Meredith Corporation (herein called the “
C
o
mpany
”), a corporation organized and
existing under the laws of the State of Iowa, hereby promises to pay to
[________________]
, or
registered assigns, the principal sum of
[________________] DOLLARS
($[_________])
on July 13, 2013, with interest (computed on the basis of
a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof
at the rate of 6.70% per annum from the date hereof, payable semiannually, on
the 13th day of July and January in each year, commencing with the July or
January next succeeding the date hereof, until the principal hereof shall have
become due and payable, and (b) to the extent permitted by law on any
overdue payment (including any overdue prepayment) of principal, any overdue
payment of interest and any overdue payment of any Make-Whole Amount (as defined
in the Note Purchase Agreement referred to below), payable semiannually as
aforesaid (or, at the option of the registered holder hereof, on demand), at a
rate per annum from time to time equal to the Series L Default Rate (as defined
in the Note Purchase Agreement).
Payments
of principal of, interest on and any Make-Whole Amount with respect to this Note
are to be made in lawful money of the United States of America at Des Moines,
Iowa or at such other place as the Company shall have designated by written
notice to the holder of this Note as provided in the Note Purchase Agreement
referred to below.
This Note
is one of a series of Series L Senior Notes (herein called the
“Notes”
) issued pursuant to a
Note Purchase Agreement dated as of July 13, 2009 (as from time to time amended,
the
“Note Purchase
Agreement”
), between the Company and the respective Purchasers named
therein and is entitled to the benefits thereof. Each holder of this
Note will be deemed, by its acceptance hereof, (i) to have agreed to the
confidentiality provisions set forth in Section 20 of the Note Purchase
Agreement and (ii) to have made the representation set forth in
Section 6.2
of
the Note Purchase Agreement.
This Note
is a registered Note and, as provided in the Note Purchase Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder’s attorney duly authorized in writing, a new Note
for a like principal amount will be issued to, and registered in the name of,
the transferee. Prior to due presentment for registration of
transfer, the Company may treat the person in whose name this Note is registered
as the owner hereof for the purpose of receiving payment and for all other
purposes, and the Company will not be affected by any notice to the
contrary.
This Note
is subject to optional prepayment, in whole or from time to time in part, at the
times and on the terms specified in the Note Purchase Agreement, but not
otherwise.
If an
Event of Default, as defined in the Note Purchase Agreement, occurs and is
continuing, the principal of this Note may be declared or otherwise become due
and payable in the manner, at the price (including any applicable Make-Whole
Amount) and with the effect provided in the Note Purchase
Agreement.
This
Note shall be construed and enforced in accordance with, and the rights of the
Company and the holder of this Note shall be governed by, the law of the State
of New York, excluding choice-of-law principles of the law of such State which
would permit application of the laws of a jurisdiction other than such
State.
|
|
By:________________________________
|
|
|
Title: Vice
President-Chief Financial Officer
|
EXHIBIT
1-B
[FORM
OF SERIES M NOTE]
MEREDITH
CORPORATION
7.19%
Senior Note, Series M, due July 13, 2014
No.
RM-[___] [Date]
$[____________] PPN: 589433
F*7
FOR VALUE
RECEIVED, the undersigned, Meredith Corporation (herein called the “
Company
”), a corporation
organized and existing under the laws of the State of Iowa, hereby promises to
pay to
[________________]
, or
registered assigns, the principal sum of
[________________] DOLLARS
($[___________])
on July 13, 2014, with interest (computed on the basis
of a 360-day year of twelve 30-day months) (a) on the unpaid balance
thereof at the rate of 7.19% per annum from the date hereof, payable
semi-annually, on the 13th day of July and January in each year, commencing with
the July or January next succeeding the date hereof, until the principal hereof
shall have become due and payable, and (b) to the extent permitted by law
on any overdue payment (including any overdue prepayment) of principal, any
overdue payment of interest and any overdue payment of any Make-Whole Amount (as
defined in the Note Purchase Agreement referred to below), payable semiannually
as aforesaid (or, at the option of the registered holder hereof, on demand), at
a rate per annum from time to time equal to the Series M Default Rate (as
defined in the Note Purchase Agreement).
Payments
of principal of, interest on and any Make-Whole Amount with respect to this Note
are to be made in lawful money of the United States of America at Des Moines,
Iowa or at such other place as the Company shall have designated by written
notice to the holder of this Note as provided in the Note Purchase Agreement
referred to below.
This Note
is one of a series of Series M Senior Notes (herein called the
“Notes”
) issued pursuant to a
Note Purchase Agreement dated as of July 13, 2009 (as from time to time amended,
the
“Note Purchase
Agreement”
), between the Company and the respective Purchasers named
therein and is entitled to the benefits thereof. Each holder of this
Note will be deemed, by its acceptance hereof, (i) to have agreed to the
confidentiality provisions set forth in Section 20 of the Note Purchase
Agreement and (ii) to have made the representation set forth in
Section 6.2
of
the Note Purchase Agreement.
This Note
is a registered Note and, as provided in the Note Purchase Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder’s attorney duly authorized in writing, a new Note
for a like principal amount will be issued to, and registered in the name of,
the transferee. Prior to due presentment for registration of
transfer, the Company may treat the person in whose name this Note is registered
as the owner hereof for the purpose of receiving payment and for all other
purposes, and the Company will not be affected by any notice to the
contrary.
This Note
is subject to optional prepayment, in whole or from time to time in part, at the
times and on the terms specified in the Note Purchase Agreement, but not
otherwise.
If an
Event of Default, as defined in the Note Purchase Agreement, occurs and is
continuing, the principal of this Note may be declared or otherwise become due
and payable in the manner, at the price (including any applicable Make-Whole
Amount) and with the effect provided in the Note Purchase
Agreement.
This
Note shall be construed and enforced in accordance with, and the rights of the
Company and the holder of this Note shall be governed by, the law of the State
of New York, excluding choice-of-law principles of the law of such State which
would permit application of the laws of a jurisdiction other than such
State.
|
|
By:____________________________
|
|
|
Title: Vice
President-Chief Financial Officer
|
Exhibit
4.4
Meredith Corporation
$50,000,000
4.70% Senior Notes, Series J, Due June 16, 2011
$50,000,000
5.04% Senior Notes, Series K, Due June 16, 2012
______________
Note
Purchase Agreement
_____________
Dated as
of June 16, 2008
|
|
SECTION 1.AUTHORIZATION
OF NOTES
|
|
|
SECTION 2.SALE
AND PURCHASE OF NOTES
|
|
|
SECTION 4.CONDITIONS
TO CLOSING
|
|
|
Section
4.1
|
Representations
and Warranties
|
|
|
|
Section
4.2
|
Performance;
No Default
|
|
|
|
Section
4.3
|
Compliance
Certificates
|
|
|
|
Section
4.4
|
Opinions
of Counsel
|
|
|
|
Section
4.5
|
Purchase
Permitted By Applicable Law, Etc
|
|
|
|
Section
4.6
|
Sale
of Other Notes
|
|
|
|
Section
4.7
|
Payment
of Special Counsel Fees
|
|
|
|
Section
4.8
|
Private
Placement Number
|
|
|
|
Section
4.9
|
Changes
in Corporate Structure
|
|
|
|
Section
4.10
|
Funding
Instructions
|
|
|
|
Section
4.11
|
Proceedings
and Documents
|
|
|
|
SECTION 5.REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
|
|
|
Section
5.1
|
Organization;
Power and Authority
|
|
|
|
Section
5.2
|
Authorization,
Etc
|
|
|
|
Section
5.4
|
Organization
and Ownership of Shares of
Subsidiaries; Affiliates
|
|
|
|
Section
5.5
|
Financial
Statements
|
|
|
|
Section
5.6
|
Compliance
with Laws, Other Instruments, Etc
|
|
|
|
Section
5.7
|
Governmental
Authorizations, Etc
|
|
|
|
Section
5.8
|
Litigation;
Observance of Agreements, Statutes and Orders
|
|
|
|
Section
5.10
|
Title
to Property; Leases
|
|
|
|
Section
5.11
|
Licenses,
Permits, Etc
|
|
|
|
Section
5.12
|
Compliance
with ERISA
|
|
|
|
Section
5.13
|
Private
Offering by the Company
|
|
|
|
Section
5.14
|
Use
of Proceeds; Margin Regulations
|
|
|
|
Section
5.15
|
Existing
Debt; Future Liens
|
|
|
|
Section
5.16
|
Foreign
Assets Control Regulations, Etc
|
|
|
|
Section
5.17
|
Status
under Certain Statutes
|
|
|
|
Section
5.18
|
Notes
Rank Pari Passu
|
|
|
|
Section
5.19
|
Environmental
Matters
|
|
|
|
SECTION 6.REPRESENTATIONS
OF THE PURCHASER
|
|
|
Section
6.1
|
Purchase
for Investment
|
|
|
|
Section
6.2
|
Source
of Funds
|
|
|
|
SECTION 7.INFORMATION
AS TO THE COMPANY
|
|
|
Section
7.1
|
Financial
and Business Information
|
|
|
|
Section
7.2
|
Officer’s
Certificate
|
|
|
|
SECTION 8.PAYMENT
AND PREPAYMENT OF THE NOTES
|
|
|
Section
8.1
|
Required
Payment
|
|
|
|
Section
8.2
|
Optional
Prepayments with Make-Whole Amount
|
|
|
Section
8.3
|
Change
in Control
|
|
|
|
Section
8.4
|
Allocation
of Partial Prepayments
|
|
|
|
Section
8.5
|
Maturity;
Surrender, Etc
|
|
|
|
Section
8.6
|
Purchase
of Notes
|
|
|
|
Section
8.7
|
Make-Whole
Amount
|
|
|
|
SECTION 9.AFFIRMATIVE
COVENANTS
|
|
|
Section
9.1
|
Compliance
with Law
|
|
|
|
Section
9.3
|
Maintenance
of Properties
|
|
|
|
Section
9.4
|
Payment
of Taxes and Claims
|
|
|
|
Section
9.5
|
Corporate
Existence, Etc
|
|
|
|
Section
9.6
|
Notes
to Rank Pari Passu
|
|
|
|
Section
9.7
|
Books
and Records
|
|
|
|
SECTION 10.NEGATIVE
COVENANTS
|
|
|
Section
10.1
|
Transactions
with Affiliates
|
|
|
|
Section
10.2
|
Interest
Coverage Ratio
|
|
|
|
Section
10.3
|
Limitations
on Debt
|
|
|
|
Section
10.5
|
Mergers,
Consolidations and Sales of Assets
|
|
|
|
Section
10.6
|
Limitation
on Sale-and-Leaseback Transactions
|
|
|
Section
10.7
|
Termination
of Pension Plans
|
|
|
|
Section
10.8
|
Nature
of Business
|
|
|
|
Section
10.9
|
Terrorism
Sanctions Regulations
|
|
|
|
SECTION 11.EVENTS
OF DEFAULT
|
|
|
SECTION 12.REMEDIES
ON DEFAULT, ETC
|
|
|
Section
12.1
|
Acceleration
|
|
|
|
Section
12.2
|
Other
Remedies
|
|
|
|
Section
12.4
|
No
Waivers or Election of Remedies, Expenses, Etc
|
|
|
|
SECTION 13.REGISTRATION;
EXCHANGE; SUBSTITUTION OF NOTES
|
|
|
Section
13.1
|
Registration
of Notes
|
|
|
|
Section
13.2
|
Transfer
and Exchange of Notes
|
|
|
|
Section
13.3
|
Replacement
of Notes
|
|
|
|
SECTION 14.PAYMENTS
ON NOTES
|
|
|
Section
14.1
|
Place
of Payment
|
|
|
|
Section
14.2
|
Home
Office Payment
|
|
|
|
Section
15.1
|
Transaction
Expenses
|
|
|
|
SECTION 16.SURVIVAL
OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT
|
|
|
SECTION 17.AMENDMENT
AND WAIVER
|
|
|
Section
17.1
|
Requirements
|
|
|
|
Section
17.2
|
Solicitation
of Holders of Notes
|
|
|
|
Section
17.3
|
Binding
Effect, etc
|
|
|
|
Section
17.4
|
Notes
Held by Company, etc
|
|
|
|
SECTION 19.REPRODUCTION
OF DOCUMENTS
|
|
|
SECTION 20.CONFIDENTIAL
INFORMATION
|
|
|
SECTION 21.SUBSTITUTION
OF PURCHASER
|
|
|
Section
22.1
|
Successors
and Assigns
|
|
|
|
Section
22.2
|
Payments
Due on Non-Business Days
|
|
|
|
Section
22.3
|
Accounting
Terms
|
|
|
|
Section
22.4
|
Severability
|
|
|
|
Section
22.5
|
Construction.
etc
|
|
|
|
Section
22.6
|
Counterparts
|
|
|
|
Section
22.7
|
Governing
Law
|
|
|
|
Section
22.8
|
Jurisdiction
and Process; Waiver of Jury Trial
|
|
SCHEDULES
AND EXHIBITS
Schedule
A
Information Relating to
Purchasers
*
Schedule B
Defined
Terms
Schedule 5.3
Disclosure
Materials
Schedule 5.4
Subsidiaries of the
Company and Ownership of Subsidiary Stock
Schedule 5.5
Financial
Statements
Schedule 5.14
Use of Proceeds
Schedule 5.15
Existing Debt
|
|
*
Exhibit 1-A
|
|
Form
of 4.70% Senior Note, Series J, due June 16,
2011
|
|
|
*
Exhibit 1-B
|
|
Form
of 5.04% Senior Note, Series K, due June 16,
2012
|
|
|
Exhibit 4.4(a)
|
|
Form
of Opinion of Special Counsel for the
Company
|
|
|
Exhibit 4.4(b)
|
|
Form
of Opinion of General Counsel for the
Company
|
|
|
Exhibit 4.4(c)
|
|
Form
of Opinion of Special Counsel for the
Purchasers
|
Material
Schedules and Exhibits (those marked with *) are included in this
filing.
MEREDITH
CORPORATION
1716
Locust Street
Des Moines,
Iowa 50309
$50,000,000
4.70% Senior Notes, Series J, Due June 16, 2011
$50,000,000
5.04% Senior Notes, Series K, Due June 16, 2012
Dated as
of June 16, 2008
To Each
of the Purchasers listed in
Schedule
A hereto:
Ladies
and Gentlemen:
Meredith
Corporation, an Iowa corporation (the “
Company
”), agrees with each of
the purchasers whose names appear at the end hereof (each, a “
Purchaser
” and, collectively,
the “
Purchasers
”) as
follows:
|
SECTION 1.
|
AUTHORIZATION
OF NOTES.
|
The
Company will authorize the issue and sale of
(a)
$50,000,000
aggregate principal amount of its 4.70% Senior Notes, Series J, due June
16, 2011 (the “
Series J Notes
”,
such term to include any such notes issued in substitution therefore pursuant to
Section 13); and
(b)
$50,000,000
aggregate principal amount of its 5.04% Senior Notes, Series K, due June
16, 2012 (the “
Series K
Notes
”, such term to include any such notes issued in substitution
therefore pursuant to Section 13).
The term
“
Notes
”
as used in this
Agreement shall include, collectively, the Series J Notes and Series K
Notes. The Series J Notes and Series K Notes shall be
substantially in the respective forms set forth in Exhibits 1-A and 1-B in
each case with such changes therefrom, if any, as may be approved by the
Purchasers and the Company. Certain capitalized and other terms used
in this Agreement are defined in Schedule B; and references to a “Schedule”
or an “Exhibit” are, unless otherwise specified, to a Schedule or an Exhibit
attached to this Agreement.
|
SECTION 2.
|
SALE
AND PURCHASE OF NOTES.
|
Subject
to the terms and conditions of this Agreement, the Company will issue and sell
to each Purchaser and each Purchaser will purchase from the Company, at the
Closing provided for in Section 3, Notes in the principal amount and of the
Series specified opposite such Purchaser’s name in Schedule A at the
purchase price of 100% of the principal amount and of the Series
thereof. The Purchasers’ obligations hereunder are several and not
joint obligations, and no Purchaser shall have any liability to any Person for
the performance or non-performance of any obligation by any other Purchaser
hereunder.
The sale
and purchase of the Notes to be purchased by each Purchaser shall occur at the
offices of Bingham McCutchen LLP, 399 Park Avenue, New York, New York at 10:00
a.m. at a closing (the “
Closing
”) on June 16, 2008 or
on such other Business Day thereafter on or prior to June 30, 2008 as may be
agreed upon by the Company and the Purchasers. At the Closing the
Company will deliver to each Purchaser the Notes to be purchased by such
Purchaser in the form of a single Note (or such greater number of Notes in
denominations of at least $100,000 as such Purchaser may request) dated the date
of the Closing and registered in such Purchaser’s name (or in the name of its
nominee), against delivery by such Purchaser to the Company or its order of
immediately available funds in the amount of the purchase price therefor by wire
transfer of immediately available funds for the account of the Company to
account number 0289646226 at Wells Fargo Bank N.A., San Francisco, CA, USA ABA
#121000248. If at the Closing the Company shall fail to tender such
Notes to any Purchaser as provided above in this Section 3, or any of the
conditions specified in Section 4 shall not have been fulfilled to such
Purchaser’s satisfaction, such Purchaser shall, at its election, be relieved of
all further obligations under this Agreement, without thereby waiving any rights
such Purchaser may have by reason of such failure or such
nonfulfillment.
|
SECTION 4.
|
CONDITIONS
TO CLOSING.
|
Each
Purchaser’s obligation to purchase and pay for the Notes to be sold to such
Purchaser at the Closing is subject to the fulfilment to such Purchaser’s
satisfaction, prior to or at the Closing, of the following
conditions:
Section
4.1
Representations and
Warranties
.
The
representations and warranties of the Company in this Agreement shall be correct
when made and at the time of the Closing.
Section
4.2
Performance; No
Default
.
The
Company shall have performed and complied with all agreements and conditions
contained in this Agreement required to be performed or complied with by it
prior to or at the Closing, and after giving effect to the issue and sale of the
Notes (and the application of the proceeds thereof as contemplated by
Section 5.14), no Default or Event of Default shall have occurred and be
continuing.
Section
4.3
Compliance
Certificates
.
(a)
Officer’s
Certificate
. The Company shall have delivered to such
Purchaser an Officer’s Certificate, dated the date of the Closing, certifying
that the conditions specified in Sections 4.1, 4.2 and 4.9 have been
fulfilled.
(b)
Secretary’s
Certificate
. The Company shall have delivered to such
Purchaser a certificate of its Secretary or Assistant Secretary, dated the date
of Closing, certifying as to the resolutions attached thereto and other
corporate proceedings relating to the authorization, execution and delivery of
the Notes and this Agreement.
Section
4.4
Opinions of
Counsel
.
Such
Purchaser shall have received opinions in form and substance satisfactory to
such Purchaser, dated the date of the Closing (a) from Sidley Austin LLP,
special counsel for the Company, covering the matters set forth in
Exhibit 4.4(a) and (b) from John S. Zieser, Esq., Chief Development
Officer, General Counsel and Secretary of the Company, covering the matters set
forth in Exhibit 4.4(b) and covering such other matters incident to the
transactions contemplated hereby as such Purchaser or its counsel may reasonably
request (and the Company hereby instructs its counsel to deliver such opinion to
the Purchasers) and (c) from Bingham McCutchen LLP, the Purchasers’ special
counsel in connection with such transactions, substantially in the form set
forth in Exhibit 4.4(c) and covering such other matters incident to such
transactions as such Purchaser may reasonably request.
Section
4.5
Purchase Permitted By Applicable Law,
Etc
.
On the
date of the Closing, such Purchaser’s purchase of Notes shall (a) be permitted
by the laws and regulations of each jurisdiction to which such Purchaser is
subject, without recourse to provisions (such as section 1405(a)(8) of the
New York Insurance Law) permitting limited investments by insurance companies
without restriction as to the character of the particular investment, (b) not
violate any applicable law or regulation (including, without limitation,
Regulation T, U or X of the Board of Governors of the Federal Reserve System)
and (c) not subject such Purchaser to any tax, penalty or liability under or
pursuant to any applicable law or regulation, which law or regulation was not in
effect on the date hereof. If requested by such Purchaser, such
Purchaser shall have received an Officer’s Certificate certifying as to such
matters of fact as such Purchaser may reasonably specify to enable such
Purchaser to determine whether such purchase is so permitted.
Section
4.6
Sale of Other
Notes
.
Contemporaneously
with the Closing, the Company shall sell to each other Purchaser, and each other
Purchaser shall purchase, the Notes to be purchased by it at the Closing as
specified in Schedule A.
Section
4.7
Payment of Special Counsel
Fees
.
Without
limiting the provisions of Section 15.1, the Company shall have paid on or
before the Closing the fees, charges and disbursements of the Purchasers’
special counsel referred to in Section 4.4 to the extent reflected in a
statement of such counsel rendered to the Company at least one Business Day
prior to the Closing.
Section
4.8
Private Placement
Number
.
A Private
Placement Number issued by Standard & Poor’s CUSIP Service Bureau (in
cooperation with the SVO) shall have been obtained for each Series of the
Notes.
Section
4.9
Changes in Corporate
Structure
.
The
Company shall not have changed its jurisdiction of incorporation or been a party
to any merger or consolidation, or succeeded to all or any substantial part of
the liabilities of any other entity, at any time following the date of the most
recent financial statements referred to in Schedule 5.5 except for the
assumption of liabilities pursuant to the acquisition of assets of Big
Communications, Inc., referred to in Schedule 5.15.
Section
4.10
Funding
Instructions
.
At least
three Business Days prior to the date of the Closing, each Purchaser shall have
received written instructions, signed by a Responsible Officer on letterhead of
the Company confirming the information specified in the second sentence of
Section 3 including (i) the name and address of the transferee bank, (ii) such
transferee bank’s ABA number, and (iii) the account name and number into which
the purchase price for the Notes is to be deposited.
Section
4.11
Proceedings and
Documents
.
All
corporate and other proceedings in connection with the transactions contemplated
by this Agreement and all documents and instruments incident to such
transactions shall be satisfactory to such Purchaser and its special counsel,
and such Purchaser and its special counsel shall have received all such
counterpart originals or certified or other copies of such documents as such
Purchaser or such special counsel may reasonably request.
|
SECTION 5.
|
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
|
The
Company represents and warrants to each Purchaser that:
Section
5.1
Organization; Power and
Authority
.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation, and is duly qualified as a
foreign corporation and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect. The Company has the corporate power and authority to own or
hold under lease the properties it purports to own or hold under lease, to
transact the business it transacts and proposes to transact, to execute and
deliver this Agreement and the Notes and to perform the provisions hereof and
thereof.
Section
5.2
Authorization,
Etc
.
This
Agreement and the Notes have been duly authorized by all necessary corporate
action on the part of the Company, and this Agreement constitutes, and upon
execution and delivery thereof each Note will constitute, a legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors’ rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
Section
5.3
Disclosure
.
This
Agreement, the documents, certificates or other writings delivered to the
Purchasers by or on behalf of the Company in connection with the transactions
contemplated hereby and identified in Schedule 5.3, and the financial statements
listed in Schedule 5.5, in each case, delivered to the Purchasers prior to
June 16, 2008 (this Agreement and such documents, certificates or other writings
and such financial statements being referred to, collectively, as the “
Disclosure Documents
”), taken
as a whole, do not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not misleading
in light of the circumstances under which they were made, it being understood
that no representation or warranty is made with respect to the projections
included therein other than that they are based on assumptions and calculated in
a manner the Company believed and believes as of the date thereof and hereof to
be reasonable. Except as disclosed in the Disclosure Documents, since
March 31, 2008, there has been no change in the financial condition, operations,
business, properties or prospects of the Company or any Subsidiary except
changes that individually or in the aggregate could not reasonably be expected
to have a Material Adverse Effect. To the best knowledge and belief
of senior management of the Company, there is no fact known to the Company that
could reasonably be expected to have a Material Adverse Effect that has not been
set forth herein or in the Disclosure Documents.
Section
5.4
Organization and Ownership of Shares
of Subsidiaries;
Affiliates
.
(a)
Schedule 5.4
contains (except as noted therein) complete and correct lists (i) of the
Company’s Subsidiaries, showing, as to each Subsidiary, the correct name
thereof, the jurisdiction of its organization, and the percentage of shares of
each class of its capital stock or similar equity interests outstanding owned by
the Company and each other Subsidiary, (ii) of the Company’s Affiliates,
other than Subsidiaries, and (iii) of the Company’s directors and senior
officers.
(b)
All of
the outstanding shares of capital stock or similar equity interests of each
Subsidiary shown in Schedule 5.4 as being owned by the Company and its
Subsidiaries have been validly issued, are fully paid and nonassessable and are
owned by the Company or another Subsidiary free and clear of any Lien (except as
otherwise disclosed in Schedule 5.4).
(c)
Each
Subsidiary identified in Schedule 5.4 is a corporation or other legal
entity duly organized, validly existing and in good standing under the laws of
its jurisdiction of organization, and is duly qualified as a foreign corporation
or other legal entity and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect. Each such Subsidiary has the corporate or other power and
authority to own or hold under lease the properties it purports to own or hold
under lease and to transact the business it transacts and proposes to
transact.
(d)
No
Subsidiary is a party to, or otherwise subject to any legal, regulatory,
contractual or other restriction (other than the agreements listed on
Schedule 5.4 and customary limitations imposed by corporate law or similar
statutes) restricting the ability of such Subsidiary to pay dividends out of
profits or make any other similar distributions of profits to the Company or any
of its Subsidiaries that owns outstanding shares of capital stock or similar
equity interests of such Subsidiary.
Section
5.5
Financial
Statements
.
The
Company has delivered to each Purchaser copies of the financial statements of
the Company and its Subsidiaries listed on Schedule 5.5. All of
said financial statements (including in each case the related schedules and
notes) fairly present in all material respects the consolidated financial
position of the Company and its Subsidiaries as of the respective dates
specified in such Schedule and the consolidated results of their operations and
cash flows for the respective periods so specified and have been prepared in
accordance with GAAP consistently applied throughout the periods involved except
as set forth in the notes thereto (subject, in the case of any interim financial
statements, to normal year-end adjustments). The Company and its
Subsidiaries do not have any Material liabilities that are not disclosed on such
financial statements or otherwise disclosed in the Disclosure
Documents.
Section
5.6
Compliance with Laws, Other
Instruments, Etc
.
The
execution, delivery and performance by the Company of this Agreement and the
Notes will not (i) contravene, result in any breach of, or constitute a
default under, or result in the creation of any Lien in respect of any property
of the Company or any Subsidiary under, any indenture, mortgage, deed of trust,
loan, purchase or credit agreement, lease, corporate charter or by-laws, or any
other agreement or instrument to which the Company or any Subsidiary is bound or
by which the Company or any Subsidiary or any of their respective properties may
be bound or affected, (ii) conflict with or result in a breach of any of the
terms, conditions or provisions of any order, judgment, decree, or ruling of any
court, arbitrator or Governmental Authority applicable to the Company or any
Subsidiary or (iii) violate any provision of any statute or other rule or
regulation of any Governmental Authority applicable to the Company or any
Subsidiary.
Section
5.7
Governmental Authorizations,
Etc
.
No
consent, approval or authorization of, or registration, filing or declaration
with, any Governmental Authority is required in connection with the execution,
delivery or performance by the Company of this Agreement or the
Notes.
Section
5.8
Litigation; Observance of Agreements,
Statutes and Orders
.
(a)
There are
no actions, suits, investigations or proceedings pending or, to the knowledge of
the Company, threatened against or affecting the Company or any Subsidiary or
any property of the Company or any Subsidiary in any court or before any
arbitrator of any kind or before or by any Governmental Authority that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(b)
Neither
the Company nor any Subsidiary is in default under any term of any agreement or
instrument to which it is a party or by which it is bound, or any order,
judgment, decree or ruling of any court, arbitrator or Governmental Authority or
is in violation of any applicable law, ordinance, rule or regulation (including
without limitation Environmental Laws or the USA Patriot Act) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse
Effect.
Section
5.9
Taxes
.
The
Company and its Subsidiaries have filed all tax returns that are required to
have been filed in any jurisdiction, and have paid all taxes shown to be due and
payable on such returns and all other taxes and assessments levied upon them or
their properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent,
except for any taxes and assessments (a) the amount of which is not individually
or in the aggregate Material or (b) the amount, applicability or validity of
which is currently being contested in good faith by appropriate proceedings and
with respect to which the Company or a Subsidiary, as the case may be, has
established adequate reserves in accordance with GAAP. The Company
knows of no basis for any other tax or assessment that could reasonably be
expected to have a Material Adverse Effect. The charges, accruals and
reserves on the books of the Company and its Subsidiaries in respect of federal,
state or other taxes for all fiscal periods are adequate. The federal
income tax liabilities of the Company and its Subsidiaries have been finally
determined (whether by reason of completed audits or the statute of limitations
having run) for all fiscal years up to and including the fiscal year ended June
30, 2004.
Section
5.10
Title to Property;
Leases
.
The
Company and its Subsidiaries have good and sufficient title to their respective
properties that individually or in the aggregate are Material, including all
such properties reflected in the most recent audited balance sheet referred to
in Section 5.5 or purported to have been acquired by the Company or any
Subsidiary after said date (except as sold or otherwise disposed of in the
ordinary course of business), in each case free and clear of Liens prohibited by
this Agreement. All leases that individually or in the aggregate are
Material are valid and subsisting and are in full force and effect in all
material respects.
Section
5.11
Licenses, Permits,
Etc
.
(a)
The
Company and its Subsidiaries own or possess all licenses, permits, franchises,
authorizations, patents, copyrights, proprietary software, service marks,
trademarks and trade names, or rights thereto, that individually or in the
aggregate are Material, without known conflict with the rights of others which
could reasonably be expected to have a Material Adverse Effect.
(b)
To the
best knowledge of the Company, no product or service of the Company or any of
its Subsidiaries infringes in any material respect any license, permit,
franchise, authorization, patent, copyright, proprietary software, service mark,
trademark, trade name or other right owned by any other Person which
infringement could reasonably be expected to have a Material Adverse
Effect.
(c)
To the
best knowledge of the Company, there is no Material violation by any Person of
any right of the Company or any of its Subsidiaries with respect to any patent,
copyright, proprietary software, service mark, trademark, trade name or other
right owned or used by the Company or any of its Subsidiaries which violation
could reasonably be expected to have a Material Adverse Effect.
Section
5.12
Compliance with
ERISA
.
(a)
The
Company and each ERISA Affiliate have operated and administered each Plan in
compliance with all applicable laws except for such instances of non-compliance
as have not resulted in and could not reasonably be expected to result in a
Material Adverse Effect. Neither the Company nor any ERISA Affiliate
has incurred any liability pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit plans (as defined
in section 3 of ERISA), and no event, transaction or condition has occurred
or exists that could reasonably be expected to result in the incurrence of any
such liability by the Company or any ERISA Affiliate, or in the imposition of
any Lien on any of the rights, properties or assets of the Company or any ERISA
Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty
or excise tax provisions or to the Pension Funding Rules or section 4068 of
ERISA, other than such liabilities or Liens as would not be individually or in
the aggregate Material.
(b)
The
present value of the aggregate benefit liabilities under each of the Plans
subject to Title IV of ERISA (other than Multiemployer Plans), determined as of
the end of such Plan’s most recently ended plan year on the basis of the
actuarial assumptions specified for funding purposes in such Plan’s most recent
actuarial valuation report, did not exceed the aggregate current value of the
assets of such Plan allocable to such benefit liabilities. The term
“benefit liabilities” has the meaning specified in section 4001 of ERISA
and the terms “current value” and “present value” have the meaning specified in
section 3 of ERISA.
(c)
The
Company and its ERISA Affiliates have not incurred withdrawal liabilities (and
are not subject to contingent withdrawal liabilities) under section 4201 or
4204 of ERISA in respect of Multiemployer Plans that individually or in the
aggregate are Material.
(d)
The
expected postretirement benefit obligation (determined as of the last day of the
Company’s most recently ended fiscal year in accordance with Financial
Accounting Standards Board Statement No. 106, without regard to liabilities
attributable to continuation coverage mandated by section 4980B of the
Code) of the Company and its Subsidiaries is not Material or has otherwise been
disclosed in footnote 7 of the Company’s most recent audited financial
statements.
(e)
The
execution and delivery of this Agreement and the issuance and sale of the Notes
hereunder will not involve any transaction that is subject to the prohibitions
of section 406 of ERISA or in connection with which a tax could be imposed
pursuant to section 4975(c)(1)(A)-(D) of the Code. The
representation by the Company to each Purchaser in the first sentence of this
Section 5.12(e) is made in reliance upon and subject to the accuracy of
such Purchaser’s representation in Section 6.2 as to the sources of the
funds used to pay the purchase price of the Notes to be purchased by such
Purchaser.
(f)
Neither
the Company nor any Subsidiary maintains any Non-U.S. Pension Plan.
Section
5.13
Private Offering by the
Company
.
Neither
the Company nor anyone acting on its behalf has offered the Notes or any similar
Securities for sale to, or solicited any offer to buy any of the same from, or
otherwise approached or negotiated in respect thereof with, any Person other
than the Purchasers and not more than one other Institutional Investor (as
defined in clause (c) of the definition of such term), each of which has been
offered the Notes at a private sale for investment. Neither the
Company nor anyone acting on its behalf has taken, or will take, any action that
would subject the issuance or sale of the Notes to the registration requirements
of section 5 of the Securities Act or the registration requirements of any
securities or blue sky laws of any applicable jurisdiction.
Section
5.14
Use of Proceeds; Margin
Regulations
.
The
Company will apply the proceeds of the sale of the Notes as set forth in
Schedule 5.14. No part of the proceeds from the sale of the
Notes hereunder will be used, directly or indirectly, for the purpose of buying
or carrying any margin stock within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System (12 CFR 221), or for the purpose of
buying or carrying or trading in any Securities under such circumstances as to
involve the Company in a violation of Regulation X of said Board (12 CFR 224) or
to involve any broker or dealer in a violation of Regulation T of said Board (12
CFR 220). Margin stock does not constitute more than 5.0% of the
value of the consolidated assets of the Company and its Subsidiaries and the
Company does not have any present intention that margin stock will constitute
more than 5.0% of the value of such assets. As used in this Section,
the terms “margin stock” and “purpose of buying or carrying” shall have the
meanings assigned to them in said Regulation U.
Section
5.15
Existing Debt; Future
Liens
.
(a)
Except as
described therein, Schedule 5.15 sets forth a complete and correct list of
all outstanding Debt of the Company and its Subsidiaries as of May 31, 2008
(including a description of the obligors and obligees, principal amount
outstanding and collateral therefor, if any, and Guaranty therefor, if any),
since which date there has been no material change in the amounts, interest
rates, sinking funds, installment payments or maturities of the Debt of the
Company or its Subsidiaries, except to the extent described in such
schedule. Neither the Company nor any Subsidiary is in default and no
waiver of default is currently in effect, in the payment of any principal or
interest on any Debt of the Company or such Subsidiary and no event or condition
exists with respect to any such Debt of the Company or any Subsidiary that would
permit (or that with notice or the lapse of time, or both, would permit) one or
more Persons to cause such Debt to become due and payable before its stated
maturity or before its regularly scheduled dates of payment.
(b)
Except as
disclosed in Schedule 5.15, neither the Company nor any Subsidiary has
agreed or consented to cause or permit in the future (upon the happening of a
contingency or otherwise) any of its property, whether now owned or hereafter
acquired, to be subject to a Lien not permitted by
Section 10.4.
(c)
Neither
the Company nor any Subsidiary is a party to, or otherwise subject to any
provision contained in any instrument evidencing Debt of the Company or such
Subsidiary, any agreement relating thereto or any other agreement (including,
but not limited to, its charter or other organizational document) which limits
the amount of, or otherwise imposes restrictions on the incurring of, Debt of
the Company, except as specifically indicated in Schedule 5.15.
Section
5.16
Foreign Assets Control Regulations,
Etc
.
(a)
Neither
the sale of the Notes by the Company hereunder nor its use of the proceeds
thereof will violate the Trading with the Enemy Act, as amended, or any of the
foreign assets control regulations of the United States Treasury Department (31
CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive
order relating thereto.
(b)
Neither
the Company nor any Subsidiary (i) is a Person described or designated in the
Specially Designated Nationals and Blocked Persons List of the Office of Foreign
Assets Control or in section 1 of the Anti-Terrorism Order or (ii) engages in
any dealings or transactions with any such Person. The Company and
its Subsidiaries are in compliance, in all material respects, with the USA
Patriot Act.
(c)
No part
of the proceeds from the sale of the Notes hereunder will be used, directly or
indirectly, for any payments to any governmental official or employee, political
party, official of a political party, candidate for political office, or anyone
else acting in an official capacity, in order to obtain, retain or direct
business or obtain any improper advantage, in violation of the United States
Foreign Corrupt Practices Act of 1977, as amended, assuming in all cases that
such Act applies to the Company.
Section
5.17
Status under Certain
Statutes
.
Neither
the Company nor any Subsidiary is subject to regulation under the Investment
Company Act of 1940, as amended, the Public Utility Holding Company Act of 2005,
as amended, the ICC Termination Act of 1995, as amended, or the Federal Power
Act, as amended.
Section
5.18
Notes Rank Pari
Passu
.
The
obligations of the Company under this Agreement and the Notes rank at least
pari passu
in right of
payment with all other senior unsecured Debt (actual or contingent) of the
Company, including, without limitation, all senior unsecured Debt of the Company
described in Schedule 5.15 hereto.
Section
5.19
Environmental
Matters
.
(a)
Neither
the Company nor any Subsidiary has knowledge of any claim or has received any
notice of any claim, and no proceeding has been instituted raising any claim
against the Company or any of its Subsidiaries or any of their respective real
properties now or formerly owned, leased or operated by any of them or other
assets, alleging any damage to the environment or violation of any Environmental
Laws, except, in each case, such as could not reasonably be expected to result
in a Material Adverse Effect.
(b)
Neither
the Company nor any Subsidiary has knowledge of any facts which would give rise
to any claim, public or private, of violation of Environmental Laws or damage to
the environment emanating from, occurring on or in any way related to real
properties now or formerly owned, leased or operated by any of them or to other
assets or their use, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect.
(c)
Neither
the Company nor any Subsidiary has stored any Hazardous Materials on real
properties now or formerly owned, leased or operated by any of them and has not
disposed of any Hazardous Materials in a manner contrary to any Environmental
Laws in each case in any manner that could reasonably be expected to result in a
Material Adverse Effect.
(d)
All
buildings on all real properties now owned, leased or operated by the Company or
any Subsidiary are in compliance with applicable Environmental Laws, except
where failure to comply could not reasonably be expected to result in a Material
Adverse Effect.
|
SECTION 6.
|
REPRESENTATIONS
OF THE PURCHASER.
|
Section
6.1
Purchase for
Investment
.
Each
Purchaser severally represents that it is purchasing the Notes for its own
account or for one or more separate accounts maintained by such Purchaser or for
the account of one or more pension or trust funds and not with a view to the
distribution thereof,
provided
that the disposition
of such Purchaser’s or their property shall at all times be within such
Purchaser’s or their control. Each Purchaser understands that the
Notes have not been registered under the Securities Act and may be resold only
if registered pursuant to the provisions of the Securities Act or if an
exemption from registration is available, except under circumstances where
neither such registration nor such an exemption is required by law, and that the
Company is not required to register the Notes.
Section
6.2
Source of Funds
.
Each
Purchaser severally represents that at least one of the following statements is
an accurate representation as to each source of funds (a “
Source
”) to be used by such
Purchaser to pay the purchase price of the Notes to be purchased by such
Purchaser hereunder:
(a)
the
Source is an “insurance company general account” (as the term is defined in the
United States Department of Labor’s Prohibited Transaction Exemption (as further
defined in Schedule B, “
PTE
”) 95-60) in respect of
which the reserves and liabilities (as defined by the annual statement for life
insurance companies approved by the NAIC (the “
NAIC Annual Statement
”)) for
the general account contract(s) held by or on behalf of any employee benefit
plan together with the amount of the reserves and liabilities for the general
account contract(s) held by or on behalf of any other employee benefit plans
maintained by the same employer (or affiliate thereof as defined in PTE 95-60)
or by the same employee organization in the general account do not exceed 10% of
the total reserves and liabilities of the general account (exclusive of separate
account liabilities) plus surplus as set forth in the NAIC Annual Statement
filed with such Purchaser’s state of domicile; or
(b)
the
Source is a separate account that is maintained solely in connection with such
Purchaser’s fixed contractual obligations under which the amounts payable, or
credited, to any employee benefit plan (or its related trust) that has any
interest in such separate account (or to any participant or beneficiary of such
plan (including any annuitant)) are not affected in any manner by the investment
performance of the separate account; or
(c)
the
Source is either (i) an insurance company pooled separate account, within
the meaning of PTE 90-1, or (ii) a bank collective investment fund, within
the meaning of PTE 91-38 and, except as disclosed by such Purchaser to the
Company in writing pursuant to this clause (c), no employee benefit plan or
group of plans maintained by the same employer or employee organization
beneficially owns more than 10% of all assets allocated to such pooled separate
account or collective investment fund; or
(d)
the
Source constitutes assets of an “investment fund” (within the meaning of Part V
of PTE 84-14 (the “
QPAM
Exemption
”)) managed by a “qualified professional asset manager” or
“QPAM” (within the meaning of Part V of the QPAM Exemption), no employee benefit
plan’s assets that are included in such investment fund, when combined with the
assets of all other employee benefit plans established or maintained by the same
employer or by an affiliate (within the meaning of section V(c)(1) of the
QPAM Exemption) of such employer or by the same employee organization and
managed by such QPAM, exceed 20% of the total client assets managed by such
QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied,
neither the QPAM nor a person controlling or controlled by the QPAM (applying
the definition of “control” in section V(e) of the QPAM Exemption) owns a
5% or more interest in the Company and (i) the identity of such QPAM and
(ii) the names of all employee benefit plans whose assets are included in
such investment fund have been disclosed to the Company in writing pursuant to
this clause (d); or
(e)
the
Source constitutes assets of a “plan(s)” (within the meaning of section IV of
PTE 96-23 (the “
INHAM
Exemption
”)) managed by an “in-house asset manager” or “INHAM” (within
the meaning of Part IV of the INHAM Exemption), the conditions of Part I(a), (g)
and (h) of the INHAM Exemption are satisfied, neither the INHAM nor a person
controlling or controlled by the INHAM (applying the definition of “control” in
section IV(d) of the INHAM Exemption) owns a 5% or more interest in the Company
and (i) the identity of such INHAM and (ii) the name(s) of the employee benefit
plan(s) whose assets constitute the Source have been disclosed to the Company in
writing pursuant to this clause (e); or
(f)
the
Source is a governmental plan; or
(g)
the
Source is one or more employee benefit plans, or a separate account or trust
fund comprised of one or more employee benefit plans, each of which has been
identified to the Company in writing pursuant to this clause (g);
or
(h)
the
Source does not include assets of any employee benefit plan (within the meaning
of ERISA) or plan (within the meaning of section 4975 of the Code), other than
an employee benefit plan or plan exempt from the coverage of ERISA and section
4975 of the Code.
As used
in this Section 6.2, the terms “employee benefit plan,” “governmental
plan,” and “separate account” shall have the respective meanings assigned to
such terms in section 3 of ERISA.
|
SECTION 7.
|
INFORMATION
AS TO THE COMPANY.
|
Section
7.1
Financial and Business
Information
.
The
Company shall deliver to each holder of Notes that is an Institutional
Investor:
(a)
Quarterly Statements
- within
60 days (or such shorter period as is 15 days greater than the period applicable
to the filing of the Company’s Quarterly Report of Form 10-Q (the “
Form 10-Q
”) with the SEC)
after the end of each quarterly fiscal period in each fiscal year of the Company
(other than the last quarterly fiscal period of each such fiscal year),
duplicate copies of:
(1)
a
consolidated balance sheet of the Company and its Subsidiaries as at the end of
such quarter, and
(2)
consolidated
statements of income, changes in shareholders’ equity and cash flows of the
Company and its Subsidiaries for such quarter and (in the case of the second and
third quarters) for the portion of the fiscal year ending with such
quarter,
setting
forth in each case in comparative form the figures for the corresponding periods
in the previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP applicable to quarterly financial statements generally, and certified
by a Senior Financial Officer as fairly presenting, in all material respects,
the financial position of the companies being reported on and their results of
operations and cash flows, subject to changes resulting from year-end
adjustments,
provided
that delivery within the time period specified above of copies of the Company’s
Form 10-Q prepared in compliance with the requirements therefor and filed with
the SEC shall be deemed to satisfy the requirements of this Section 7.1(a),
provided, further
, that
the Company shall be deemed to have made such delivery of such Form 10-Q if it
shall have timely made such Form 10-Q available on “EDGAR” and on its home page
on the worldwide web (at the date of this Agreement located
at: http//www.meredith.com) and shall have given each Purchaser prior
notice of such availability on EDGAR and on its home page in connection with
each delivery (such availability and notice thereof being referred to as “
Electronic
Delivery
”);
(b)
Annual Statements
- within
105 days (or such shorter period as is 15 days greater than the period
applicable to the filing of the Company’s Annual Report on Form 10-K (the “
Form 10-K
”) with the SEC)
after the end of each fiscal year of the Company, duplicate copies
of:
(1)
a
consolidated balance sheet of the Company and its Subsidiaries, as at the end of
such year, and
(2)
consolidated
statements of income, changes in shareholders’ equity and cash flows of the
Company and its Subsidiaries, for such year,
setting
forth in each case in comparative form the figures for the previous fiscal year,
all in reasonable detail, prepared in accordance with GAAP, and accompanied
by:
(A) an
opinion thereon of independent public accountants of recognized national
standing, which opinion shall state that such financial statements present
fairly, in all material respects, the financial position of the companies being
reported upon and their results of operations and cash flows and have been
prepared in conformity with GAAP, and that the examination of such accountants
in connection with such financial statements has been made in accordance with
generally accepted auditing standards, and that such audit provides a reasonable
basis for such opinion in the circumstances, and
(B) a
certificate of such accountants stating that they have reviewed this Agreement
and stating further whether, in making their audit, they have become aware of
any condition or event that then constitutes a Default or an Event of Default,
and, if they are aware that any such condition or event then exists, specifying
the nature and period of the existence thereof (it being understood that such
accountants shall not be liable, directly or indirectly, for any failure to
obtain knowledge of any Default or Event of Default unless such accountants
should have obtained knowledge thereof in making an audit in accordance with
generally accepted auditing standards or did not make such an
audit),
provided
that the delivery
within the time period specified above of the Company’s Form 10-K for such
fiscal year (together with the Company’s annual report to shareholders, if any,
prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance
with the requirements therefor and filed with the SEC, together with the
accountant’s certificate described in clause (B) above (the “
Accountants’ Certificate
”),
shall be deemed to satisfy the requirements of this
Section 7.1(b),
provided, further,
that
the Company shall be deemed to have made such delivery of such Form 10-K if it
shall have timely made Electronic Delivery thereof, in which event the Company
shall separately deliver, concurrently with such Electronic Delivery, the
Accountants’ Certificate;
(c)
SEC and Other Reports
-
promptly upon their becoming available, one copy of (i) each financial
statement, report, notice or proxy statement sent by the Company or any
Subsidiary to its principal lending banks as a whole (excluding information sent
to such banks in the ordinary course of administration of a bank facility, such
as information relating to pricing and borrowing availability) or to its public
Securities holders generally, and (ii) each regular or periodic report,
each registration statement (without exhibits except as expressly requested by
such holder), and each prospectus and all amendments thereto filed by the
Company or any Subsidiary with the SEC and of all press releases and other
statements made available generally by the Company or any Subsidiary to the
public concerning developments that are Material;
(d)
Notice of Default or Event of
Default
- promptly, and in any event within five days after a Responsible
Officer becoming aware of the existence of any Default or Event of Default or
that any Person has given any notice or taken any action with respect to a
claimed default hereunder or that any Person has given any notice or taken any
action with respect to a claimed default of the type referred to in
Section 11(f), a written notice specifying the nature and period of
existence thereof and what action the Company is taking or proposes to take with
respect thereto;
(e)
ERISA Matters
- promptly, and
in any event within five days after a Responsible Officer becoming aware of any
of the following, a written notice setting forth the nature thereof and the
action, if any, that the Company or an ERISA Affiliate proposes to take with
respect thereto:
(1)
with
respect to any Plan, any reportable event, as defined in section 4043(c) of
ERISA and the regulations thereunder, for which notice thereof has not been
waived pursuant to such regulations as in effect on the date hereof;
or
(2)
the
taking by the PBGC of steps to institute, or the threatening by the PBGC of the
institution of, proceedings under section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Plan, or the receipt by
the Company or any ERISA Affiliate of a notice from a Multiemployer Plan that
such action has been taken by the PBGC with respect to such Multiemployer Plan;
or
(3)
any
event, transaction or condition that could result in the incurrence of any
liability by the Company or any ERISA Affiliate pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the Code relating to employee
benefit plans, or in the imposition of any Lien on any of the rights, properties
or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of
ERISA, the Pension Funding Rules, or such penalty or excise tax provisions, if
such liability or Lien, taken together with any other such liabilities or Liens
then existing, could reasonably be expected to have a Material Adverse
Effect;
(f)
Notices from Governmental
Authority
- promptly, and in any event within 30 days of receipt thereof,
copies of any notice to the Company or any Subsidiary from any federal or state
Governmental Authority relating to any order, ruling, statute or other law or
regulation that could reasonably be expected to have a Material Adverse Effect;
and
(g)
Requested Information
— with
reasonable promptness, such other data and information relating to the business,
operations, affairs, financial condition, assets or properties of the Company or
any of its Subsidiaries (including, but without limitation, actual copies of the
Company’s Form 10-Q and Form 10-K) or relating to the ability of the Company to
perform its obligations hereunder and under the Notes as from time to time may
be reasonably requested by any such holder of Notes.
Section
7.2
Officer’s
Certificate
.
Each set
of financial statements delivered to a holder of Notes pursuant to
Section 7.1(a) or Section 7.1(b) shall be accompanied by a certificate
of a Senior Financial Officer setting forth (which, in the case of Electronic
Delivery of any such financial statements, shall be by separate concurrent
delivery of such certificate to each holder of Notes):
(a)
Covenant Compliance
- the
information (including detailed calculations) required in order to establish
whether the Company was in compliance with the requirements of Section 10.2
through Section 10.6 hereof, inclusive, during the quarterly or annual
period covered by the statements then being furnished (including with respect to
each such Section, where applicable, the calculations of the maximum or minimum
amount, ratio or percentage, as the case may be, permissible under the terms of
such Sections, and the calculation of the amount, ratio or percentage then in
existence); and
(b)
Event of Default
- a
statement that such Senior Financial Officer has reviewed the relevant terms
hereof and has made, or caused to be made, under his or her supervision, a
review of the transactions and conditions of the Company and its Subsidiaries
from the beginning of the quarterly or annual period covered by the statements
then being furnished to the date of the certificate and that such review shall
not have disclosed the existence during such period of any condition or event
that constitutes a Default or an Event of Default or, if any such condition or
event existed or exists (including, without limitation, any such event or
condition resulting from the failure of the Company or any Subsidiary to comply
with any Environmental Law), specifying the nature and period of existence
thereof and what action the Company shall have taken or proposes to take with
respect thereto.
Section
7.3
Visitation
.
The
Company shall permit the representatives of each holder of Notes that is an
Institutional Investor:
(a)
No Default
- if no Default or
Event of Default then exists, at the expense of such holder and upon reasonable
prior notice to the Company, to visit the principal executive office of the
Company, to discuss the affairs, finances and accounts of the Company and its
Subsidiaries with the Company’s officers, and (with the consent of the Company,
which consent will not be unreasonably withheld) its independent public
accountants, and (with the consent of the Company, which consent will not be
unreasonably withheld) to visit the other offices and properties of the Company
and each Subsidiary, all at such reasonable times and as often as may be
reasonably requested in writing, but not more frequently than twice in any
twelve month period; and
(b)
Default
- if a Default or
Event of Default then exists, at the expense of the Company, to visit and
inspect any of the offices or properties of the Company or any Subsidiary, to
examine all their respective books of account, records, reports and other
papers, to make copies and extracts therefrom, and to discuss their respective
affairs, finances and accounts with their respective officers and independent
public accountants (and by this provision the Company authorizes said
accountants to discuss the affairs, finances and accounts of the Company and its
Subsidiaries), all at such times and as often as may be requested.
|
SECTION 8.
|
PAYMENT
AND PREPAYMENT OF THE NOTES.
|
Section
8.1
Required Payment
.
(a)
Series J
Notes
. The Series J Notes shall not be subject to
scheduled principal prepayments. The entire unpaid principal amount
of the Series J Notes shall be paid by the Company on June 16, 2011 at par,
together with accrued interest thereon, but without payment of the Make-Whole
Amount or any premium.
(b)
Series K
Notes
. The Series K Notes shall not be subject to
scheduled principal prepayments. The entire unpaid principal amount
of the Series K Notes shall be paid by the Company on June 16, 2012 at par,
together with accrued interest thereon, but without payment of the Make-Whole
Amount or any premium.
Section
8.2
Optional Prepayments with Make-Whole
Amount
.
The
Company may, at its option, upon notice as provided below, prepay at any time
all, or from time to time any part of, any Series of Notes (if no Event of
Default then exists) or the Notes without regard to Series (if an Event of
Default then exists), in an amount not less than 10% of the aggregate principal
amount of the Notes then outstanding (or the entire outstanding amount of any
Series being prepaid in full if such amount is less than 10% of the aggregate
principal amount of the Notes then outstanding) in the case of a partial
prepayment, at 100% of the principal amount so prepaid, together with interest
accrued thereon to the date of such prepayment, and the Make-Whole Amount
determined for the prepayment date with respect to such principal
amount. The Company will give each holder of Notes written notice of
each optional prepayment under this Section 8.2 not less than 30 days and
not more than 60 days prior to the date fixed for such
prepayment. Each such notice shall specify such date, the aggregate
principal amount and the Series of the Notes to be prepaid on such date, the
principal amount of each Note held by such holder to be prepaid (determined in
accordance with Section 8.4), and the interest to be paid on the prepayment
date with respect to such principal amount being prepaid, and shall be
accompanied by a certificate of a Senior Financial Officer as to the estimated
Make-Whole Amount due in connection with such prepayment (calculated as if the
date of such notice were the date of the prepayment), setting forth the details
of such computation. Two Business Days prior to such prepayment, the
Company shall deliver to each holder of Notes of the Series to be prepaid a
certificate of a Senior Financial Officer specifying the calculation of such
Make-Whole Amount as of the specified prepayment date.
Section
8.3
Change in
Control
.
(a)
Notice of Change in Control or
Control Event
. The Company will, within five Business Days
after any Responsible Officer has knowledge of the occurrence of any Change in
Control or Control Event, give written notice of such Change in Control or
Control Event to each holder of Notes unless notice in respect of such Change in
Control (or the Change in Control contemplated by such Control Event) shall have
been given pursuant to subparagraph (b) of this Section 8.3. If a
Change in Control has occurred, such notice shall contain and constitute an
offer to prepay the Notes, on a pro rata basis in respect of all Notes of all
Series outstanding at such time, as described in subparagraph (c) of this
Section 8.3 and shall be accompanied by the certificate described in
subparagraph (g) of this Section 8.3.
(b)
Condition to Company
Action
. The Company will not take any action that consummates
or finalizes a Change in Control unless (i) at least 30 days prior to such
action it shall have given to each holder of Notes written notice containing and
constituting an offer to prepay the Notes, on a
pro rata
basis in respect of
all Notes of all Series outstanding at such time, as described in
subparagraph (c) of this Section 8.3, accompanied by the certificate
described in subparagraph (g) of this Section 8.3, and
(ii) contemporaneously with such action, it prepays all Notes required to
be prepaid in accordance with this Section 8.3.
(c)
Offer to Prepay
Notes
. The offer to prepay Notes contemplated by subparagraphs
(a) and (b) of this Section 8.3 shall be an offer to prepay, in accordance
with and subject to this Section 8.3, all, but not less than all, of the
Notes of each Series held by each holder (in this case only, “
holder
” in respect of any Note
registered in the name of a nominee for a disclosed beneficial owner shall mean
such beneficial owner) on a date specified in such offer (the “
Proposed Prepayment
Date
”). If such Proposed Prepayment Date is in connection with
an offer contemplated by subparagraph (a) of this Section 8.3, such date
shall be not less than 30 days and not more than 120 days after the
date of such offer (if the Proposed Prepayment Date shall not be specified in
such offer, the Proposed Prepayment Date shall be the first Business Day after
the 45th day after the date of such offer).
(d)
Acceptance
. A
holder of Notes may accept the offer to prepay made pursuant to this Section 8.3
by causing a notice of such acceptance to be delivered to the Company not later
than 15 days after receipt by such holder of the most recent offer of
prepayment. A failure by a holder of Notes to respond to an offer to
prepay made pursuant to this Section shall be deemed to constitute a rejection
of such offer by such holder.
(e)
Prepayment
. Prepayment
of the Notes to be prepaid pursuant to this Section 8.3 shall be at 100% of
the principal amount of such Notes, together with interest on such Notes accrued
to the date of prepayment. The prepayment shall be made on the
Proposed Prepayment Date except as provided in subparagraph (f) of this Section
8.3.
(f)
Deferral Pending Change in
Control
. The obligation of the Company to prepay Notes
pursuant to the offers required by subparagraph (c) and accepted in
accordance with subparagraph (d) of this Section 8.3 is subject to the
occurrence of the Change in Control in respect of which such offers and
acceptances shall have been made. In the event that such Change in
Control has not occurred on the Proposed Prepayment Date in respect thereof, the
prepayment shall be deferred until, and shall be made on, the date on which such
Change in Control occurs. The Company shall keep each holder of Notes
reasonably and timely informed of (i) any such deferral of the date of
prepayment, (ii) the date on which such Change in Control and the
prepayment are expected to occur, and (iii) any determination by the
Company that efforts to effect such Change in Control have ceased or been
abandoned (in which case the offers and acceptances made pursuant to this
Section 8.3 in respect of such Change in Control shall be deemed
rescinded).
(g)
Officer’s
Certificate
. Each offer to prepay the Notes pursuant to this
Section 8.3 shall be accompanied by a certificate, executed by a Senior
Financial Officer of the Company and dated the date of such offer, specifying:
(i) the Proposed Prepayment Date; (ii) that such offer is made
pursuant to this Section 8.3; (iii) the principal amount and Series of
each Note offered to be prepaid; (iv) the interest that would be due on
each Note offered to be prepaid, accrued to the Proposed Prepayment Date;
(v) that the conditions of this Section 8.3 have been fulfilled; and
(vi) in reasonable detail, the nature and date or proposed date of the
Change in Control.
(h)
Certain
Definitions
. “
Change in Control
” shall be
deemed to have occurred if any person (as such term is used in
section 13(d) and section 14(d)(2) of the Exchange Act as in effect on
the date of the Closing) or related persons constituting a group (as such term
is used in Rule 13d-5 under the Exchange Act as in effect on the date of
the Closing), other than members of the Meredith Family,
(1) become
the “beneficial owners” (as such term is used in Rule 13d-3 under the
Exchange Act as in effect on the date of the Closing), directly or indirectly,
of more than 50% of the total voting power of all classes then outstanding of
the Company’s Voting Stock, or
(2) acquire
after the date of the Closing (x) the power to elect, appoint or cause the
election or appointment of at least a majority of the members of the board of
directors of the Company, through beneficial ownership of the capital stock of
the Company or otherwise, or (y) all or substantially all of the properties and
assets of the Company.
“Control Event”
means:
(i)
the
execution by the Company or any of its Subsidiaries or Affiliates of any
agreement or letter of intent with respect to any proposed transaction or event
or series of transactions or events which, individually or in the aggregate, may
reasonably be expected to result in a Change in Control,
(1)
the
execution of any written agreement which, when fully performed by the parties
thereto, would result in a Change in Control, or
(2)
the
making of any written offer by any person (as such term is used in
section 13(d) and section 14(d)(2) of the Exchange Act as in effect on
the date of the Closing) or related persons constituting a group (as such term
is used in Rule 13d-5 under the Exchange Act as in effect on the date of the
Closing) to the holders of the common stock of the Company, which offer, if
accepted by the requisite number of holders, would result in a Change in
Control.
All
calculations contemplated in this Section 8.3 involving the capital stock
of any Person shall be made with the assumption that all convertible Securities
of such Person then outstanding and all convertible Securities issuable upon the
exercise of any warrants, options and other rights outstanding at such time were
converted at such time and that all options, warrants and similar rights to
acquire shares of capital stock of such Person were exercised at such
time.
Section
8.4
Allocation of Partial
Prepayments
.
In the
case of each partial prepayment of the Notes pursuant to Section 8.2, the
principal amount of the Notes to be prepaid shall be allocated among all such
Notes being prepaid at the time outstanding in proportion, as nearly as
practicable, to the respective unpaid principal amounts thereof not theretofore
called for prepayment. All partial prepayments made pursuant to
Section 8.3 shall be applied only to the Notes of the holders who have
elected to participate in such prepayment.
Section
8.5
Maturity; Surrender,
Etc
.
In the
case of each prepayment of Notes pursuant to this Section 8, the principal
amount of each Note to be prepaid shall mature and become due and payable on the
date fixed for such prepayment (which shall be a Business Day), together with
interest on such principal amount accrued to such date and the applicable
Make-Whole Amount, if any. From and after such date, unless the
Company shall fail to pay such principal amount when so due and payable,
together with the interest and Make-Whole Amount, if any, as aforesaid, interest
on such principal amount shall cease to accrue. Any Note paid or
prepaid in full shall be surrendered to the Company and cancelled and shall not
be reissued, and no Note shall be issued in lieu of any prepaid principal amount
of any Note.
Section
8.6
Purchase of
Notes
.
The
Company will not and will not permit any Affiliate to purchase, redeem, prepay
or otherwise acquire, directly or indirectly, any of the outstanding Notes
except (a) upon the payment or prepayment of the Notes in accordance with
the terms of this Agreement and the Notes or (b) pursuant to an offer to
purchase made by the Company or an Affiliate pro rata to the holders of all
Notes at the time outstanding upon the same terms and conditions. Any
such offer shall provide each holder with sufficient information to enable it to
make an informed decision with respect to such offer, and shall remain open for
at least 30 days. If the holders of more than 50% of the principal
amount of the Notes then outstanding accept such offer, the Company shall
promptly notify the remaining holders of such fact and the expiration date for
the acceptance by holders of Notes of such offer shall be extended by the number
of days necessary to give each such remaining holder at least 15 days from its
receipt of such notice to accept such offer. The Company will
promptly cancel all Notes acquired by it or any Affiliate pursuant to any
payment, prepayment or purchase of Notes pursuant to any provision of this
Agreement and no Notes may be issued in substitution or exchange for any such
Notes.
Section
8.7
Make-Whole
Amount
.
The term
“
Make-Whole Amount
”
means, with respect to any Note of any Series, an amount equal to the excess, if
any, of the Discounted Value of the Remaining Scheduled Payments with respect to
the Called Principal of such Note of such Series over the amount of such Called
Principal,
provided
that the Make-Whole Amount may in no event be less than
zero. For the purposes of determining the Make-Whole Amount, the
following terms have the following meanings:
“
Called Principal
” means, with
respect to any Note of any Series, the principal of such Note that is to be
prepaid pursuant to Section 8.2 or has become or is declared to be
immediately due and payable pursuant to Section 12.1, as the context
requires.
“
Discounted Value
” means, with
respect to the Called Principal of any Note of any Series, the amount obtained
by discounting all Remaining Scheduled Payments with respect to such Called
Principal from their respective scheduled due dates to the Settlement Date with
respect to such Called Principal, in accordance with accepted financial practice
and at a discount factor (applied on the same periodic basis as that on which
interest on such Series of the Notes is payable) equal to the Reinvestment Yield
with respect to such Called Principal.
“
Reinvestment Yield
” means,
with respect to the Called Principal of any Note of any Series, the sum of (a)
0.50% per annum plus (b) the yield to maturity implied by (i) the yields
reported, as of 10:00 a.m. (New York City time) on the second Business Day
preceding the Settlement Date with respect to such Called Principal, on the
display designated as “Page PX1” (or such other display as may replace Page
PX1 on Bloomberg Financial Markets) for the most recently issued actively traded
U.S. Treasury securities having a maturity equal to the Remaining Average Life
of such Called Principal as of such Settlement Date, or (ii) if such yields
are not reported as of such time or the yields reported as of such time are not
ascertainable (including by way of interpolation), the Treasury Constant
Maturity Series Yields reported, for the latest day for which such yields have
been so reported as of the second Business Day preceding the Settlement Date
with respect to such Called Principal, in Federal Reserve Statistical Release
H.15 (519) (or any comparable successor publication) for actively traded U.S.
Treasury securities having a constant maturity equal to the Remaining Average
Life of such Called Principal as of such Settlement Date. Such
implied yield will be determined, if necessary, by (1) converting U.S.
Treasury bill quotations to bond-equivalent yields in accordance with accepted
financial practice and (2) interpolating linearly between (A) the
actively traded U.S. Treasury security with the maturity closest to and greater
than such Remaining Average Life and (B) the actively traded U.S. Treasury
security with the maturity closest to and less than such Remaining Average
Life. The Reinvestment Yield shall be rounded to the number of
decimal places as appears in the interest rate of the applicable
Note.
“
Remaining Average Life
” means,
with respect to any Called Principal of any Series of Notes, the number of years
(calculated to the nearest one-twelfth year) obtained by dividing (i) such
Called Principal into (ii) the sum of the products obtained by multiplying
(a) the principal component of each Remaining Scheduled Payment with
respect to such Called Principal by (b) the number of years (calculated to
the nearest one-twelfth year) that will elapse between the Settlement Date with
respect to such Called Principal and the scheduled due date of such Remaining
Scheduled Payment.
“
Remaining Scheduled Payments
”
means, with respect to the Called Principal of any Series of Notes, all payments
of such Called Principal and interest thereon that would be due after the
Settlement Date with respect to such Called Principal if no payment of such
Called Principal were made prior to its scheduled due date,
provided
that if such
Settlement Date is not a date on which interest payments are due to be made
under the terms of the Notes of such Series, then the amount of the next
succeeding scheduled interest payment will be reduced by the amount of interest
accrued to such Settlement Date and required to be paid on such Settlement Date
pursuant to Section 8.2 or 12.1.
“
Settlement Date
” means, with
respect to the Called Principal of any Note, the date on which such Called
Principal is to be prepaid pursuant to Section 8.2 or has become or is
declared to be immediately due and payable pursuant to Section 12.1, as the
context requires.
|
SECTION 9.
|
AFFIRMATIVE
COVENANTS.
|
The
Company covenants that so long as any of the Notes are outstanding:
Section
9.1
Compliance with
Law
.
Without
limiting Section 10.9, the Company will, and will cause each of its Subsidiaries
to, comply with all laws, ordinances or governmental rules or regulations to
which each of them is subject, including, without limitation, ERISA, the USA
Patriot Act, and applicable laws in respect of Non-U.S. Pension Plans and all
Environmental Laws, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental authorizations
necessary to the ownership of their respective properties or to the conduct of
their respective businesses, in each case to the extent necessary to ensure that
non-compliance with such laws, ordinances or governmental rules or regulations
or failures to obtain or maintain in effect such licenses, certificates,
permits, franchises and other governmental authorizations could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
Section
9.2
Insurance
.
The
Company will, and will cause each of its Subsidiaries to, maintain, with
financially sound and reputable insurers, insurance with respect to their
respective properties and businesses against such casualties and contingencies,
of such types, on such terms and in such amounts (including deductibles,
co-insurance and self-insurance, if adequate reserves are maintained with
respect thereto) as is customary in the case of entities of established
reputations engaged in the same or a similar business and similarly
situated.
Section
9.3
Maintenance of
Properties
.
The
Company will, and will cause each of its Subsidiaries to, maintain and keep, or
cause to be maintained and kept, their respective properties in good repair,
working order and condition (other than ordinary wear and tear), so that the
business carried on in connection therewith may be properly conducted at all
times;
provided
that
this Section shall not prevent the Company or any Subsidiary from discontinuing
the operation and the maintenance of any of its properties if such
discontinuance is desirable in the conduct of its business and the Company has
concluded that such discontinuance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
Section
9.4
Payment of Taxes and
Claims
.
The
Company will, and will cause each of its Subsidiaries to, file all tax returns
required to be filed in any jurisdiction and to pay and discharge all taxes
shown to be due and payable on such returns and all other taxes, assessments,
governmental charges, or levies imposed on them or any of their properties,
assets, income or franchises, to the extent the same have become due and payable
and before they have become delinquent and all claims for which sums have become
due and payable that have or might become a Lien on properties or assets of the
Company or any Subsidiary,
provided
that neither the
Company nor any Subsidiary need pay any such tax, assessment, charge, levy or
claim if (i) the amount, applicability or validity thereof is contested by
the Company or such Subsidiary on a timely basis in good faith and in
appropriate proceedings, and the Company or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or such Subsidiary or (ii) the nonpayment of all such taxes, assessments,
charges, levies and claims in the aggregate could not reasonably be expected to
have a Material Adverse Effect.
Section
9.5
Corporate Existence,
Etc
.
Subject
to Section 10.5, the Company will at all times preserve and keep in full force
and effect its corporate existence. Subject to Section 10.5, the
Company will at all times preserve and keep in full force and effect the
corporate existence of each of its Subsidiaries (unless merged into the Company
or a Wholly-Owned Subsidiary) and all rights and franchises of the Company and
its Subsidiaries unless, in the good faith judgment of the Company, the
termination of or failure to preserve and keep in full force and effect such
corporate existence, right or franchise could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
Section
9.6
Notes to Rank Pari
Passu
.
The Notes
and all other obligations under this Agreement of the Company are and at all
times shall remain direct and unsecured obligations of the Company ranking
pari passu
as against the
assets of the Company with all other Notes from time to time issued and
outstanding hereunder without any preference among themselves and
pari passu
with all other
present and future unsecured Debt (actual or contingent) of the Company which is
not expressed to be subordinate or junior in rank to any other unsecured Debt of
the Company.
Section
9.7
Books and
Records
.
The
Company will, and will cause each of its Subsidiaries to, maintain proper books
of record and account in conformity with GAAP and all applicable requirements of
any Governmental Authority having legal or regulatory jurisdiction over the
Company or such Subsidiary, as the case may be.
|
SECTION 10.
|
NEGATIVE
COVENANTS.
|
The
Company covenants that so long as any of the Notes are outstanding:
Section
10.1
Transactions with
Affiliates
.
The
Company will not and will not permit any Subsidiary to enter into directly or
indirectly any Material transaction or Material group of related transactions
(including without limitation the purchase, lease, sale or exchange of
properties of any kind or the rendering of any service) with any Affiliate
(other than the Company or another Subsidiary), except in the ordinary course
and pursuant to the reasonable requirements of the Company’s or such
Subsidiary’s business and upon fair and reasonable terms no less favorable to
the Company or such Subsidiary than would be obtainable in a comparable
arm’s-length transaction with a Person not an Affiliate.
Section
10.2
Interest Coverage
Ratio
.
The
Company will not at any time permit the ratio of (a) Consolidated EBITDA to
(b) Consolidated Interest Expense for each period of four consecutive
fiscal quarters to be less than 2.75 to 1.0.
Section
10.3
Limitations on
Debt
.
(a)
The
Company will not at any time permit the ratio of (i) Consolidated Total
Debt at such time to (ii) Consolidated EBITDA for the period of the four
consecutive fiscal quarters then most recently ended to exceed 3.75 to
1.0. The maximum amount of Consolidated Total Debt permitted pursuant
to the terms of this Section 10.3(a) is hereafter referred to as “
Maximum Permitted Total
Debt
”.
(b)
The
Company will not at any time permit Priority Debt to exceed an amount equal to
25% of Maximum Permitted Total Debt.
Section
10.4
Liens
.
The
Company will not, and will not permit any of its Subsidiaries to, directly or
indirectly create, incur, assume or permit to exist (upon the happening of a
contingency or otherwise) any Lien on or with respect to any property or asset
(including, without limitation, any document or instrument in respect of goods
or accounts receivable) of the Company or any such Subsidiary, whether now owned
or held or hereafter acquired, or any income or profits therefrom, or assign or
otherwise convey any right to receive income or profits, except:
(a)
Liens for
taxes, assessments or other governmental charges which are not yet due and
payable or the payment of which is not at the time required by
Section 9.4;
(b)
statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen
and other similar Liens, in each case, incurred in the ordinary course of
business for sums not yet due and payable or the payment of which is not at the
time required by Section 9.1 or Section 9.4;
(c)
Liens
(other than any Lien imposed by ERISA) incurred or deposits made in the ordinary
course of business (i) in connection with workers’ compensation, unemployment
insurance and other types of social security or retirement benefits, or (ii) to
secure (or to obtain letters of credit that secure) the performance of tenders,
statutory obligations, surety bonds, appeal bonds (not in excess of
$15,000,000), bids, leases (other than Capital Leases), performance bonds,
purchase, construction or sales contracts and other similar obligations, in each
case not incurred or made in connection with the borrowing of money, the
obtaining of advances or credit or the payment of the deferred purchase price of
property;
(d)
any
attachment or judgment Lien, unless (i) the judgment it secures shall not,
within 60 days after the entry thereof, have been discharged or execution
thereof stayed pending appeal, or shall not have been discharged within 60 days
after the expiration of any such stay or (ii) the uninsured portion of the
judgment such Lien secures, including any portion for which the insurer has not
acknowledged responsibility, exceeds $15,000,000;
(e)
leases or
subleases granted to others, easements, rights-of-way, restrictions and other
similar charges or encumbrances, in each case incidental to, and not interfering
with, the ordinary conduct of the business of the Company or any of its
Subsidiaries,
provided
that such Liens do not, in the aggregate, materially detract from the value of
such property;
(f)
Liens on
property or assets of the Company or any of its Subsidiaries securing Debt owing
to the Company or to any of its Wholly-Owned Subsidiaries;
(g)
Liens on
all existing or hereafter acquired or arising Receivables of the Company or any
Subsidiary, the Related Security with respect thereto, the collections and
proceeds of such Receivables and Related Security, all lockboxes, lockbox
accounts, collection accounts or other deposit accounts into which such
collections are deposited and all other rights and payments relating to such
Receivables (collectively, “
Receivables Assets
”), which
are transferred to the Company, a Subsidiary or a Receivables Purchaser in
connection with Receivables Facility Attributed Indebtedness;
provided
such Receivables
Facility Attributed Indebtedness is permitted under
Section 10.3(b);
(h)
any Lien
created to secure all or any part of the purchase price, or to secure Debt
incurred or assumed to pay all or any part of the purchase price or cost of
construction, of property (or any improvement thereon) acquired or constructed
by the Company or a Subsidiary after the date of the Closing,
provided
that:
(i)
any such
Lien shall extend solely to the item or items of such property (or improvement
thereon) so acquired or constructed and, if required by the terms of the
instrument originally creating such Lien, other property (or improvement
thereon) which is an improvement to or is acquired for specific use in
connection with such acquired or constructed property (or improvement thereon)
or which is real property being improved by such acquired or constructed
property (or improvement thereon),
(1)
the
principal amount of the Debt secured by any such Lien shall at no time exceed an
amount equal to the lesser of (1) the cost to the Company or such
Subsidiary of the property (or improvement thereon) so acquired or constructed
and (2) the fair market value (as determined in good faith by the board of
directors of the Company) of such property (or improvement thereon) at the time
of such acquisition or construction, and
(2)
any such
Lien shall be created contemporaneously with, or within 180 days after, the
acquisition or construction of such property;
(3)
any Lien
existing on property of a Person immediately prior to its being consolidated
with or merged into the Company or a Subsidiary or its becoming a Subsidiary, or
any Lien existing on any property acquired by the Company or any Subsidiary at
the time such property is so acquired (whether or not the Debt secured thereby
shall have been assumed),
provided
that (i) no
such Lien shall have been created or assumed in contemplation of such
consolidation or merger or such Person’s becoming a Subsidiary or such
acquisition of property, and (ii) each such Lien shall extend solely to the
item or items of property so acquired and, if required by the terms of the
instrument originally creating such Lien, other property which is an improvement
to or is acquired for specific use in connection with such acquired
property;
(j)
any Lien
renewing, extending or refunding any Lien permitted by paragraphs (h) or (i) of
this Section 10.4,
provided
that (i) the
principal amount of Debt secured by such Lien immediately prior to such
extension, renewal or refunding is not increased or the maturity thereof
reduced, (ii) such Lien is not extended to any other property, and
(iii) immediately after such extension, renewal or refunding no Default or
Event of Default would exist;
(k)
the
security interest contemplated by Section 18.3 of the Trademark License
Agreement among Meredith Corporation, as Licensor, Better Homes & Garden
Real Estate Licensee LLC, as the successor to Project Five TM LLC, as Licensee,
and Realogy Corporation, as Guarantor dated as of October 3, 2007, as amended
(so long as any such amendment does not provide for any change to the
obligations secured thereby as in effect on the date of Closing);
and
(l)
other
Liens not otherwise permitted by subparagraphs (a) through (k) securing Debt,
provided
that all Debt
secured by such Liens shall have been incurred within the applicable limitations
of Section 10.3, including, without limitation, that after giving effect thereto
Priority Debt will not exceed 25% of Maximum Permitted Total Debt.
Section
10.5
Mergers, Consolidations and Sales of
Assets
.
(a)
The
Company will not, and will not permit any of its Subsidiaries to, consolidate
with or be a party to a merger with any other Person, or sell, lease or
otherwise dispose of all or substantially all of its assets;
provided
that:
(1)
any
Subsidiary may merge or consolidate with or into the Company or any Subsidiary
so long as in (1) any merger or consolidation involving the Company, the Company
shall be the surviving or continuing corporation, (2) any merger or
consolidation involving a Wholly-Owned Subsidiary (and not the Company), the
Wholly-Owned Subsidiary shall be the surviving or continuing
Person;
(2)
the
Company may consolidate or merge with or into any other corporation if
(1) the corporation which results from such consolidation or merger (the
“
surviving corporation
”)
is organized under the laws of any state of the United States or the District of
Columbia, (2) the due and punctual payment of the principal of and premium,
if any, and interest on all of the Notes, according to their tenor, and the due
and punctual performance and observation of all of the covenants in the Notes
and this Agreement to be performed or observed by the Company are expressly
assumed in writing by the surviving corporation and the surviving corporation
shall furnish to the holders of the Notes an opinion of counsel satisfactory to
the Required Holders to the effect that the instrument of assumption has been
duly authorized, executed and delivered and constitutes the legal, valid and
binding contract and agreement of the surviving corporation enforceable in
accordance with its terms, except as enforcement of such terms may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the enforcement of creditors’ rights generally and by general equitable
principles, (3) at the time of such consolidation or merger and immediately
after giving effect thereto, no Default or Event of Default would exist, and (4)
the Company or such surviving corporation shall have complied with all
obligations under this Agreement with respect to any Change in Control resulting
from such transaction;
(3)
the
Company may sell or otherwise dispose of all or substantially all of its assets
to any Person for consideration which represents the fair market value of such
assets (as determined in good faith by the Board of Directors of the Company) at
the time of such sale or other disposition if (1) the Person which is
acquiring all or substantially all of the assets of the Company is a corporation
organized under the laws of any state of the United States or the District of
Columbia, (2) the due and punctual payment of the principal of and premium,
if any, and interest on all the Notes, according to their tenor, and the due and
punctual performance and observance of all of the covenants in the Notes and in
this Agreement to be performed or observed by the Company are expressly assumed
in writing by the acquiring corporation and the acquiring corporation shall
furnish to the holders of the Notes an opinion of counsel satisfactory to the
Required Holders to the effect that the instrument of assumption has been duly
authorized, executed and delivered and constitutes the legal, valid and binding
contract and agreement of such acquiring corporation enforceable in accordance
with its terms, except as enforcement of such terms may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the enforcement of creditors’ rights generally and by general equitable
principles, (3) at the time of such sale or disposition and immediately
after giving effect thereto, no Default or Event of Default would exist, and (4)
the Company or such acquiring corporation shall have complied with all
obligations under this Agreement with respect to any Change in Control resulting
from such transaction; and
(4)
the
Company or any Subsidiary may sell or otherwise dispose of assets as part of any
Permitted Receivables Transaction so long as the aggregate amount of Priority
Debt (including Receivables Facility Attributed Indebtedness) does not exceed
25% of Maximum Permitted Total Debt.
(b)
The
Company will not, and will not permit any of its Subsidiaries to, sell, lease,
transfer, abandon or otherwise dispose of assets (except assets sold in the
ordinary course of business for fair market value and except as provided in
Section 10.5 (a)(iii));
provided
that the foregoing
restrictions do not apply to:
(1)
(1) the
sale, lease, transfer or other disposition of assets of a Subsidiary to the
Company or another Subsidiary or by the Company to a Wholly-Owned Subsidiary or
(2) the sale, lease, transfer or other disposition of assets (valued at net book
value) of the Company to another Subsidiary not to exceed in any 12-month period
10% of Consolidated Total Assets as of the last day of the fiscal quarter
immediately preceding such sale, lease, transfer or other disposition;
or
(2)
the sale
or other disposition of assets as part of any Permitted Receivables Transaction
so long as the aggregate amount of Priority Debt (including Receivables Facility
Attributed Indebtedness) does not exceed 25% of Maximum Permitted Total Debt;
or
(3)
the sale
of inventory in the ordinary course of business; or
(4)
the sale
of assets for cash or other property to a Person or Persons other than an
Affiliate if all of the following conditions are met:
(1) such
assets (valued at net book value) do not, together with all other assets of the
Company and its Subsidiaries previously disposed of during the immediately
preceding 36 calendar month period (other than in the ordinary course of
business), exceed 30% of the average of Consolidated Total Assets as of the last
day of each of the 12 consecutive fiscal quarters then most recently
ended;
(2) in
the opinion of the Board of Directors of the Company, the sale is for fair value
and is in the best interests of the Company and its Subsidiaries;
and
(3) immediately
after the consummation of the transaction and after giving effect thereto, no
Default or Event of Default would exist;
provided, however
, that for
purposes of the foregoing calculation, there shall not be included any assets
the proceeds of which were or are applied either (A) within 12 months
before or 12 months after the effective date of such asset disposition to the
acquisition of assets useful and intended to be used in the operation of the
business of the Company and its Subsidiaries as described in Section 10.8 and
having a fair market value (as determined in good faith by the Board of
Directors of the Company) at least equal to that of the assets so disposed of or
(B) within 180 days after the effective date of such asset disposition to
the prepayment at any applicable prepayment premium of all Senior Debt of the
Company on a pro rata basis (other than (x) Senior Debt owing to the Company,
any of its Subsidiaries or any Affiliate and (y) Senior Debt in respect of any
revolving credit or similar facility providing the Company or any such
Subsidiary with the right to obtain loans or other extensions of credit from
time to time, unless in connection with such payment of Senior Debt, the
availability of credit under such credit facility is permanently reduced by an
amount not less than the amount of such proceeds applied to the payment of such
Senior Debt), based upon principal amount then outstanding. It is
understood and agreed by the Company that, to the extent any such proceeds are
applied to the prepayment of the Notes, such prepayment will be made on a pro
rata basis in respect of all Notes of all Series outstanding at such time in the
manner and with the premium, if any, then required pursuant to the optional
prepayment provisions provided in Section 8.2.
Section
10.6
Limitation on Sale-and-Leaseback
Transactions
.
The
Company will not, and will not permit any Subsidiary to, enter into any
Sale-and-Leaseback Transaction unless immediately after giving effect thereto,
the aggregate amount of Priority Debt (including the Attributable Debt to be
incurred in connection with such Sale-and-Leaseback Transaction) does not exceed
25% of Maximum Permitted Total Debt.
Section
10.7
Termination of Pension
Plans
.
The
Company will not and will not permit any Subsidiary to, withdraw from any
Multiemployer Plan or permit any employee benefit plan maintained by it to be
terminated if such withdrawal or termination could result in withdrawal
liability (as described in Part 1 of Subtitle E of Title IV of
ERISA) or the imposition of a Lien on any property of the Company or any
Subsidiary pursuant to section 4068 of ERISA, which withdrawal liability or
Lien could reasonably be expected to have a Material Adverse
Effect.
Section
10.8
Nature of
Business
.
The
Company will not, and will not permit any Subsidiary to, engage in any business
if, as a result, the general nature of the business, in which the Company and
its Subsidiaries, taken as a whole, would then be engaged would be substantially
changed from the general nature of the business in which the Company and its
Subsidiaries, taken as a whole, are engaged on the date of this Agreement (it
being understood that this covenant shall not require the Company to remain in
any current business if it remains in one or more current businesses of the
Company or its Subsidiaries).
Section
10.9
Terrorism Sanctions
Regulations
.
The
Company will not, and will not permit any Subsidiary to, (i) become a Person
described or designated in the Specially Designated Nationals and Blocked
Persons List of the Office of Foreign Assets Control or in section 1 of the
Anti-Terrorism Order or (ii) engage in any dealings or transactions with any
such Person.
|
SECTION 11.
|
EVENTS
OF DEFAULT.
|
An “
Event of Default
” shall exist
if any of the following conditions or events shall occur and be
continuing:
(a)
the
Company defaults in the payment of any principal or Make-Whole Amount, if any,
on any Note when the same becomes due and payable, whether at maturity or at a
date fixed for prepayment or by declaration or otherwise; or
(b)
the
Company defaults in the payment of any interest on any Note for more than five
Business Days after the same becomes due and payable; or
(c)
the
Company defaults in the performance of or compliance with any term contained in
Sections 10.1 through 10.6 and such default is not remedied within 10 days after
the earlier of (i) a Responsible Officer obtaining actual knowledge of such
default and (ii) the Company receiving written notice of such default from
any holder of a Note (any such written notice to be identified as a “notice of
default” and to refer specifically to this paragraph (c) of Section 11);
or
(d)
the
Company defaults in the performance of or compliance with any term contained
herein (other than those referred to in Sections 11(a), (b) and (c)) and such
default is not remedied within 30 days after the earlier of (i) a
Responsible Officer obtaining actual knowledge of such default and (ii) the
Company receiving written notice of such default from any holder of a Note (any
such written notice to be identified as a “notice of default” and to refer
specifically to this Section 11(d)); or
(e)
any
representation or warranty made in writing by or on behalf of the Company or by
any officer of the Company in this Agreement or in any writing furnished in
connection with the transactions contemplated hereby proves to have been false
or incorrect in any material respect on the date as of which made;
or
(f)
(i) the
Company or any Subsidiary is in default (as principal or as guarantor or other
surety) in the payment of any principal of or premium or make-whole amount or
interest on any Debt that is outstanding in an aggregate principal amount of at
least $25,000,000 (or the equivalent in other applicable currencies) beyond any
period of grace provided with respect thereto, or (ii) the Company or any
Subsidiary is in default in the performance of or compliance with any term of
any evidence of any Debt in an aggregate outstanding principal amount of at
least $25,000,000 (or the equivalent in other applicable currencies) or of any
mortgage, indenture or other agreement relating thereto or any other condition
exists, and as a consequence of such default or condition such Debt has become,
or has been declared, due and payable before its stated maturity or before its
regularly scheduled dates of payment, or (iii) as a consequence of the
occurrence or continuation of any event or condition (other than the passage of
time or the right of the holder of Debt to convert such Debt into equity
interests), the Company or any Subsidiary has become obligated to purchase or
repay Debt before its regular maturity or before its regularly scheduled dates
of payment in an aggregate outstanding principal amount of at least $25,000,000,
or (iv) the occurrence of any “Amortization Event” under any Permitted
Receivables Transaction which event has not been cured, waived or rescinded, or
(v) the Company shall be removed as the “Servicer” under any Permitted
Receivables Transaction; or
(g)
the
Company or any Material Subsidiary (i) is generally not paying, or admits
in writing its inability to pay, its debts as they become due, (ii) files,
or consents by answer or otherwise to the filing against it of, a petition for
relief or reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy, insolvency, reorganization,
moratorium or other similar law of any jurisdiction, (iii) makes an
assignment for the benefit of its creditors, (iv) consents to the
appointment of a custodian, receiver, trustee or other officer with similar
powers with respect to it or with respect to any substantial part of its
property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes
corporate action for the purpose of any of the foregoing; or
(h)
a court
or other Governmental Authority of competent jurisdiction enters an order
appointing, without consent by the Company or any of its Material Subsidiaries,
a custodian, receiver, trustee or other officer with similar powers with respect
to the Company or any Material Subsidiary or with respect to any substantial
part of the property of the Company or any Material Subsidiary, or constituting
an order for relief or approving a petition for relief or reorganization or any
other petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution,
winding-up or liquidation of the Company or any of its Material Subsidiaries, or
any such petition shall be filed against the Company or any of its Material
Subsidiaries and such petition shall not be dismissed within 60 days;
or
(i)
a final
judgment or judgments for the payment of money aggregating in excess of
$25,000,000 (or the equivalent in other applicable currencies) are rendered
against one or more of the Company and its Subsidiaries and which judgments are
not, within 60 days after entry thereof, bonded, discharged or stayed pending
appeal, or are not discharged within 60 days after the expiration of such stay;
or
(j)
if
(i) any Plan shall fail to satisfy the minimum funding standards of the
Pension Funding Rules for any plan year or part thereof or a waiver of such
standards or extension of any amortization period is sought or granted under the
Pension Funding Rules, (ii) a notice of intent to terminate any Plan shall have
been or is reasonably expected to be filed with the PBGC or the PBGC shall have
instituted proceedings under ERISA section 4042 to terminate or appoint a
trustee to administer any Plan or the PBGC shall have notified the Company or
any ERISA Affiliate that a Plan may become a subject of any such proceedings,
(iii) the aggregate “amount of unfunded benefit liabilities” (within the
meaning of section 4001(a)(18) of ERISA) under all Plans, determined in
accordance with Title IV of ERISA, shall exceed $25,000,000, (iv) the Company or
any ERISA Affiliate shall have incurred or is reasonably expected to incur any
liability pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, (v) the Company or
any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the Company
or any Subsidiary establishes or amends any employee welfare benefit plan that
provides post-employment welfare benefits in a manner that would increase the
liability of the Company or any Subsidiary thereunder; and any such event or
events described in clauses (i) through (vi) above, either individually or
together with any other such event or events, could reasonably be expected to
have a Material Adverse Effect.
As used
in Section 11(j), the terms “employee benefit plan” and “employee welfare
benefit plan” shall have the respective meanings assigned to such terms in
section 3 of ERISA.
|
SECTION 12.
|
REMEDIES
ON DEFAULT, ETC.
|
Section
12.1
Acceleration
.
(a)
If an
Event of Default with respect to the Company described in Section 11(g) or (h)
(other than an Event of Default described in clause (i) of Section 11(g) or
described in clause (vi) of Section 11(g) by virtue of the fact that such clause
encompasses clause (i) of Section 11(g)) has occurred, all the Notes then
outstanding shall automatically become immediately due and payable.
(b)
If any
other Event of Default has occurred and is continuing, the Required Holders may
at any time at its or their option, by notice or notices to the Company, declare
all the Notes then outstanding to be immediately due and payable.
(c)
If any
Event of Default described in Section 11(a) or (b) has occurred and is
continuing, any holder or holders of Notes at the time outstanding affected by
such Event of Default may at any time, at its or their option, by notice or
notices to the Company, declare all the Notes held by it or them to be
immediately due and payable.
Upon any
Notes becoming due and payable under this Section 12.1, whether
automatically or by declaration, such Notes will forthwith mature and the entire
unpaid principal amount of such Notes, plus (x) all accrued and unpaid
interest thereon (including, but not limited to, any interest accrued thereon at
the Default Rate) and (y) the Make-Whole Amount determined in respect of
such principal amount (to the full extent permitted by applicable law), shall
all be immediately due and payable, in each and every case without presentment,
demand, protest or further notice, all of which are hereby
waived. The Company acknowledges, and the parties hereto agree, that
each holder of a Note has the right to maintain its investment in the Notes free
from repayment by the Company (except as herein specifically provided for), and
that the provision for payment of a Make-Whole Amount by the Company, in the
event that the Notes are prepaid or are accelerated as a result of an Event of
Default, is intended to provide compensation for the deprivation of such right
under such circumstances.
Section
12.2
Other Remedies
.
If any
Default or Event of Default has occurred and is continuing, and irrespective of
whether any Notes have become or have been declared immediately due and payable
under Section 12.1, the holder of any Note at the time outstanding may
proceed to protect and enforce the rights of such holder by an action at law,
suit in equity or other appropriate proceeding, whether for the specific
performance of any agreement contained herein or in any Note, or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law or
otherwise.
Section
12.3
Rescission
.
At any
time after any Notes have been declared due and payable pursuant to clause
Section 12.1(b) or (c), the Required Holders, by written notice to the Company,
may rescind and annul any such declaration and its consequences if (a) the
Company has paid all overdue interest on the Notes, all principal of and
Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid
other than by reason of such declaration, and all interest on such overdue
principal and Make-Whole Amount, if any, and (to the extent permitted by
applicable law) any overdue interest in respect of each Series of the Notes, at
the Default Rate for such Series, (b) neither the Company nor any other
Person shall have paid any amounts which have become due solely by reason of
such declaration, (c) all Events of Default and Defaults, other than non-payment
of amounts that have become due solely by reason of such declaration, have been
cured or have been waived pursuant to Section 17, and (d) no judgment
or decree has been entered for the payment of any monies due pursuant hereto or
to the Notes. No rescission and annulment under this
Section 12.3 will extend to or affect any subsequent Event of Default or
Default or impair any right consequent thereon.
Section
12.4
No Waivers or Election of Remedies,
Expenses, Etc
.
No course
of dealing and no delay on the part of any holder of any Note in exercising any
right, power or remedy shall operate as a waiver thereof or otherwise prejudice
such holder’s rights, powers or remedies. No right, power or remedy
conferred by this Agreement or by any Note upon any holder thereof shall be
exclusive of any other right, power or remedy referred to herein or therein or
now or hereafter available at law, in equity, by statute or
otherwise. Without limiting the obligations of the Company under
Section 15, the Company will pay to the holder of each Note on demand such
further amount as shall be sufficient to cover all costs and expenses of such
holder incurred in any enforcement or collection under this Section 12,
including, without limitation, reasonable attorneys’ fees, expenses and
disbursements.
|
SECTION 13.
|
REGISTRATION;
EXCHANGE; SUBSTITUTION OF NOTES.
|
Section
13.1
Registration of
Notes
.
The
Company shall keep at its principal executive office a register for the
registration and registration of transfers of Notes. The name and
address of each holder of one or more Notes, each transfer thereof and the name
and address of each transferee of one or more Notes shall be registered in such
register. Prior to due presentment for registration of transfer, the
Person in whose name any Note shall be registered shall be deemed and treated as
the owner and holder thereof for all purposes hereof, and the Company shall not
be affected by any notice or knowledge to the contrary. The Company
shall give to any holder of a Note that is an Institutional Investor promptly
upon request therefor, a complete and correct copy of the names and addresses of
all registered holders of Notes.
Section
13.2
Transfer and Exchange of
Notes
.
Upon
surrender of any Note to the Company at the address and to the attention of the
designated officer (all as specified in Section 18(c), for registration of
transfer or exchange (and in the case of a surrender for registration of
transfer, duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered holder of such Note or such holder’s attorney duly
authorized in writing and accompanied by the relevant name, address and other
information for notices of each transferee of such Note or part thereof), within
ten Business Days thereafter, the Company shall execute and deliver, at the
Company’s expense (except as provided below), one or more new Notes (as
requested by the holder thereof) of the same Series in exchange therefor, in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such Person
as such holder may request and shall be substantially in the form of Notes for
such Series set forth in Exhibits 1-A and 1-B, as the case may
be. Each such new Note shall be dated and bear interest from the date
to which interest shall have been paid on the surrendered Note or dated the date
of the surrendered Note if no interest shall have been paid
thereon. The Company may require payment of a sum sufficient to cover
any stamp tax or governmental charge imposed in respect of any such transfer of
Notes. Notes shall not be transferred in denominations of less than
$100,000;
provided
that
if necessary to enable the registration of transfer by a holder of its entire
holding of Notes of a Series, one Note of such Series may be in a denomination
of less than $100,000. Any transferee, by its acceptance of a Note
registered in its name (or the name of its nominee), shall be deemed to have
made the representation set forth in Section 6.2.
Section
13.3
Replacement of
Notes
.
Upon
receipt by the Company at the address and to the attention of the designated
officer (all as specified in Section 18(c)) of evidence reasonably satisfactory
to it of the ownership of and the loss, theft, destruction or mutilation of any
Note (which evidence shall be, in the case of an Institutional Investor, notice
from such Institutional Investor of such ownership and such loss, theft,
destruction or mutilation), and
(a)
in the
case of loss, theft or destruction, of indemnity reasonably satisfactory to it
(
provided
that if the
holder of such Note is, or is a nominee for, an original Purchaser or another
holder of a Note with a minimum net worth of at least $10,000,000 or a Qualified
Institutional Buyer, such Person’s own unsecured agreement of indemnity shall be
deemed to be satisfactory), or
(b)
in the
case of mutilation, upon surrender and cancellation thereof,
within
ten Business Days thereafter, the Company at its own expense shall execute and
deliver, in lieu thereof, a new Note of the same Series, dated and bearing
interest from the date to which interest shall have been paid on such lost,
stolen, destroyed or mutilated Note or dated the date of such lost, stolen,
destroyed or mutilated Note if no interest shall have been paid
thereon.
|
SECTION 14.
|
PAYMENTS
ON NOTES.
|
Section
14.1
Place of Payment
.
Subject
to Section 14.2, payments of principal, Make-Whole Amount, if any, and
interest becoming due and payable on the Notes shall be made in Des Moines, Iowa
at the principal office of the Company in such jurisdiction. The
Company may at any time, by notice to each holder of a Note, change the place of
payment of the Notes so long as such place of payment shall be either the
principal office of the Company in such jurisdiction or the principal office of
a bank or trust company in such jurisdiction.
Section
14.2
Home Office
Payment
.
So long
as any Purchaser or its nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Make-Whole Amount, if any, and interest by the method and at the address
specified for such purpose below such Purchaser’s name in Schedule A, or by
such other method or at such other address as such Purchaser shall have from
time to time specified to the Company in writing for such purpose, without the
presentation or surrender of such Note or the making of any notation thereon,
except that upon written request of the Company made concurrently with or
reasonably promptly after payment or prepayment in full of any Note, such
Purchaser shall surrender such Note for cancellation, reasonably promptly after
any such request, to the Company at its principal executive office or at the
place of payment most recently designated by the Company pursuant to
Section 14.1. Prior to any sale or other disposition of any Note
held by a Purchaser or its nominee, such Purchaser will, at its election, either
endorse thereon the amount of principal paid thereon and the last date to which
interest has been paid thereon or surrender such Note to the Company in exchange
for a new Note or Notes pursuant to Section 13.2. The Company
will afford the benefits of this Section 14.2 to any Institutional Investor
that is the direct or indirect transferee of any Note purchased by a Purchaser
under this Agreement and that has made the same agreement relating to such Note
as the Purchasers have made in this Section 14.2.
|
SECTION 15.
|
EXPENSES,
ETC.
|
Section
15.1
Transaction
Expenses
.
Whether
or not the transactions contemplated hereby are consummated, the Company will
pay all costs and expenses (including reasonable attorneys’ fees of a special
counsel and, if reasonably required by the Required Holders, local or other
counsel) incurred by the Purchasers and each other holder of a Note in
connection with such transactions and in connection with any amendments, waivers
or consents under or in respect of this Agreement or the Notes (whether or not
such amendment, waiver or consent becomes effective), including, without
limitation: (a) the costs and expenses incurred in enforcing or defending
(or determining whether or how to enforce or defend) any rights under this
Agreement or the Notes or in responding to any subpoena or other legal process
or informal investigative demand issued in connection with this Agreement or the
Notes, or by reason of being a holder of any Note, (b) the costs and
expenses, including financial advisors’ fees, incurred in connection with the
insolvency or bankruptcy of the Company or any Subsidiary or in connection with
any work-out or restructuring of the transactions contemplated hereby and by the
Notes and (c) the costs and expenses incurred in connection with the initial
filing of this Agreement and all related documents and financial information
with the SVO, provided that such costs and expenses shall not exceed
$2,500.00. The Company will pay, and will save each Purchaser and
each other holder of a Note harmless from, all claims in respect of any fees,
costs or expenses, if any, of brokers and finders (other than those, if any,
retained by a Purchaser or other holder in connection with its purchase of the
Notes).
Section
15.2
Survival
.
The
obligations of the Company under this Section 15 will survive the payment
or transfer of any Note, the enforcement, amendment or waiver of any provision
of this Agreement or the Notes, and the termination of this
Agreement.
|
SECTION 16.
|
SURVIVAL
OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT.
|
All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement and the Notes, the purchase or transfer by any
Purchaser of any Note or portion thereof or interest therein and the payment of
any Note, and may be relied upon by any subsequent holder of a Note, regardless
of any investigation made at any time by or on behalf of such Purchaser or any
other holder of a Note. All statements contained in any certificate
or other instrument delivered by or on behalf of the Company pursuant to this
Agreement shall be deemed representations and warranties of the Company under
this Agreement. Subject to the preceding sentence, this Agreement and
the Notes embody the entire agreement and understanding between each Purchaser
and the Company and supersede all prior agreements and understandings relating
to the subject matter hereof.
|
SECTION 17.
|
AMENDMENT
AND WAIVER.
|
Section
17.1
Requirements
.
This
Agreement and the Notes may be amended, and the observance of any term hereof or
of the Notes may be waived (either retroactively or prospectively), with (and
only with) the written consent of the Company and the Required Holders, except
that (a) no amendment or waiver of any of the provisions of Section 1,
2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it is used therein), will be
effective as to any Purchaser unless consented to by such Purchaser in writing,
and (b) no such amendment or waiver may, without the written consent of the
holder of each Note at the time outstanding affected thereby, (i) subject
to the provisions of Section 12 relating to acceleration or rescission,
change the amount or time of any prepayment or payment of principal of, or
reduce the rate or change the time of payment or method of computation of
interest or of the Make-Whole Amount on, any Series of the Notes,
(ii) change the percentage of the principal amount of the Notes the holders
of which are required to consent to any such amendment or waiver, or
(iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or
20.
Section
17.2
Solicitation of Holders of
Notes
.
(a)
Solicitation
. The
Company will provide each holder of the Notes (irrespective of the amount of
Notes then owned by it) with sufficient information, sufficiently far in advance
of the date a decision is required, to enable such holder to make an informed
and considered decision with respect to any proposed amendment, waiver or
consent in respect of any of the provisions hereof or of the
Notes. The Company will deliver executed or true and correct copies
of each amendment, waiver or consent effected pursuant to the provisions of this
Section 17 to each holder of outstanding Notes promptly following the date
on which it is executed and delivered by, or receives the consent or approval
of, the requisite holders of Notes.
(b)
Payment
. The
Company will not directly or indirectly pay or cause to be paid any
remuneration, whether by way of supplemental or additional interest, fee or
otherwise, or grant any security or provide other credit support, to any holder
of Notes as consideration for or as an inducement to the entering into by any
holder of Notes of any waiver or amendment of any of the terms and provisions
hereof unless such remuneration is concurrently paid, or security is
concurrently granted or other credit support concurrently provided, on the same
terms, ratably to each holder of Notes then outstanding even if such holder did
not consent to such waiver or amendment.
Section
17.3
Binding Effect,
etc
.
Any
amendment or waiver consented to as provided in this Section 17 applies
equally to all holders of Notes and is binding upon them and upon each future
holder of any Note and upon the Company without regard to whether such Note has
been marked to indicate such amendment or waiver. No such amendment
or waiver will extend to or affect any obligation, covenant, agreement, Default
or Event of Default not expressly amended or waived or impair any right
consequent thereon. No course of dealing between the Company and the
holder of any Note nor any delay in exercising any rights hereunder or under any
Note shall operate as a waiver of any rights of any holder of such
Note. As used herein, the term “
this Agreement
” and references
thereto shall mean this Agreement as it may from time to time be amended or
supplemented.
Section
17.4
Notes Held by Company,
etc
.
Solely
for the purpose of determining whether the holders of the requisite percentage
of the aggregate principal amount of Notes then outstanding approved or
consented to any amendment, waiver or consent to be given under this Agreement
or the Notes, or have directed the taking of any action provided herein or in
the Notes to be taken upon the direction of the holders of a specified
percentage of the aggregate principal amount of Notes then outstanding, Notes
directly or indirectly owned by the Company or any of its Affiliates shall be
deemed not to be outstanding.
All
notices and communications provided for hereunder shall be in writing and sent
(a) by telecopy if the sender on the same day sends a confirming copy of
such notice by a recognized overnight delivery service (charges prepaid), or
(b) by registered or certified mail with return receipt requested (postage
prepaid), or (c) by a recognized overnight delivery service (with charges
prepaid). Any such notice must be sent:
(a)
if to any
Purchaser or its nominee, to such Purchaser or nominee at the address specified
for such communications in Schedule A, or at such other address as such
Purchaser or nominee shall have specified to the Company in
writing,
(b)
if to any
other holder of any Note, to such holder at such address as such other holder
shall have specified to the Company in writing, or
(c)
if to the
Company, to the Company at its address set forth at the beginning hereof to the
attention of the Chief Financial Officer with a copy to the General Counsel, or
at such other address as the Company shall have specified to the holder of each
Note in writing.
Notices
under this Section 18 will be deemed given only when actually
received.
|
SECTION 19.
|
REPRODUCTION
OF DOCUMENTS.
|
This
Agreement and all documents relating thereto, including, without limitation,
(a) consents, waivers and modifications that may hereafter be executed,
(b) documents received by any Purchaser at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other
information previously or hereafter furnished to any Purchaser, may be
reproduced by such Purchaser by any photographic, photostatic, electronic,
digital or other similar process and such Purchaser may destroy any original
document so reproduced. The Company agrees and stipulates that, to
the extent permitted by applicable law, any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding (whether or not the original is in existence and whether or not such
reproduction was made by such Purchaser in the regular course of business) and
any enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. This Section 19 shall not
prohibit the Company or any other holder of Notes from contesting any such
reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such
reproduction.
|
SECTION 20.
|
CONFIDENTIAL
INFORMATION.
|
For the
purposes of this Section 20, “
Confidential Information
”
means information delivered to any Purchaser by or on behalf of the Company or
any Subsidiary in connection with the transactions contemplated by or otherwise
pursuant to this Agreement that is proprietary in nature and that was clearly
marked or labeled or otherwise adequately identified when received by such
Purchaser as being confidential information of the Company or such Subsidiary,
provided
that such term
does not include information that (a) was publicly known or otherwise known
to such Purchaser prior to the time of such disclosure, (b) subsequently
becomes publicly known through no act or omission by such Purchaser or any
Person acting on such Purchaser’s behalf, (c) otherwise becomes known to
such Purchaser other than through disclosure by the Company or any Subsidiary or
(d) constitutes financial statements delivered to such Purchaser under
Section 7.1 that are otherwise publicly available. Each
Purchaser will maintain the confidentiality of such Confidential Information in
accordance with procedures adopted by such Purchaser in good faith to protect
confidential information of third parties delivered to such Purchaser’
provided
that such Purchaser
may deliver or disclose Confidential Information to (i) its directors,
trustees, officers, employees, agents, attorneys and affiliates (to the extent
such disclosure reasonably relates to the administration of the investment
represented by its Notes), (ii) its financial advisors and other
professional advisors who agree to hold confidential the Confidential
Information substantially in accordance with the terms of this Section 20,
(iii) any other holder of any Note, (iv) any Institutional Investor to
which it sells or offers to sell such Note or any part thereof or any
participation therein (if such Person has agreed in writing prior to its receipt
of such Confidential Information to be bound by the provisions of this
Section 20), (v) any Person from which it offers to purchase any
security of the Company (if such Person has agreed in writing prior to its
receipt of such Confidential Information to be bound by the provisions of this
Section 20), (vi) any federal or state regulatory authority having
jurisdiction over such Purchaser, (vii) the NAIC or the SVO or, in each
case, any similar organization, or any nationally recognized rating agency that
requires access to information about such Purchaser’s investment portfolio, or
(viii) any other Person to which such delivery or disclosure may be
necessary or appropriate (w) to effect compliance with any law, rule,
regulation or order applicable to such Purchaser, (x) in response to any
subpoena or other legal process, (y) in connection with any litigation to
which such Purchaser is a party or (z) if an Event of Default has occurred
and is continuing, to the extent such Purchaser may reasonably determine such
delivery and disclosure to be necessary or appropriate in the enforcement or for
the protection of the rights and remedies under such Purchaser’s Notes and this
Agreement. Each holder of a Note, by its acceptance of a Note, will
be deemed to have agreed to be bound by and to be entitled to the benefits of
this Section 20 as though it were a party to this Agreement. On
reasonable request by the Company in connection with the delivery to any holder
of a Note of information required to be delivered to such holder under this
Agreement or requested by such holder (other than a holder that is a party to
this Agreement or its nominee), such holder will enter into an agreement with
the Company embodying the provisions of this Section 20.
|
SECTION 21.
|
SUBSTITUTION
OF PURCHASER.
|
Each
Purchaser shall have the right to substitute any one of its affiliates as the
purchaser of the Notes that it has agreed to purchase hereunder, by written
notice to the Company, which notice shall be signed by both such Purchaser and
such affiliate, shall contain such affiliate’s agreement to be bound by this
Agreement and shall contain a confirmation by such affiliate of the accuracy
with respect to it of the representations set forth in
Section 6. Upon receipt of such notice, any reference to such
Purchaser in this Agreement (other than in this Section 21), shall be
deemed to refer to such affiliate in lieu of such original
Purchaser. In the event that such affiliate is so substituted as a
Purchaser hereunder and such affiliate thereafter transfers to such original
Purchaser all of the Notes then held by such affiliate, upon receipt by the
Company of notice of such transfer, any reference to such affiliate as a
“Purchaser” in this Agreement (other than in this Section 21), shall no
longer be deemed to refer to such affiliate, but shall refer to such original
Purchaser, and such original Purchaser shall again have all the rights of an
original holder of the Notes under this Agreement.
|
SECTION 22.
|
MISCELLANEOUS.
|
Section
22.1
Successors and
Assigns
.
All
covenants and other agreements contained in this Agreement by or on behalf of
any of the parties hereto bind and inure to the benefit of their respective
successors and assigns (including, without limitation, any subsequent holder of
a Note) whether so expressed or not.
Section
22.2
Payments Due on Non-Business
Days
.
Anything
in this Agreement or the Notes to the contrary notwithstanding (but without
limiting the requirement in Section 8.5 that the notice of any optional
prepayment specify a Business Day as the date fixed for such prepayment), any
payment of principal of or Make-Whole Amount or interest on any Note that is due
on a date other than a Business Day shall be made on the next succeeding
Business Day without including the additional days elapsed in the computation of
the interest payable on such next succeeding Business Day,
provided
that if the maturity
date of any Note is a date other than a Business Day, the payment otherwise due
on such maturity date shall be made on the next succeeding Business Day and
shall include the additional days elapsed in the computation of interest payable
on such next succeeding Business Day.
Section
22.3
Accounting Terms
.
All
accounting terms used herein which are not expressly defined in this Agreement
have the meanings respectively given to them in accordance with
GAAP. Except as otherwise specifically provided herein, (i) all
computations made pursuant to this Agreement shall be made in accordance with
GAAP, and (ii) all financial statements shall be prepared in accordance with
GAAP.
Section
22.4
Severability
.
Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
Section
22.5
Construction etc
.
Each
covenant contained herein shall be construed (absent express provision to the
contrary) as being independent of each other covenant contained herein, so that
compliance with any one covenant shall not (absent such an express contrary
provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by
any Person, or which such Person is prohibited from taking, such provision shall
be applicable whether such action is taken directly or indirectly by such
Person.
For the
avoidance of doubt, all Schedules and Exhibits attached to this Agreement shall
be deemed to be a part hereof.
Section
22.6
Counterparts
.
This
Agreement may be executed in any number of counterparts, each of which shall be
an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies
hereof, each signed by less than all, but together signed by all, of the parties
hereto. Delivery of an executed signature page by facsimile or e-mail
transmission shall be effective as delivery of a manually signed counterpart of
this Agreement.
Section
22.7
Governing Law
.
This
Agreement shall be construed and enforced in accordance with, and the rights of
the parties shall be governed by, the law of the State of New York, excluding
choice-of-law principles of the law of such State that would permit the
application of the laws of a jurisdiction other than such State.
Section
22.8
Jurisdiction and Process; Waiver of
Jury Trial
.
(a)
The
Company irrevocably submits to the non-exclusive jurisdiction of any New York
State or federal court sitting in the Borough of Manhattan, The City of New
York, over any suit, action or proceeding arising out of or relating to this
Agreement or the Notes. To the fullest extent permitted by applicable
law, the Company irrevocably waives and agrees not to assert, by way of motion,
as a defense or otherwise, any claim that it is not subject to the jurisdiction
of any such court, any objection that it may now or hereafter have to the laying
of the venue of any such suit, action or proceeding brought in any such court
and any claim that any such suit, action or proceeding brought in any such court
has been brought in an inconvenient forum.
(b)
The
Company consents to process being served by or on behalf of any holder of Notes
in any suit, action or proceeding of the nature referred to in Section 22.8(a)
by mailing a copy thereof by registered or certified mail (or any substantially
similar form of mail), postage prepaid, return receipt requested, to it at its
address specified in Section 18 or at such other address of which such holder
shall then have been notified pursuant to said Section. The Company
agrees that such service upon receipt (i) shall be deemed in every respect
effective service of process upon it in any such suit, action or proceeding and
(ii) shall, to the fullest extent permitted by applicable law, be taken and held
to be valid personal service upon and personal delivery to
it. Notices hereunder shall be conclusively presumed received as
evidenced by a delivery receipt furnished by the United States Postal Service or
any reputable commercial delivery service.
(c)
Nothing
in this Section 22.8 shall affect the right of any holder of a Note to serve
process in any manner permitted by law, or limit any right that the holders of
any of the Notes may have to bring proceedings against the Company in the courts
of any appropriate jurisdiction or to enforce in any lawful manner a judgment
obtained in one jurisdiction in any other jurisdiction.
(d)
THE
PARTIES HERETO HEREBY WAIVE TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH
RESPECT TO THIS AGREEMENT, THE NOTES OR ANY OTHER DOCUMENT EXECUTED IN
CONNECTION HEREWITH OR THEREWITH.
[Remainder
of page intentionally left blank. Next page is a signature
page.]
If you
are in agreement with the foregoing, please sign the form of agreement on a
counterpart of this Agreement and return it to the Company, whereupon this
Agreement shall become a binding agreement between you and the
Company.
|
|
By:
|
/s/ Steven M.
Cappaert
|
|
|
|
Title: Corporate
Controller
|
This
Agreement is hereby accepted and
agreed to
as of the date thereof.
METROPOLITAN
LIFE INSURANCE COMPANY
METLIFE
INVESTORS INSURANCE COMPANY,
By: Metropolitan
Life Insurance Company,
its
Investment Manager
METLIFE
INSURANCE COMPANY OF CONNECTICUT
By: Metropolitan
Life Insurance Company,
its
Investment Manager
By:
/s/
Judith A.
Gulotta
Name: Judith
A. Gulotta
Title: Managing
Director
(executed
by Metropolitan Life Insurance Company (i) as to itself
as a
Purchaser and (ii) as investment manager to MetLife Investors
Insurance
Company as a Purchaser and MetLife Insurance Company
of
Connecticut as a Purchaser)
SCHEDULE
B
DEFINED
TERMS
As used
herein, the following terms have the respective meanings set forth below or set
forth in the Section hereof following such term:
“
Accountants’ Certificate
” is
defined in Section 7.1(b).
“
Affiliate
” means, at any time,
and with respect to any Person, any other Person that at such time directly or
indirectly through one or more intermediaries Controls, or is Controlled by, or
is under common Control with, such first Person, and, with respect to the
Company, shall include any Person beneficially owning or holding, directly or
indirectly, 10% or more of voting or equity interests of the Company or any
Subsidiary or any Person of which the Company and its Subsidiaries beneficially
own or hold, in the aggregate, directly or indirectly, 10% or more of voting or
equity interests. As used in this definition, “
Control
” means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
Securities, by contract or otherwise. Unless the context otherwise
clearly requires, any reference to an “
Affiliate
” is a reference to
an Affiliate of the Company.
“
Agreement
” is defined in
Section 17.3.
“
Anti-Terrorism Order
”
means Executive Order
No. 13,224 of September 24, 2001, Blocking Property and Prohibiting Transactions
with Persons Who Commit, Threaten to Commit or Support Terrorism, 66 U.S. Fed.
Reg. 49, 079 (2001), as amended.
“
Attributable Debt
” means in
connection with any Sale-and-Leaseback Transaction entered into within the
limitations of Section 10.6, as of the date of any determination thereof,
the greater of (a) the fair market value of the property or assets which is
or are the subject of such Sale-and-Leaseback Transaction (as reasonably
determined in good faith by the Board of Directors of the Company at or about
the time of the consummation of such Sale-and-Leaseback Transaction) and
(b) the aggregate amount of Rentals due and to become due (discounted from
the respective due dates thereof at the interest rate implicit in such Rentals
and otherwise in accordance with GAAP) under the lease relating to such
Sale-and-Leaseback Transaction.
“
Bloomberg
” is defined in
Section 8.7.
“
Business Day
” means
(a) for the purposes of Section 8.7 only, any day other than a
Saturday, a Sunday or a day on which commercial banks in New York City are
required or authorized to be closed, and (b) for the purposes of any other
provision of this Agreement, any day other than a Saturday, a Sunday or a day on
which commercial banks in Des Moines, Iowa or New York, New York are required or
authorized to be closed.
“
Capital Lease
” means, at any
time, a lease with respect to which the lessee is required concurrently to
recognize the acquisition of an asset and the incurrence of a liability in
accordance with GAAP.
“
Change in Control
” is defined
in Section 8.3(h).
“
Closing
” is defined in
Section 3.
“
Code
” means the Internal
Revenue Code of 1986, as amended from time to time, and the rules and
regulations promulgated thereunder from time to time.
“Company”
means Meredith
Corporation, an Iowa corporation or any successor that becomes such in the
manner prescribed in Section 10.5.
“Confidential Information”
is
defined in Section 20.
“Consolidated EBITDA”
for any
period means the sum of (a) Consolidated Net Income during such period plus
(to the extent deducted in determining Consolidated Net Income) (b) all
provisions for any federal, state or other income taxes made by the Company and
its Subsidiaries during such period, (c) all provisions for depreciation
and amortization (other than amortization of debt discount) made by the Company
and its Subsidiaries during such period, and (d) Consolidated Interest
Expense during such period.
“Consolidated Interest
Expense”
means all Interest Expense of the Company and its Subsidiaries
for any period after eliminating intercompany items. For purposes of
any determination of Consolidated Interest Expense pursuant to this Agreement,
the Company shall include, on a
pro forma
basis, “
interest expense
” (calculated
in a manner consistent with the computation of Interest Expense herein) of any
business entity acquired by the Company or any Subsidiary during the four fiscal
quarters immediately preceding any determination of Consolidated Interest
Expense and, concurrently with such determination, the Company shall furnish to
the holders of the Notes audited financial statements or other financial
information with respect to such business entity demonstrating to the reasonable
satisfaction of the Required Holders the basis for such computations; provided,
that the Company may elect not to compute Consolidated Interest Expense on a pro
forma basis for any period with respect to one or more business entities so
acquired so long as (i) the Company has elected not to include the net income of
such business entities on a pro forma basis for such period in the computation
of Consolidated Net Income for such period and (ii) such election by the Company
with respect to the computation of Consolidated Interest Expense for such period
does not cause the Consolidated Interest Expense of the Company for such period
to be less than 90% of what the Company’s Consolidated Interest Expense would
have been if such election had not been made.
“Consolidated Net Income”
for
any period means the gross revenues of the Company and its Subsidiaries for such
period less all expenses and other proper charges (including taxes on income),
determined on a consolidated basis after eliminating earnings or losses
attributable to outstanding Minority Interests, but excluding in any
event:
(e)
any gains
or losses on the sale or other disposition of investments or fixed or capital
assets, and any taxes on such excluded gains and any tax deductions or credits
on account of any such excluded losses;
(f)
the
proceeds of any life insurance policy;
(g)
net
earnings and losses of any Subsidiary accrued prior to the date it became a
Subsidiary;
(h)
net
earnings and losses of any business entity (other than a Subsidiary),
substantially all the assets of which have been acquired in any manner by the
Company or any Subsidiary, realized by such business entity prior to the date of
such acquisition;
(i)
net
earnings and losses of any business entity (other than a Subsidiary) with which
the Company or a Subsidiary shall have consolidated or which shall have merged
into or with the Company or a Subsidiary prior to the date of such consolidation
or merger;
(j)
net
earnings of any business entity (other than a Subsidiary) in which the Company
or any Subsidiary has an ownership interest unless such net earnings shall have
actually been received by the Company or such Subsidiary in the form of cash
distributions;
(k)
any
portion of the net earnings of any Subsidiary which for any reason is
unavailable for payment of dividends to the Company or any other
Subsidiary;
(l)
(i)
earnings resulting from any reappraisal, revaluation or write-up of assets or
losses resulting from writedowns of goodwill or other intangibles under
Statement of Financial Accounting Standards No. 142 or any successor statement
or principle, (ii) losses resulting from any exit or disposal activities under
Statement of Financial Accounting Standards No. 146 or any successor statement
or principle or (iii) non-cash expenses resulting from equity-based
compensation;
(m)
any
deferred or other credit representing any excess of the equity in any Subsidiary
at the date of acquisition thereof over the amount invested in such
Subsidiary;
(n)
any gain
arising from the acquisition of any Securities of the Company or any
Subsidiary;
(o)
any
reversal of any contingency reserve, except to the extent that provision for
such contingency reserve shall have been made from income arising during such
period; and
(p)
any other
extraordinary or nonrecurring gain or loss.
For
purposes of any determination of Consolidated Net Income pursuant to this
Agreement and notwithstanding clause (d) of this definition, the Company may
include, on a
pro forma
basis, “
net income
”
(calculated in a manner consistent with the computation of Consolidated Net
Income herein) earned by any business entity acquired (or whose assets have been
acquired) by the Company or any Subsidiary during the four fiscal quarters
immediately preceding any determination of Consolidated Net Income,
provided
that there shall be
a reasonable basis for the computation of such “
net income
” and, concurrently
with such determination, the Company shall have furnished to the holders of the
Notes audited financial statements or other financial information with respect
to such business entity (or such acquired assets) demonstrating to the
reasonable satisfaction of the Required Holders the basis for such
computations.
“Consolidated Total Assets”
means, as of the date of any determination thereof, total assets of the Company
and its Subsidiaries determined on a consolidated basis in accordance with
GAAP.
“Consolidated Total Debt”
means, as of the date of any determination thereof, all Debt of the Company and
its Subsidiaries, determined on a consolidated basis eliminating intercompany
items.
“Control Event”
is defined in
Section 8.3(h).
“Debt”
with respect to any
Person means, at any time, without duplication,
(q)
its
liabilities for borrowed money and its redemption obligations in respect of
mandatorily redeemable Preferred Stock;
(r)
its
liabilities for the deferred purchase price of property acquired by such Person
(excluding accounts payable arising in the ordinary course of business but
including all liabilities created or arising under any conditional sale or other
title retention agreement with respect to any such property);
(s)
all
liabilities appearing on its balance sheet in accordance with GAAP in respect of
Capital Leases;
(t)
all
liabilities for borrowed money secured by any Lien with respect to any property
owned by such Person (whether or not it has assumed or otherwise become liable
for such liabilities);
(u)
all its
liabilities in respect of letters of credit or instruments serving a similar
function issued or accepted for its account by banks and other financial
institutions (whether or not representing obligations for borrowed
money);
(v)
Swaps of
such Person;
(w)
any
Guaranty of such Person with respect to liabilities of a type described in any
of clauses (a) through (f) or (h) hereof; and
(x)
Receivables
Facility Attributed Indebtedness.
Debt of
any Person shall include all obligations of such Person of the character
described in clauses (a) through (h) to the extent such Person remains legally
liable in respect thereof notwithstanding that any such obligation is deemed to
be extinguished under GAAP.
“Default”
means an event or
condition the occurrence or existence of which would, with the lapse of time or
the giving of notice or both, become an Event of Default.
“Default Rate”
means the
Series J Default Rate and the Series K Default Rate, as applicable.
“Disclosure Documents”
is
defined in Section 5.3.
“Electronic Delivery”
is
defined in Section 7.1(a).
“Environmental Laws”
means any
and all federal, state, local, and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits, concessions, grants,
franchises, licenses, agreements or governmental restrictions relating to
pollution and the protection of the environment or the release of any materials
into the environment, including but not limited to those related to Hazardous
Materials.
“ERISA”
means the Employee
Retirement Income Security Act of 1974, as amended from time to time, and the
rules and regulations promulgated thereunder from time to time in
effect.
“ERISA Affiliate”
means any
trade or business (whether or not incorporated) that is treated as a single
employer together with the Company under section 414 of the
Code.
“Event of Default”
is defined
in Section 11.
“Exchange Act”
means the
Securities Exchange Act of 1934, as amended from time to time, and the rules and
regulations promulgated thereunder from time to time in effect.
“Finsub”
means any
bankruptcy-remote corporation or other Person that is a Wholly-Owned Subsidiary
organized solely for the purposes of engaging in a Permitted Receivables
Transaction.
“Form 10-K”
is defined in
Section 7.1(b).
“
Form 10-Q”
is defined in
Section 7.1(a).
“GAAP”
means generally
accepted accounting principles as in effect from time to time in the United
States of America.
“
Governmental Authority
”
means
(y)
the
government of
(1)
the
United States of America or any state or other political subdivision thereof,
or
(2)
any other
jurisdiction in which the Company or any Subsidiary conducts all or any part of
its business, or which asserts jurisdiction over any properties of the Company
or any Subsidiary, or
(z)
any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of, or pertaining to, any such government, including without
limitation the Federal Communications Commission of the United
States.
“Guaranty”
means, with respect
to any Person, any obligation (except the endorsement in the ordinary course of
business of negotiable instruments for deposit or collection) of such Person
guaranteeing or in effect guaranteeing any Debt, dividend or other obligation of
any other Person in any manner, whether directly or indirectly, including
(without limitation) obligations incurred through an agreement, contingent or
otherwise, by such Person:
(aa)
to
purchase such indebtedness or obligation or any property constituting security
therefor;
(bb)
to
advance or supply funds (i) for the purchase or payment of such
indebtedness or obligation, or (ii) to maintain any working capital or
other balance sheet condition or any income statement condition of any other
Person or otherwise to advance or make available funds for the purchase or
payment of such indebtedness or obligation;
(cc)
to lease
properties or to purchase properties or services primarily for the purpose of
assuring the owner of such indebtedness or obligation of the ability of any
other Person to make payment of the indebtedness or obligation; or
(dd)
otherwise
to assure the owner of such indebtedness or obligation against loss in respect
thereof.
In any
computation of the indebtedness or other liabilities of the obligor under any
Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
“Hazardous Material”
means any
and all pollutants, toxic or hazardous wastes or any other substances that might
pose a hazard to health and safety, the removal of which may be required or the
generation, manufacture, refining, production, processing, treatment, storage,
handling, transportation, transfer, use, disposal, release, discharge, spillage,
seepage, or filtration of which is or shall be restricted, prohibited or
penalized by any applicable law including, but not limited to, asbestos, urea
formaldehyde foam insulation, polychlorinated biphenyls, petroleum, petroleum
products, lead based paint, radon gas or similar restricted, prohibited or
penalized substances.
“holder”
means, with respect
to any Note, the Person in whose name such Note is registered in the register
maintained by the Company pursuant to Section 13.1.
“INHAM Exemption”
is defined
in Section 6.2(e).
“Institutional Investor”
means
(a) any Purchaser of a Note, (b) any holder of a Note holding
(together with one or more of its affiliates) more than 5% of the aggregate
principal amount of the Notes then outstanding, (c) any bank, trust
company, savings and loan association or other financial institution, any
pension plan, any investment company, any insurance company, any broker or
dealer, or any other similar financial institution or entity, regardless of
legal form, and (d) any Related Fund of any holder of any Note.
“Interest Expense”
of the
Company and its Subsidiaries for any period means all interest (including the
interest component included in Rentals on Capital Leases) and all amortization
of debt discount and expense on any particular Debt (including, without
limitation, payment-in-kind, zero coupon and other like Securities) for which
such calculations are being made.
“Lien”
means, with respect to
any Person, any mortgage, lien, pledge, charge, security interest or other
encumbrance, or any interest or title of any vendor, lessor, lender or other
secured party to or of such Person under any conditional sale or other title
retention agreement or Capital Lease, upon or with respect to any property or
asset of such Person (including in the case of stock, stockholder agreements,
voting trust agreements and all similar arrangements).
“Make-Whole Amount”
is defined
in Section 8.7.
“Material”
means material in
relation to the business, operations, affairs, financial condition, assets,
properties, or prospects of the Company and its Subsidiaries taken as a
whole.
“Material Adverse Effect”
means a material adverse effect on (a) the business, operations, affairs,
financial condition, assets, properties or prospects of the Company and its
Subsidiaries taken as a whole, or (b) the ability of the Company to perform
its obligations under this Agreement and the Notes, or (c) the validity or
enforceability of this Agreement or the Notes.
“Material Subsidiary”
means,
at any time, any Subsidiary if: (i) the portion of Consolidated
Net Income which was contributed by such Subsidiary during the immediately
preceding fiscal year of the Company exceeds 10% of Consolidated Net Income or
(ii) the portion of consolidated operating profit, as determined in
accordance with GAAP, which was contributed by such Subsidiary during the
immediately preceding fiscal year of the Company exceeds 10% of such
consolidated operating profit or (iii) the assets of such Subsidiary as at
the end of the immediately preceding fiscal year of the Company exceeds 10% of
Consolidated Total Assets.
“Maximum Permitted Total Debt”
is defined in Section 10.3(a).
“Meredith Family”
means
(a) the lineal descendants by blood or adoption of E.T. Meredith (“
descendants
”) and the spouses
and surviving spouses of such descendants; (b) any estate, trust,
guardianship, custodianship or other fiduciary arrangement for the primary
benefit of any one or more individuals described in (a) above; and (c) any
corporation, partnership, limited liability company or other business
organization so long as (i) one or more individuals or entities described
in clauses (a) and (b) above possess, directly or indirectly, the power to
direct or cause the direction of, the management and policies of such
corporation, partnership, limited liability company or other business
organization and (ii) substantially all of the ownership, beneficial or
other equity interests in such corporation, partnership, limited liability
company or other business organization are owned, directly or indirectly, by one
or more individuals or entities described in clauses (a) and (b)
above.
“Minority Interests”
means any
shares of stock of any class of a Subsidiary (other than directors’ qualifying
shares as required by law) that are not owned by the Company and/or one or more
of its Subsidiaries. Minority Interests shall be valued by valuing
Minority Interests constituting Preferred Stock at the voluntary or involuntary
liquidating value of such Preferred Stock, whichever is greater, and by valuing
Minority Interests constituting common stock at the book value of capital and
surplus applicable thereto adjusted, if necessary, to reflect any changes from
the book value of such common stock required by the foregoing method of valuing
Minority Interests in Preferred Stock.
“Multiemployer Plan”
means any
Plan that is a “multiemployer plan” (as such term is defined in
section 4001(a)(3) of ERISA).
“
NAIC”
means the National
Association of Insurance Commissioners or any successor thereto.
“NAIC Annual Statement”
is
defined in Section 6.2(a).
“Non-U.S. Pension Plan”
means
any plan, fund, or other similar program established or maintained outside the
United States of America by the Company or any one or more of its Subsidiaries
primarily for the benefit of employees of the Company or such Subsidiaries
residing outside the United States of America, which plan, fund or other similar
program provides for retirement income for such employees or a deferral of
income for such employees in contemplation of retirement and is not subject to
ERISA or the Code.
“Notes”
is defined in
Section 1.
“Officer’s Certificate”
means
a certificate of a Senior Financial Officer or of any other officer of the
Company whose responsibilities extend to the subject matter of such
certificate.
“PBGC”
means the Pension
Benefit Guaranty Corporation referred to and defined in ERISA or any successor
thereto.
“
Pension Funding Rules
” shall
mean the rules of the Code and ERISA regarding minimum required contributions
(including any installment payment thereof) to Plans and set forth in, with
respect to plan years ending prior to the effective date as to any such Plan of
the Pension Protection Act of 2006, Sections 401(a)(29) and 412 of the Code and
Part 3, Subtitle I, of Title I of ERISA each as in effect prior to the Pension
Protection Act of 2006 and, thereafter, Sections 412 and 430 through
436 of the Code and Part 3, Subtitle I, of Title I of ERISA each as in effect
from time to time.
“Permitted Receivables
Transaction”
means each of (a) the sale or other transfer, or
transfer of interest, by the Company or a Subsidiary of Receivables Assets to a
Subsidiary (including, without limitation, Finsub) or the Company in exchange
for consideration equal to the fair market value of the related Receivables,
(b) the entry by the Company or one or more Subsidiaries into one or more
Receivables Purchase Agreements, and (c) the entry by the Company and any
such Subsidiaries into such ancillary agreements, guarantees, documents or
instruments as are necessary or advisable in connection with Receivables Program
Documents.
“Person”
means an individual,
partnership, corporation, limited liability company, association, trust,
unincorporated organization, business entity or Governmental
Authority.
“Plan”
means an “employee
benefit plan” (as defined in section 3(3) of ERISA) subject to Title I of
ERISA that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any
liability.
“Preferred Stock”
means any
class of capital stock (or other equity interests) of a Person that is preferred
over any other class of capital stock (or other similar equity interests) of
such Person as to the payment of dividends or the payment of any amount upon
liquidation or dissolution of such Person.
“Priority Debt”
means, without
duplication, the sum of (i) all Debt of the Company secured by Liens
permitted by Sections 10.4(h), (i), (j) and (k) plus (ii) all Debt of
Subsidiaries (excluding Debt held by the Company or a Wholly-Owned Subsidiary),
plus (iii) all Attributable Debt of the Company and its Subsidiaries, plus
(iv) all Receivables Facility Attributed Indebtedness of the Company and
its Subsidiaries.
“property”
or
“properties”
means, unless
otherwise specifically limited, real or personal property of any kind, tangible
or intangible, choate or inchoate.
“Proposed Prepayment Date”
is
defined in Section 8.3(c).
“PTE”
means a Prohibited
Transaction Exemption issued by the Department of Labor.
“
Purchaser”
is defined in the
first paragraph of this Agreement.
“QPAM Exemption”
is defined in
Section 6.2(d).
“
Qualified Institutional Buyer”
means any Person who is a “qualified institutional buyer” within the
meaning of such term as set forth in Rule 144A(a)(1) under the Securities
Act.
“Receivable”
means all
indebtedness and other obligations owed by a Person to the Company or any
Subsidiary or in which the Company or any Subsidiary has a security interest or
other interest, including, without limitation, any indebtedness, obligation or
interest constituting an account, chattel paper, instrument or general
intangible, arising in connection with the sale or lease of goods or the
rendering of services by the Company or such Subsidiary, including the
obligation to pay finance charges with respect thereto.
“Receivables Assets”
means all
the assets described in Section 10.4(g).
“Receivables Facility Attributed
Indebtedness”
means, on any date of determination, the amount of
obligations outstanding as of such date under a Receivables Purchase Agreement
that would be characterized as principal if such facility were structured as a
secured lending transaction rather than as a purchase.
“Receivables Program
Documents”
means (i) the Receivables Sale Agreement, dated April 9, 2002,
by and among Meredith Funding Corporation, the Company and the other originators
party thereto from time to time, as amended, (ii) the Receivables Purchase
Agreement, dated April 9, 2002, by and among Meredith Funding Corporation, the
Company, as servicer, Falcon Asset Securitization Corporation, the financial
institutions from time to time party thereto and JPMorgan Chase Bank, N.A.
(successor by merger to Bank One, NA (Main Office Chicago)), as agent, as
amended, and (iii) all receivable sale agreements, receivable purchase
agreements or other written agreements that may from time to time be entered
into by the Company or any of its Subsidiaries, including Finsub, in connection
with any receivables program, as such agreements may be amended, supplemented or
otherwise modified from time to time in accordance with the provisions
thereof.
“Receivables Purchase
Agreement”
means a receivables purchase agreement or other receivables
financing agreement with one or more Receivables Purchasers, pursuant to which
some or all of such Receivables Purchasers will purchase undivided interests in,
or otherwise finance, Receivables Assets.
“Receivables Purchaser”
means
any purchaser or investor which purchases undivided interests in or otherwise
finances Receivables Assets, and includes any agent of any such purchaser or
investor.
“
Related Fund”
means, with
respect to any holder of any Note, any fund or entity that (i) invests in
Securities or bank loans, and (ii) is advised or managed by such holder, the
same investment advisor as such holder or by an affiliate of such holder or such
investment advisor.
“Related Security”
means with
respect to any Receivable (i) the inventory and goods, the sale, financing
or lease of which gave rise to such Receivable and all insurance contracts with
respect thereto, (ii) all security interests or Liens and the property
subject thereto purporting to secure payment of such Receivable, together with
all financing statements and security agreements describing any collateral
securing such Receivable, (iii) all guaranties, letters of credit,
insurance and other agreements or arrangements supporting or securing the
payment of such Receivable, (iv) all invoices, agreements, contracts,
records, books and other information relating to such Receivable or the Person
obligated to pay such Receivable, (v) any rights of the Company or any
Subsidiary under any agreement, document or guaranty executed or delivered in
connection with a Permitted Receivables Transaction, and (vi) all proceeds
of the foregoing.
“Rentals”
means and includes
as of the date of any determination thereof all fixed payments (including as
such all payments which the lessee is obligated to make to the lessor on
termination of the lease or surrender of the property) payable by the Company or
a Subsidiary, as lessee or sublessee under a lease of real or personal property,
but shall be exclusive of any amounts required to be paid by the Company or a
Subsidiary (whether or not designated as rents or additional rents) on account
of maintenance, repairs, insurance, taxes and similar charges. Fixed
rents under any so-called “
percentage leases
” shall be
computed solely on the basis of the minimum rents, if any, required to be paid
by the lessee regardless of sales volume or gross revenues.
“Required Holders”
means, at
any time, the holders of a majority in principal amount of the Notes (without
regard to Series) at the time outstanding (exclusive of Notes then owned by the
Company or any of its Affiliates).
“Responsible Officer”
means
any Senior Financial Officer and any other officer of the Company with
responsibility for the administration of the relevant portion of this
Agreement.
“Sale-and-Leaseback
Transaction”
means a transaction or series of transactions pursuant to
which the Company or any Subsidiary shall sell or transfer to any Person (other
than the Company or a Subsidiary) any property, whether now owned or hereafter
acquired, and, as part of the same transaction or series of transactions, the
Company or any Subsidiary shall rent or lease as lessee (other than pursuant to
a Capital Lease), or similarly acquire the right to possession or use of, such
property or one or more properties which it intends to use for the same purpose
or purposes as such property.
“
SEC”
means the Securities and
Exchange Commission of the United States, or any successor thereto.
“Securities Act”
means the
Securities Act of 1933, as amended from time to time, and the rules and
regulations promulgated thereunder from time to time in effect.
“Securities”
or “Security” has the meaning specified in Section 2(1) of the Securities
Act.
“Senior Debt”
means any Debt
of the Company that is not in any manner subordinated in right of payment to the
Notes or to any other Debt of the Company.
“Senior Financial Officer”
means the chief financial officer, principal accounting officer,
treasurer or comptroller of the Company.
“Series”
means any of the
Series J Notes or the Series K Notes issued hereunder.
“Series J Default Rate”
means
the lesser of (a) the maximum rate of interest allowed by applicable law
and (b) the greater of (i) 6.70% and (ii) 2.0% per annum over the rate
of interest publicly announced from time to time by JPMorgan Chase Bank, N.A.
(or its successors) in New York, New York as its “base” or “prime”
rate.
“Series J Notes”
is defined in
Section 1.
“Series K Default Rate”
means
the lesser of (a) the maximum rate of interest allowed by applicable law
and (b) the greater of (i) 7.04% and (ii) 2.0% per annum over the rate
of interest publicly announced from time to time by JPMorgan Chase Bank, N.A.
(or its successors) in New York, New York as its “base” or “prime”
rate.
“Series K Notes”
is defined
in
Section
1.
“Source”
is defined in
Section 6.2.
“Subsidiary”
means, as to any
Person, any Person in which such first Person or one or more of its Subsidiaries
or such first Person and one or more of its Subsidiaries owns sufficient equity
or voting interests to enable it or them (as a group) ordinarily, in the absence
of contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such second Person, and any partnership or joint venture
if more than a 50% interest in the profits or capital thereof is owned by such
first Person or one or more of its Subsidiaries or such first Person and one or
more of its Subsidiaries (unless such partnership or joint venture can and does
ordinarily take major business actions without the prior approval of such first
Person or one or more of its Subsidiaries). Unless the context
otherwise clearly requires, any reference to a “Subsidiary” is a reference to a
Subsidiary of the Company.
“surviving corporation”
is
defined in Section 10.5(a)(ii).
“
SVO”
means the Securities
Valuation Office of the NAIC or any successor to such Office.
“Swaps”
means, with respect to
any Person, payment obligations with respect to interest rate swaps, currency
swaps and similar obligations obligating such Person to make payments, whether
periodically or upon the happening of a contingency. For the purposes
of this Agreement, the amount of the obligation under any Swap shall be the
amount determined in respect thereof as of the end of the then most recently
ended fiscal quarter of such Person, based on the assumption that such Swap had
terminated at the end of such fiscal quarter, and in making such determination,
if any agreement relating to such Swap provides for the netting of amounts
payable by and to such Person thereunder or if any such agreement provides for
the simultaneous payment of amounts by and to such Person, then in each such
case, the amount of such obligation shall be the net amount so
determined.
“
USA Patriot Act”
means United
States Public Law 107-56, Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT)
Act of 2001, as amended from time to time, and the rules and regulations
promulgated thereunder from time to time in effect.
“Voting Stock”
means
Securities of any class or classes, the holders of which are ordinarily, in the
absence of contingencies, entitled to elect a majority of the corporate
directors (or Persons performing similar functions).
“Wholly-Owned Subsidiary”
means, at any time, any Subsidiary one hundred percent of all of the equity
interests (except directors’ qualifying shares) and voting interests of which
are owned by any one or more of the Company and the Company’s other Wholly-Owned
Subsidiaries at such time.
EXHIBIT
1-A
[FORM
OF SERIES J NOTE]
MEREDITH
CORPORATION
4.70%
Senior Note, Series J, due June 16, 2011
No.
RJ-[____] [Date]
$[____________] PPN: 589433
E*8
FOR VALUE
RECEIVED, the undersigned, Meredith Corporation (herein called the “C
ompany
”), a corporation
organized and existing under the laws of the State of Iowa, hereby promises to
pay to
[________________]
, or
registered assigns, the principal sum of
[________________] DOLLARS
($[_________])
on June 16, 2011, with interest (computed on the basis of
a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof
at the rate of 4.70% per annum from the date hereof, payable semiannually, on
the 16th day of June and December in each year, commencing with the June or
December next succeeding the date hereof, until the principal hereof shall have
become due and payable, and (b) to the extent permitted by law on any
overdue payment (including any overdue prepayment) of principal, any overdue
payment of interest and any overdue payment of any Make-Whole Amount (as defined
in the Note Purchase Agreement referred to below), payable semiannually as
aforesaid (or, at the option of the registered holder hereof, on demand), at a
rate per annum from time to time equal to the Series J Default Rate (as
defined in the Note Purchase Agreement).
Payments
of principal of, interest on and any Make-Whole Amount with respect to this Note
are to be made in lawful money of the United States of America at Des Moines,
Iowa or at such other place as the Company shall have designated by written
notice to the holder of this Note as provided in the Note Purchase Agreement
referred to below.
This Note
is one of a series of Series J Senior Notes (herein called the
“Notes”
) issued pursuant to a
Note Purchase Agreement dated as of June 16, 2008 (as from time to time amended,
the
“Note Purchase
Agreement”
), between the Company and the respective Purchasers named
therein and is entitled to the benefits thereof. Each holder of this
Note will be deemed, by its acceptance hereof, (i) to have agreed to the
confidentiality provisions set forth in Section 20 of the Note Purchase
Agreement and (ii) to have made the representation set forth in
Section 6.2
of
the Note Purchase Agreement.
This Note
is a registered Note and, as provided in the Note Purchase Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder’s attorney duly authorized in writing, a new Note
for a like principal amount will be issued to, and registered in the name of,
the transferee. Prior to due presentment for registration of
transfer, the Company may treat the person in whose name this Note is registered
as the owner hereof for the purpose of receiving payment and for all other
purposes, and the Company will not be affected by any notice to the
contrary.
This Note
is subject to optional prepayment, in whole or from time to time in part, at the
times and on the terms specified in the Note Purchase Agreement, but not
otherwise.
If an
Event of Default, as defined in the Note Purchase Agreement, occurs and is
continuing, the principal of this Note may be declared or otherwise become due
and payable in the manner, at the price (including any applicable Make-Whole
Amount) and with the effect provided in the Note Purchase
Agreement.
This
Note shall be construed and enforced in accordance with, and the rights of the
Company and the holder of this Note shall be governed by, the law of the State
of New York, excluding choice-of-law principles of the law of such State which
would permit application of the laws of the jurisdiction other than such
State.
|
|
By:________________________________
|
|
|
Title: Corporate
Controller
|
Exhibit
1-A-
A/72528156.5
EXHIBIT
1-B
[FORM
OF SERIES K NOTE]
MEREDITH
CORPORATION
5.04%
Senior Note, Series K, due June 16, 2012
No.
RK-[___] [Date]
$[____________] PPN: 589433
E@6
FOR VALUE
RECEIVED, the undersigned, Meredith Corporation (herein called the “
Company
”), a corporation
organized and existing under the laws of the tate of Iowa, hereby promises to
pay to
[________________]
, or
registered assigns, the principal sum of
[________________] DOLLARS
($[___________])
on June 16, 2012, with interest (computed on the basis
of a 360-day year of twelve 30-day months) (a) on the unpaid balance
thereof at the rate of 5.04% per annum from the date hereof, payable
semi-annually, on the 16th day of June and December in each year, commencing
with the June or December next succeeding the date hereof, until the principal
hereof shall have become due and payable, and (b) to the extent permitted
by law on any overdue payment (including any overdue prepayment) of principal,
any overdue payment of interest and any overdue payment of any Make-Whole Amount
(as defined in the Note Purchase Agreement referred to below), payable
semiannually as aforesaid (or, at the option of the registered holder hereof, on
demand), at a rate per annum from time to time equal to the Series K Default
Rate (as defined in the Note Purchase Agreement).
Payments
of principal of, interest on and any Make-Whole Amount with respect to this Note
are to be made in lawful money of the United States of America at Des Moines,
Iowa or at such other place as the Company shall have designated by written
notice to the holder of this Note as provided in the Note Purchase Agreement
referred to below.
This Note
is one of a series of Series K Senior Notes (herein called the
“Notes”
) issued pursuant to a
Note Purchase Agreement dated as of June 16, 2008 (as from time to time amended,
the
“Note Purchase
Agreement”
), between the Company and the respective Purchasers named
therein and is entitled to the benefits thereof. Each holder of this
Note will be deemed, by its acceptance hereof, (i) to have agreed to the
confidentiality provisions set forth in Section 20 of the Note Purchase
Agreement and (ii) to have made the representation set forth in
Section 6.2
of
the Note Purchase Agreement.
This Note
is a registered Note and, as provided in the Note Purchase Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder’s attorney duly authorized in writing, a new Note
for a like principal amount will be issued to, and registered in the name of,
the transferee. Prior to due presentment for registration of
transfer, the Company may treat the person in whose name this Note is registered
as the owner hereof for the purpose of receiving payment and for all other
purposes, and the Company will not be affected by any notice to the
contrary.
This Note
is subject to optional prepayment, in whole or from time to time in part, at the
times and on the terms specified in the Note Purchase Agreement, but not
otherwise.
If an
Event of Default, as defined in the Note Purchase Agreement, occurs and is
continuing, the principal of this Note may be declared or otherwise become due
and payable in the manner, at the price (including any applicable Make-Whole
Amount) and with the effect provided in the Note Purchase
Agreement.
This
Note shall be construed and enforced in accordance with, and the rights of the
Company and the holder of this Note shall be governed by, the law of the State
of New York, excluding choice-of-law principles of the law of such State which
would permit application of the laws of the jurisdiction other than such
State.
|
|
By:____________________________
|
|
|
Title: Corporate
Controller
|
EXECUTION
VERSION
Exhibit
4.5
MEREDITH CORPORATION
AMENDMENT
NO. 1 TO NOTE PURCHASE AGREEMENT
As of
July 13, 2009
To the
Holders of Notes
Named in
Annex 1
Hereto
Ladies
and Gentlemen:
Meredith
Corporation, an Iowa corporation (the “
Company
”) agrees with you as
follows:
|
1.
|
PRELIMINARY
STATEMENTS.
|
1.1.
Note
Issuances, etc.
Pursuant
to that certain Note Purchase Agreement dated as of June 16, 2008 (as in effect
immediately prior to giving effect to the Amendments (as defined below) provided
for hereby, the “
Existing
Note Purchase Agreement
”, and
as amended by this Amendment Agreement (as defined below) and as may be further
amended, restated or otherwise modified from time to time, the “
Note Purchase Agreement
”) the
Company issued and sold (a) Fifty Million Dollars ($50,000,000) in aggregate
principal amount of its 4.70% Senior Notes, Series J, due June 16, 2011 (as
amended, restated or otherwise modified from time to time as of the date hereof,
the “
Series J
Notes
”) and (b) Fifty Million
Dollars ($50,000,000) in aggregate principal amount of its 5.04% Senior Notes,
Series K, due June 16, 2012 (as amended, restated or otherwise modified from
time to time as of the date hereof, the “
Series K
Notes
”, and together with the
Series J Notes, collectively, the “
Notes
”). The
register for the registration and transfer of the Notes indicates that the
parties named in
Annex
1
(the “
Noteholders
”) to this
Amendment No. 1 to Note Purchase Agreement (the “
Amendment Agreement
”) are
currently the holders of the entire outstanding principal amount of the
Notes.
Capitalized
terms used herein and not otherwise defined herein have the meanings ascribed to
them in the Existing Note Purchase Agreement.
|
3.
|
AMENDMENTS
TO THE EXISTING NOTE PURCHASE
AGREEMENT.
|
Subject
to Section 5 of this Amendment Agreement, the Required Holders and the Company
hereby agree to each of the amendments to the Existing Note Purchase Agreement
as provided for by this Amendment Agreement and specified in
Exhibit
A
. Such amendments are referred to herein, collectively, as
the “
Amendments
”.
|
4.
|
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
|
To induce
you to enter into this Amendment Agreement and to consent to the Amendments, the
Company represents and warrants as follows:
4.1.
Reaffirmation
of Representations and Warranties.
All of
the representations and warranties contained in Section 5 of the Existing Note
Purchase Agreement, other than the representation and warranty set forth in
Section 5.12(b) of the Existing Note Purchase Agreement, are correct with the
same force and effect as if made by the Company on the date hereof (or, if any
representation or warranty is expressly stated to have been made as of a
specific date, as of such date); provided that for this purpose the Schedules
5.3, 5.4 and 5.5 shall be deemed to be in the respective forms attached
hereto.
4.2.
Organization,
Power and Authority, etc.
The
Company has all requisite corporate power and authority to enter into and
perform its obligations under this Amendment Agreement.
4.3.
Legal
Validity.
The
execution and delivery of this Amendment Agreement by the Company and compliance
by the Company with its obligations hereunder and under the Note Purchase
Agreement: (a) are within the corporate powers of the Company; and (b) do not
violate or result in any breach of, constitute a default under, or result in the
creation of any Lien upon any property of the Company under the provisions of:
(i) its organizational and governing documents; (ii) any order, judgment, decree
or ruling of any court, arbitrator or Governmental Authority applicable to
either the Company or its property; or (iii) any agreement or instrument to
which the Company is a party or by which the Company or any of its property may
be bound or any statute or other rule or regulation of any Governmental
Authority applicable to the Company or its property.
This
Amendment Agreement has been duly authorized by all necessary action on the part
of the Company, has been executed and delivered by a duly authorized officer of
the Company, and constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, reorganization,
arrangement, insolvency, moratorium, or other similar laws affecting the
enforceability of creditors’ rights generally and subject to general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
4.4.
No
Defaults.
As of the
date hereof and after giving effect to this Amendment Agreement, no event has
occurred and no condition exists that constitutes or would constitute a Default
or an Event of Default.
4.5.
Disclosure.
This
Amendment Agreement and the documents, certificates or other writings delivered
to the Noteholders by or on behalf of the Company in connection therewith, taken
as a whole, do not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not misleading
in light of the circumstances under which they were made. There is no
fact known to the Company that could reasonably be expected to have a Material
Adverse Effect that has not been set forth herein or in the other documents,
certificates and other writings delivered to the Noteholders by or on behalf of
the Company specifically for use in connection with the transactions
contemplated by this Amendment Agreement.
4.6.
Compliance
with ERISA.
The
present value of the aggregate benefit liabilities under each of the Plans
subject to Title IV of ERISA (other than Multiemployer Plans), determined as of
the end of such Plan’s most recently ended plan year on the basis of the
actuarial assumptions specified for funding purposes in such Plan’s most recent
actuarial valuation report, did not exceed the aggregate current value of the
assets of such Plan allocable to such benefit liabilities by more than
$1,000,000 in the case of any single Plan and by more than $1,000,000 in the
aggregate for all Plans. The term “benefit liabilities” has the
meaning specified in section 4001 of ERISA and the terms “current value” and
“present value” have the meaning specified in section 3 of ERISA.
|
5.
|
EFFECTIVENESS
OF AMENDMENTS.
|
The
Amendments shall become effective only upon the date of the satisfaction in full
of the following conditions precedent (the “
Effective Date
”):
5.1.
Execution
and Delivery of this Amendment Agreement.
The
Company and the Required Holders shall have executed and delivered this
Amendment Agreement.
5.2.
Representations
and Warranties True.
The
representations and warranties set forth in Section 4 shall be true and correct
on such date in all respects.
5.3.
Authorization.
The
Company shall have authorized, by all necessary action, the execution, delivery
and performance of all documents, agreements and certificates in connection with
this Amendment Agreement.
5.4.
2009
Note Purchase Agreement.
Each of
the Noteholders shall have received, on or before the date hereof, a fully
executed copy of the Note Purchase Agreement (the “
2009 Note Purchase
Agreement
”), dated as of July 13, 2009, by and among the Company and the
purchasers party thereto, in form and substance satisfactory to the Required
Holders, and the conditions to the effectiveness thereof, and all conditions to
the obligations of the purchasers party thereto to purchase the notes to be
issued thereunder shall have been satisfied or waived.
5.5.
Special
Counsel Fees.
The
Company shall have paid the reasonable fees and disbursements of Noteholders’
special counsel in accordance with Section 6 below.
5.6.
Proceedings
Satisfactory.
All
proceedings taken in connection with this Amendment Agreement and all documents
and papers relating thereto shall be satisfactory to the Noteholders signatory
hereto and their special counsel, and such Noteholders and their special counsel
shall have received copies of such documents and papers as they or their special
counsel may reasonably request in connection herewith.
Whether
or not the Amendments become effective, the Company will promptly (and in any
event within thirty (30) days of receiving any statement or invoice therefor)
pay all fees, expenses and costs relating to this Amendment Agreement,
including, but not limited to, the reasonable fees of the Noteholders’ special
counsel, Bingham McCutchen LLP, incurred in connection with the preparation,
negotiation and delivery of this Amendment Agreement and any other documents
related thereto. In addition, the Company will pay all such fees,
expenses and costs set forth in any subsequent statement within thirty (30) days
of its receipt thereof. Nothing in this Section shall limit the
Company’s obligations pursuant to Section 15.1 of the Existing Note Purchase
Agreement.
7.1.
Part
of Existing Note Purchase Agreement; Future References, etc.
This
Amendment Agreement shall be construed in connection with and as a part of the
Note Purchase Agreement and, except as expressly amended by this Amendment
Agreement, all terms, conditions and covenants contained in the Existing Note
Purchase Agreement are hereby ratified and shall be and remain in full force and
effect. Any and all notices, requests, certificates and other
instruments executed and delivered after the execution and delivery of this
Amendment Agreement may refer to the Note Purchase Agreement without making
specific reference to this Amendment Agreement, but nevertheless all such
references shall include this Amendment Agreement unless the context otherwise
requires.
7.2.
Counterparts,
Facsimiles
.
This
Amendment Agreement may be executed in any number of counterparts, each of which
shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies
hereof, each signed by less than all, but together signed by all, of the parties
hereto.
Delivery of
an executed signature page by facsimile or e-mail transmission shall be
effective as delivery of a manually signed counterpart of this Amendment
Agreement.
7.3.
Governing
Law
.
THIS
AMENDMENT AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE
RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK
EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD PERMIT
THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH
STATE.
[Remainder
of page intentionally left blank. Next page is signature
page.]
If you
are in agreement with the foregoing, please so indicate by signing the
acceptance below on the accompanying counterpart of this Amendment Agreement and
returning it to the Company, whereupon it will become a binding agreement among
you and the Company.
MEREDITH
CORPORATION
By:
/s/ Joseph H.
Ceryanec
Name: Joseph
H. Ceryanec
Title: Vice
President-Chief Financial Officer
Signature
Page to Amendment No. 1 to Note Purchase Agreement
The
foregoing Amendment Agreement is hereby accepted as of the date first above
written. By its execution below, each of the undersigned represents
that it is the owner of one or more of the Notes and is authorized to enter into
this Amendment Agreement in respect thereof.
METROPOLITAN
LIFE INSURANCE COMPANY
METLIFE
INVESTORS INSURANCE COMPANY,
By: Metropolitan
Life Insurance Company,
its Investment Manager
METLIFE
INSURANCE COMPANY OF CONNECTICUT
By: Metropolitan
Life Insurance Company,
its Investment Manager
By:
/s/ Judith A.
Gulotta
Name: Judith
A. Gulotta
Title: Managing
Director
(executed
by Metropolitan Life Insurance Company (i) as to itself
as a
Noteholder and (ii) as investment manager to MetLife Investors
Insurance
Company as a Noteholder and MetLife Insurance Company
of
Connecticut as a Noteholder)
Signature
Page to Amendment No. 1 to Note Purchase Agreement
EXHIBIT
A
AMENDMENTS
(a)
Section 8.3(h)
– Definition of Control
Event
. The definition of “Control Event” in Section 8.3(h) of
the Existing Note Purchase Agreement is hereby amended and restated in its
entirety to read as follows:
““
Control Event
”
means:
(i) the
execution by the Company or any of its Subsidiaries or Affiliates of any
agreement or letter of intent with respect to any proposed transaction or event
or series of transactions or events which, individually or in the aggregate, may
reasonably be expected to result in a Change in Control,
(ii) the
execution of any written agreement which, when fully performed by the parties
thereto, would result in a Change in Control, or
(iii) the
making of any written offer by any person (as such term is used in section 13(d)
and section 14(d)(2) of the Exchange Act as in effect on the date of the
Closing) or related persons constituting a group (as such term is used in Rule
13d-5 under the Exchange Act as in effect on the date of the Closing) to the
holders of the common stock of the Company, which offer, if accepted by the
requisite number of holders, would result in a Change in Control.”
(b)
Section 9
– Affirmative
Covenants
. Section 9 of the Existing Note Purchase Agreement
is hereby amended by adding thereto the following new Sections 9.8 and 9.9 to
read as follows:
“
Section
9.8
Guaranty by Subsidiaries;
Liens
.
(a) If
at any time, pursuant to the terms and conditions of any Major Credit Facility,
any existing or newly acquired or formed Subsidiary of the Company becomes
obligated as a guarantor or obligor under such Major Credit Facility, the
Company will, at its sole cost and expense, cause such Subsidiary to, prior to
or concurrently therewith, become a Guarantor in respect of this Agreement and
the Notes and deliver to each of the holders of the Notes the following
items:
(1) an
executed guaranty in form and substance reasonably satisfactory to the Required
Holders;
(2) such
documents and evidence with respect to such Subsidiary as the Required Holders
may reasonably request in order to establish the existence and good standing of
such Subsidiary and the authorization of the transactions contemplated by such
guaranty;
(3) an
opinion letter of counsel to such Subsidiary in form and substance reasonably
satisfactory to the Required Holders which shall include, without limitation,
opinions to the effect, subject to customary assumptions, qualifications and
exceptions, that (x) such guaranty has been duly authorized, executed and
delivered by such Subsidiary, (y) such guaranty constitutes the legal, valid and
binding contract and agreement of such Subsidiary, enforceable in accordance
with its terms (except as enforcement of such terms may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
similar laws affecting the enforcement of creditors’ rights generally and by
general equitable principles) and (z) the execution, delivery and performance by
such Subsidiary of such guaranty do not (A) violate any law, rule or regulation
applicable to such Subsidiary, or (B) (1) require the creation or imposition of
any Lien not permitted by Section 10.4 or (2) conflict with or result in any
breach of any of the provisions of or constitute a default under (I) the
provisions of the charter, bylaws, certificate of formation, operating agreement
or other constitutive documents of such Subsidiary, or (II) any material
agreement or other instrument to which such Subsidiary is a party or by which
such Subsidiary may be bound; and
(4) such
other certificates, resolutions, opinions, documents and instruments as may be
reasonably requested by the Required Holders to give effect to the undertaking
of such Subsidiary becoming a Guarantor.
(b) If
at any time, pursuant to the terms and conditions of any Major Credit Facility,
any Guarantor is discharged and released from its Guaranty of Debt under such
Major Credit Facility and (i) such Guarantor is not a co-obligor under such
Major Credit Facility and (ii) the Company will have delivered to each holder of
Notes an Officer’s Certificate certifying that (x) the condition specified in
clause (i) above has been satisfied and (y) immediately preceding the release of
such Guarantor from its Guaranty of the Debt under this Agreement and the Notes
and after giving effect thereto, no Default or Event of Default will have
existed or would exist, then, upon receipt by the holders of Notes of such
Officer’s Certificate, such Guarantor will be discharged and released,
automatically and without the need for any further action, from its obligations
under its Guaranty of the Debt under this Agreement and the Notes; provided
that, if in connection with any release of a Guarantor from its Guaranty of Debt
under such Major Credit Facility any fee or other consideration (excluding, for
the avoidance of doubt, any repayment of the principal or interest or payment of
any pre-existing prepayment or similar repayment fee under such Major Credit
Facility in connection with such release) is paid or given to any holder of Debt
under such Major Credit Facility in connection with such release, each holder of
a Note shall receive equivalent consideration on a pro rata basis (determined,
in respect of revolving credit facilities, based upon the commitment in effect
thereunder rather than amounts outstanding thereunder) in connection with such
Guarantor’s release from its Guaranty of the Debt under this Agreement and the
Notes. Without limiting the foregoing, for purposes of further
assurance, each of the holders of the Notes agrees to provide to the Company and
such Guarantor, if reasonably requested by the Company or such Guarantor and at
the Company’s expense, written evidence of such discharge and release signed by
such holder.
(c) If
at any time, pursuant to the terms and conditions of any Major Credit Facility,
the Company or any of its Subsidiaries are required to or elect to grant Liens
on any of their assets to secure the Debt evidenced by such Major Credit
Facility, the Company will, at its sole cost and expense, prior to or
concurrently therewith, grant, or cause such Subsidiary to grant, Liens on such
assets in favor of the holders of the Notes (or in favor of a collateral agent
reasonably acceptable to the Required Holders for the benefit of the holders of
the Notes) and deliver to each of the holders of the Notes the following
items:
(1) such
security documents as the Required Holders deem necessary or advisable to grant
to the holders of Notes (or such collateral agent for the benefit of the holders
of Notes) a perfected security interest having priority on a pari passu basis
with such Major Credit Facility to (or for the benefit of) the holders of
Notes;
(2) such
documents and evidence with respect to such Liens as the Required Holders may
reasonably request in order to establish the existence and priority of such
Liens and the authorization of the transactions contemplated by such security
documents;
(3) an
opinion letter of counsel to the Company or such Subsidiary in form and
substance reasonably satisfactory to the Required Holders which shall include,
without limitation, opinions to the effect, subject to customary assumptions,
qualifications and exceptions, that (w) such security documents have been duly
authorized, executed and delivered by the Company or such Subsidiary, (x) such
security documents constitute the legal, valid and binding contract and
agreement of the Company or such Subsidiary, enforceable in accordance with
their terms (except as enforcement of such terms may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and similar laws
affecting the enforcement of creditors’ rights generally and by general
equitable principles), (y) the execution, delivery and performance by the
Company or such Subsidiary of such security documents do not (A) violate any
law, rule or regulation applicable to the Company or such Subsidiary, or (B)(1)
require the creation or imposition of any Lien not permitted by Section 10.4 or
(2) conflict with or result in any breach of any of the provisions of or
constitute a default under (I) the provisions of the charter, bylaws,
certificate of formation, operating agreement or other constitutive documents of
the Company or such Subsidiary, or (II) any material agreement or other
instrument to which the Company or such Subsidiary is a party or by which such
Subsidiary may be bound, and (z) such security documents create a perfected
security interest in such assets; and
(4) such
other certificates, resolutions, opinions, documents and instruments as may be
reasonably requested by the Required Holders to give effect to the granting of
such Liens by such Subsidiary.
(d) If
at any time, pursuant to the terms and conditions of any Major Credit Facility,
Liens granted by the Company or any Subsidiary are released under such Major
Credit Facility and the Company will have delivered to each holder of Notes an
Officer’s Certificate certifying that immediately preceding the release of such
Liens and after giving effect thereto, no Default or Event of Default will have
existed or would exist, then, upon receipt by the holders of Notes of such
Officer’s Certificate, such Liens in favor of the holders of Notes will be
discharged and released, automatically and without the need for any further
action; provided that, if in connection with any release of such Liens under
such Major Credit Facility any fee or other consideration (excluding, for the
avoidance of doubt, any repayment of the principal or interest or payment of any
pre-existing prepayment or similar repayment fee under such Major Credit
Facility in connection with such release) is paid or given to any holder of Debt
under such Major Credit Facility in connection with such release, each holder of
a Note shall receive equivalent consideration on a pro rata basis (determined,
in respect of revolving credit facilities, based upon the commitment in effect
thereunder rather than amounts outstanding thereunder) in connection with such
release of Liens securing the Debt evidenced by this Agreement and the
Notes. Without limiting the foregoing, for purposes of further
assurance, each of the holders of the Notes agrees to provide to the Company, if
reasonably requested by the Company and at the Company’s expense, written
evidence of such discharge and release signed by such holder (or the collateral
agent appointed by the holders of Notes).
Section
9.9
Intercreditor
Agreement
.
If at any
time, pursuant to the terms and conditions of any Major Credit Facility, the
Company or any of its Subsidiaries are required to grant Liens on any of their
assets to secure the Debt evidenced by such Major Credit Facility, and the
Company or such Subsidiaries are required to grant Liens to secure the Debt
evidenced by this Agreement and the Notes, then the Company will, concurrently
with the execution thereof or the granting of such Guaranties and/or Liens,
cause the lenders under such Major Credit Facility to enter into, and the
holders of Notes hereby agree to enter into, an intercreditor agreement in form
and substance (including, without limitation, as to the sharing of recoveries
and set offs) reasonably satisfactory to the Required Holders (the “
Intercreditor Agreement
”) with
the holders of Notes, or enter into a joinder agreement to such Intercreditor
Agreement in form and substance reasonably satisfactory to the Required
Holders. Within ten (10) Business Days following the execution of any
such Intercreditor Agreement (or any joinder thereto), the Company will deliver
an executed copy thereof to each holder of Notes.”
(c)
Section 10.4 –
Liens
. Section 10.4 of the Existing Note Purchase Agreement is
hereby amended and restated in its entirety to read as follows:
“
Section
10.4
Liens
.
The
Company will not, and will not permit any of its Subsidiaries to, directly or
indirectly create, incur, assume or permit to exist (upon the happening of a
contingency or otherwise) any Lien on or with respect to any property or asset
(including, without limitation, any document or instrument in respect of goods
or accounts receivable) of the Company or any such Subsidiary, whether now owned
or held or hereafter acquired, or any income or profits therefrom, or assign or
otherwise convey any right to receive income or profits (unless it makes, or
causes to be made, effective provision whereby the Notes will be equally and
ratably secured with any and all other obligations thereby secured, such
security to be pursuant to an agreement reasonably satisfactory to the Required
Holders and, in any such case, (x) the Notes shall have the benefit, to the
fullest extent that, and with such priority as, the holders of the Notes may be
entitled under applicable law, of an equitable Lien on such property and (y) in
respect of any Lien securing any Major Credit Facility, the Company or such
Subsidiary has complied with Sections 9.8 and 9.9), except:
(a) Liens
for taxes, assessments or other governmental charges which are not yet due and
payable or the payment of which is not at the time required by Section
9.4;
(b) statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen
and other similar Liens, in each case, incurred in the ordinary course of
business for sums not yet due and payable or the payment of which is not at the
time required by Section 9.1 or Section 9.4;
(c) Liens
(other than any Lien imposed by ERISA) incurred or deposits made in the ordinary
course of business (i) in connection with workers’ compensation, unemployment
insurance and other types of social security or retirement benefits, or (ii) to
secure (or to obtain letters of credit that secure) the performance of tenders,
statutory obligations, surety bonds, appeal bonds (not in excess of
$15,000,000), bids, leases (other than Capital Leases), performance bonds,
purchase, construction or sales contracts and other similar obligations, in each
case not incurred or made in connection with the borrowing of money, the
obtaining of advances or credit or the payment of the deferred purchase price of
property;
(d) any
attachment or judgment Lien, unless (i) the judgment it secures shall not,
within 60 days after the entry thereof, have been discharged or execution
thereof stayed pending appeal, or shall not have been discharged within 60 days
after the expiration of any such stay or (ii) the uninsured portion of the
judgment such Lien secures, including any portion for which the insurer has not
acknowledged responsibility, exceeds $15,000,000;
(e) leases
or subleases granted to others, easements, rights-of-way, restrictions and other
similar charges or encumbrances, in each case incidental to, and not interfering
with, the ordinary conduct of the business of the Company or any of its
Subsidiaries,
provided
that such Liens do not, in the aggregate, materially detract from the value of
such property;
(f) Liens
on property or assets of the Company or any of its Subsidiaries securing Debt
owing to the Company or to any of its Wholly-Owned Subsidiaries;
(g) Liens
on all existing or hereafter acquired or arising Receivables of the Company or
any Subsidiary, the Related Security with respect thereto, the collections and
proceeds of such Receivables and Related Security, all lockboxes, lockbox
accounts, collection accounts or other deposit accounts into which such
collections are deposited and all other rights and payments relating to such
Receivables (collectively, “
Receivables Assets
”), which
are transferred to the Company, a Subsidiary or a Receivables Purchaser in
connection with Receivables Facility Attributed Indebtedness;
provided
such Receivables
Facility Attributed Indebtedness is permitted under Section
10.3(b);
(h) any
Lien created to secure all or any part of the purchase price, or to secure Debt
incurred or assumed to pay all or any part of the purchase price or cost of
construction, of property (or any improvement thereon) acquired or constructed
by the Company or a Subsidiary after the date of the Closing,
provided
that:
(1) any
such Lien shall extend solely to the item or items of such property (or
improvement thereon) so acquired or constructed and, if required by the terms of
the instrument originally creating such Lien, other property (or improvement
thereon) which is an improvement to or is acquired for specific use in
connection with such acquired or constructed property (or improvement thereon)
or which is real property being improved by such acquired or constructed
property (or improvement thereon),
(2) the
principal amount of the Debt secured by any such Lien shall at no time exceed an
amount equal to the lesser of (i) the cost to the Company or such Subsidiary of
the property (or improvement thereon) so acquired or constructed and (ii) the
fair market value (as determined in good faith by the board of directors of the
Company) of such property (or improvement thereon) at the time of such
acquisition or construction, and
(3) any
such Lien shall be created contemporaneously with, or within 180 days after, the
acquisition or construction of such property;
(i) any
Lien existing on property of a Person immediately prior to its being
consolidated with or merged into the Company or a Subsidiary or its becoming a
Subsidiary, or any Lien existing on any property acquired by the Company or any
Subsidiary at the time such property is so acquired (whether or not the Debt
secured thereby shall have been assumed),
provided
that (i) no such
Lien shall have been created or assumed in contemplation of such consolidation
or merger or such Person’s becoming a Subsidiary or such acquisition of
property, and (ii) each such Lien shall extend solely to the item or items of
property so acquired and, if required by the terms of the instrument originally
creating such Lien, other property which is an improvement to or is acquired for
specific use in connection with such acquired property;
(j) any
Lien renewing, extending or refunding any Lien permitted by paragraphs (h) or
(i) of this Section 10.4,
provided
that (i) the
principal amount of Debt secured by such Lien immediately prior to such
extension, renewal or refunding is not increased or the maturity thereof
reduced, (ii) such Lien is not extended to any other property, and (iii)
immediately after such extension, renewal or refunding no Default or Event of
Default would exist;
(k) the
security interest contemplated by Section 18.3 of the Trademark License
Agreement among Meredith Corporation, as Licensor, Better Homes & Garden
Real Estate Licensee LLC, as the successor to Project Five TM LLC, as Licensee,
and Realogy Corporation, as Guarantor dated as of October 3, 2007, as amended
(so long as any such amendment does not provide for any change to the
obligations secured thereby as in effect on the date of Closing);
and
(l) other
Liens not otherwise permitted by subparagraphs (a) through (k) securing Debt,
provided
that (x) all
Debt secured by such Liens shall have been incurred within the applicable
limitations of Section 10.3, including, without limitation, that after giving
effect thereto Priority Debt will not exceed 25% of Maximum Permitted Total Debt
and (y) no such Liens under this clause (l) shall secure the obligations under
any Major Credit Facility.”
(d)
Section 10.5 – Mergers,
Consolidations and Sales of Assets
. Section 10.5(b) of the
Existing Note Purchase Agreement is hereby amended by deleting “Section
10.5(a)(iii)” appearing in the first paragraph thereof and substituting “Section
10.5(a)(3)” therefor.
(e)
Section 11 – Events of
Default
. Section 11 of the Existing Note Purchase Agreement is
hereby amended by replacing the period at the end of paragraph (j) with “; or”
and by adding a new paragraph (k) to read as follows:
“(k) (i)
a default shall occur under any Guaranty by a Subsidiary of the Debt under this
Agreement and the Notes granted pursuant to Section 9.8 and such default shall
continue beyond the period of grace, if any, allowed with respect thereto or
(ii) except as expressly permitted under Section 9.8(b), such Guaranty shall
cease to be in full force and effect for any reason whatsoever with respect to
one or more Guarantors, including, without limitation, a determination by any
Governmental Authority or court that such agreement is invalid, void or
unenforceable with respect to one or more Guarantors or any Guarantor shall
contest or deny in writing the validity or enforceability of any of its
obligations under any such Guaranty.”
(f)
Section 17.1 – Amendment and Waiver
Requirements
. Section 17.1 of the Existing Note Purchase
Agreement is hereby amended and restated in its entirety to read as
follows:
“
Section 17.1 –
Requirements
.
This
Agreement and the Notes may be amended, and the observance of any term hereof or
of the Notes may be waived (either retroactively or prospectively), with (and
only with) the written consent of the Company and the Required Holders, except
that (a) no amendment or waiver of any of the provisions of Section 1, 2, 3, 4,
5, 6 or 21 hereof, or any defined term (as it is used therein), will be
effective as to any Purchaser unless consented to by such Purchaser in writing,
and (b) no such amendment or waiver may, without the written consent of the
holder of each Note at the time outstanding affected thereby, (i) subject to the
provisions of Section 12 relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or reduce the rate
or change the time of payment or method of computation of interest or of the
Make-Whole Amount on, any Series of the Notes, (ii) change the percentage of the
principal amount of the Notes the holders of which are required to consent to
any such amendment or waiver, (iii) amend any of Sections 8, 11(a), 11(b), 12,
17 or 20, or (iv) release any Guarantor from its Guaranty of the Debt under this
Agreement and the Notes (other than in compliance with Section
9.8(b)).”
(g)
Section 22.3 – Accounting
Terms
. Section 22.3 of the Existing Note Purchase Agreement is
hereby amended by inserting the following sentence at the end
thereof:
“For
purposes of determining compliance with the financial covenants contained in
this Agreement, any election by the Company or its Subsidiaries to measure an
item of its Debt using fair value (as may be permitted by Statement of Financial
Accounting Standards No. 159 or any similar accounting standard) shall be
disregarded and such determination shall be made as if such election had not
been made.”
(h)
Schedule B
–
Definitions of Guaranty,
Intercreditor Agreement and Major Credit Facility
. The
following definitions are hereby added to Schedule B of the Existing Note
Purchase Agreement in their proper alphabetical order to read as
follows:
“
“Guarantor”
means each
Subsidiary required to guaranty the Notes pursuant to Section 9.8.”
“
“Intercreditor Agreement”
is
defined in Section 9.9.”
“
“Major Credit Facility”
means
(a) the Credit Agreement, dated as of April 5, 2002, providing for revolving
loans in an aggregate principal amount of up to $150,000,000, among the Company,
the lenders listed therein, Bank of America, N.A., as Administrative Agent and
Issuing Lender and the other agents listed therein, and (b) any other facility
(other than any Receivables Program Documents or Receivables Purchase
Agreements) providing credit availability in excess of $75,000,000 to any one or
more of the Company and its Subsidiaries, in each case under clauses (a) and
(b), as such agreement or facility may be amended, restated, supplemented or
otherwise modified and together with increases, refinancings and replacements
thereof.”
(i)
Schedule B
–
Definitions of Consolidated Net
Income, Priority Debt and “surviving corporation”
. The
definitions of “Consolidated Net Income,” “Priority Debt” and “surviving
corporation” appearing in Schedule B of the Existing Note Purchase Agreement are
hereby amended and restated to read as follows:
“
“Consolidated Net Income”
for
any period means the gross revenues of the Company and its Subsidiaries for such
period less all expenses and other proper charges (including taxes on income),
determined on a consolidated basis after eliminating earnings or losses
attributable to outstanding Minority Interests, but excluding in any
event:
(a) any
gains or losses on the sale or other disposition of investments or fixed or
capital assets, and any taxes on such excluded gains and any tax deductions or
credits on account of any such excluded losses;
(b) the
proceeds of any life insurance policy;
(c) net
earnings and losses of any Subsidiary accrued prior to the date it became a
Subsidiary;
(d) net
earnings and losses of any business entity (other than a Subsidiary),
substantially all the assets of which have been acquired in any manner by the
Company or any Subsidiary, realized by such business entity prior to the date of
such acquisition;
(e) net
earnings and losses of any business entity (other than a Subsidiary) with which
the Company or a Subsidiary shall have consolidated or which shall have merged
into or with the Company or a Subsidiary prior to the date of such consolidation
or merger;
(f) net
earnings of any business entity (other than a Subsidiary) in which the Company
or any Subsidiary has an ownership interest unless such net earnings shall have
actually been received by the Company or such Subsidiary in the form of cash
distributions;
(g) any
portion of the net earnings of any Subsidiary which for any reason is
unavailable for payment of dividends to the Company or any other
Subsidiary;
(h) (i)
earnings resulting from any reappraisal, revaluation or write-up of assets or
losses resulting from writedowns of goodwill or other intangibles under
Statement of Financial Accounting Standards No. 142, Statement of Financial
Accounting Standards No. 144, or any successor statement or principle, (ii)
losses resulting from any exit or disposal activities under Statement of
Financial Accounting Standards No. 146 or any successor statement or principle
or (iii) non-cash expenses resulting from equity-based
compensation;
(i) any
deferred or other credit representing any excess of the equity in any Subsidiary
at the date of acquisition thereof over the amount invested in such
Subsidiary;
(j) any
gain arising from the acquisition of any Securities of the Company or any
Subsidiary;
(k) any
reversal of any contingency reserve, except to the extent that provision for
such contingency reserve shall have been made from income arising during such
period; and
(l) any
other extraordinary or nonrecurring gain or loss.
For
purposes of any determination of Consolidated Net Income pursuant to this
Agreement and notwithstanding clause (d) of this definition, the Company may
include, on a
pro forma
basis, “
net income
”
(calculated in a manner consistent with the computation of Consolidated Net
Income herein) earned by any business entity acquired (or whose assets have been
acquired) by the Company or any Subsidiary during the four fiscal quarters
immediately preceding any determination of Consolidated Net Income,
provided
that there shall be
a reasonable basis for the computation of such “
net income
” and, concurrently
with such determination, the Company shall have furnished to the holders of the
Notes audited financial statements or other financial information with respect
to such business entity (or such acquired assets) demonstrating to the
reasonable satisfaction of the Required Holders the basis for such
computations.”
“
“Priority Debt”
means, without
duplication, the sum of (i) all Debt of the Company secured by Liens permitted
by Sections 10.4(h), (i), (j), (k) and (l) plus (ii) all Debt of Subsidiaries
(excluding Debt held by the Company or a Wholly-Owned Subsidiary), plus (iii)
all Attributable Debt of the Company and its Subsidiaries, plus (iv) all
Receivables Facility Attributed Indebtedness of the Company and its
Subsidiaries.”
“
“surviving corporation”
is
defined in Section 10.5(a)(2).”
(j)
Schedule B
–
Definitions of Debt, Governmental
Authority and Guaranty
. The definitions of “Debt,”
“Governmental Authority” and “Guaranty” appearing in Schedule B of the Existing
Note Purchase Agreement are hereby amended by deleting the lettering of the
subparagraphs in each such definition and substituting therefore in each
lettering in alphabetical order beginning, in each such definition, with the
letter “(a).”
Exhibit
10.15
EMPLOYMENT
AGREEMENT
AGREEMENT
entered into as of January 30, 2006, by and between MEREDITH CORPORATION, an
Iowa corporation (the "Company"), and STEPHEN M. LACY ("Lacy"), to become
effective July 1, 2006.
WITNESSETH:
WHEREAS,
Lacy has been employed by the Company as its President; and
WHEREAS,
the Company wishes to continue to employ Lacy pursuant to the terms and
conditions hereof, and in order to induce Lacy to enter into this agreement (the
"Agreement") and to secure the benefits to accrue from his performance hereunder
is willing to undertake the obligations assigned to it herein; and
WHEREAS,
Lacy is willing to continue his employment with the Company under the terms
hereof and to enter into the Agreement;
NOW
THEREFORE, in consideration of the premises and mutual covenants contained
herein and for other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1.
Position; Duties;
Responsibilities
.
1.1 Lacy
shall initially serve as President and Chief Executive Officer of the Company
effective July 1, 2006. Lacy shall at all times report to and be
subject to the supervision, control and direction of the Board of Directors of
the Company. Lacy shall at all times be the most senior executive
officer of the Company. Subject only to Lacy’s duty to report to the
Board, Lacy’s responsibilities and authorities hereunder shall include day to
day and strategic authority over the Company and its affiliates, P&L
authority over all operations of the Company and its affiliates, and the duty
and authority to hire, make employment decisions, and terminate all subordinates
employed by the Company or its affiliates and Lacy shall report directly and
exclusively to the Board, and all other officers, employees, and consultants of
the Company shall (except to the extent otherwise prescribed by law, regulation,
or principles of good corporate governance) report directly (or indirectly
through subordinates) to Lacy. Lacy shall have such other
responsibilities and authorities consistent with the status, titles and
reporting requirements set forth herein as are appropriate to said positions,
subject to change (other than diminution in position, authority, duties or
responsibilities) from time to time by the Board of Directors of the
Company.
1.2 During
the course of his employment, Lacy agrees to devote his full time and attention
and give his best efforts and skills to furthering the business and interests of
the Company, which, subject to the mutual agreement of Lacy and the Board of
Directors, which shall not be unreasonably withheld, may include Lacy
volunteering his time and efforts on behalf of charitable, civic, professional
organizations and boards of other corporations.
2.
Term
.
The term
of employment under this Agreement shall commence as of July 1, 2006, and
shall continue through June 30, 2009, unless sooner terminated in
accordance with this Agreement, and thereafter as herein
provided. Lacy's term of employment shall automatically renew for
subsequent one (1) year terms, the first of which would begin on July 1,
2009, subject to the terms of this Agreement unless either party gives written
notice six (6) months or more prior to the expiration of the then existing term
of its decision not to renew (the "Term").
In the
event this Agreement expires at the end of the Term, as extended if applicable,
after the Company has delivered a Non-Renewal Notice to Lacy, such termination
of Lacy’s employment with the Company will be treated for all purposes hereunder
as a termination of employment by the Company Without Cause pursuant to Section
9.4.
3.
Base
Salary
.
3.1 The
Company shall pay Lacy a base salary during the Term of this Agreement at the
minimum annual rate of Eight Hundred Ten Thousand Dollars ($810.000) ("Base
Salary"), payable in accordance with the standard payroll practices of the
Company.
3.2 It
is understood that the Base Salary is to be Lacy's minimum annual compensation
during the Term. The Base Salary may increase at the discretion of
the Compensation Committee of the Company's Board of Directors ("Compensation
Committee"). Base Salary shall include all such increased amounts,
and, if increased, Base Salary shall not thereafter be decreased.
4.
Long-Term Incentive
Plans
.
During
the Term of this Agreement, Lacy shall be eligible to participate in all
long-term incentive plans, including, without limitation, stock incentive plans
adopted by the Company and in effect (collectively, "Long-Term Incentive
Plans"), at levels of awards to be granted by the Compensation Committee
commensurate with the level of Lacy's responsibilities and performance
thereof. At its regular August 2006 meeting the Compensation
Committee shall approve an award to Lacy of One Hundred Six Thousand (106,000)
stock options with a three (3) year cliff vesting schedule and a strike price
equal to the fair market value of Meredith common stock on the date of such
award.
5.
Bonus
.
5.1 During
the Term of this Agreement, Lacy shall be eligible to participate in the
Meredith Management Incentive Plan (or any successor or replacement annual
incentive plan of the Company) ("MIP"), for such periods as it continues in
effect, subject to the terms of the MIP, and to the discretion vested in the
Compensation Committee under the MIP; provided, however, that the percentage of
Base Salary payable as a target bonus under the MIP shall not be less than one
hundred percent (100%) (actual Company financial results may result in an actual
bonus paid to Lacy equal to less than or more than one hundred percent (100%) of
Base Salary).
5.2 All
bonuses pursuant to this Section 5 shall be paid to Lacy in conformance with the
Company's normal bonus pay policies following the end of the respective fiscal
year. For the purpose of this Section 5, bonuses paid with respect to
the fiscal year shall include payments made outside of the fiscal year but for
such fiscal year and shall exclude payments made in the fiscal year that are for
another fiscal year.
6.
Short-Term
Disability
.
During
any period of short-term disability, the Company will continue to pay to Lacy
the Base Salary throughout the period of short-term disability, but in no event
beyond the end of Term. In addition, Lacy will continue to receive
all rights and benefits under the benefit plans and programs of the Company in
which Lacy is a participant as determined in accordance with the terms of such
plans and programs, and Lacy shall be eligible to receive the benefit of his
target MIP bonus for the initial year in which the short-term disability occurs
without reduction for the period of short-term disability. In the
event of Lacy's death during a period of short-term disability, the provisions
of Section 9.1 shall apply. For the purposes of this Agreement,
short-term disability shall be defined as the incapacitation of Lacy by reason
of sickness, accident or other physical or mental disability which continues for
a period not to exceed the fifth month anniversary of the date of the cause or
onset of such incapacitation. All benefits provided under this
Section 6 shall be in replacement of and not in addition to benefits payable
under the Company’s short-term and long-term disability plan(s), except to the
extent such disability plan(s) provide greater benefits than the disability
benefits provided under this Agreement, in which case the applicable disability
plan(s) would supersede the applicable provisions of this
Agreement. In the event Lacy is determined to be permanently disabled
(as determined under Section 9.2), the provisions of Section 9.2 shall
apply.
7.
Employee Benefit
Plans
.
7.1 During
the Term of this Agreement and subject to all eligibility requirements, and to
the extent permitted by law, Lacy will have the opportunity to participate in
all employee benefit plans and programs generally available to the Company's
employees in accordance with the provisions thereof as in effect from time to
time, including, without limitation, medical coverage, group life insurance,
holidays and vacations, Meredith Savings and Investment Plan (401k) and the
Meredith Employees' Retirement Income Plan, but not including the Company's
short-term and long-term disability plans, except to the extent that such
disability plans provide greater benefits than the disability benefits provided
under this Agreement, in which case the applicable disability plan would
supersede the applicable provisions of this Agreement.
7.2 In
addition to benefits described in Section 7.1 during the Term of this Agreement,
Lacy shall also receive or participate in, to the extent permitted by law, the
various perquisites and plans generally available to officers of the Company in
accordance with the provisions thereof as in effect from time to time including,
without limitation, the following perquisites to the extent the Company
continues to offer them: an automobile or automobile allowance, country club
dues, dining club dues, tax and estate planning, supplemental medical plan and
executive life insurance (if insurable). All such reimbursements or in-kind
benefits shall be payable by the Company on or before the last day of Lacy’s
taxable year following the taxable year in which the expense was incurred. The
expenses paid or in-kind benefits provided by the Company during any taxable
year of Lacy will not affect the expenses paid or in-kind benefits provided by
the Company in another taxable year. This right to reimbursement or in-kind
benefits is not subject to liquidation or exchange for another benefit. In
addition, Lacy shall participate in the Meredith Replacement Benefit Plan and
the Meredith Supplemental Benefit Plan.
8.
Expense
Reimbursements
.
During
Lacy's employment with the Company, Lacy will be entitled to receive
reimbursement by the Company for all reasonable, out-of-pocket expenses incurred
by him (in accordance with policies and procedures established by the Company),
in connection with his performing services hereunder, provided Lacy properly
accounts therefor. All such reimbursements shall be payable by the Company on or
before the last day of Lacy’s taxable year following the taxable year in which
the expense was incurred. The expenses paid by the Company during any taxable
year of Lacy will not affect the expenses paid by the Company in another taxable
year. This right to reimbursement is not subject to liquidation or
exchange for another benefit.
9.
Consequences of Termination
of Employment
.
9.1
Death
. In the event
of the death of Lacy during the Term of this Agreement or during the period when
payments are being made pursuant to Sections 6 or 9.2, this Agreement shall
terminate and all obligations to Lacy shall cease as of the date of death except
that, (a) the Company will pay to the legal representative of his estate in
substantially equal installments the Base Salary until the end of the month of
the first anniversary of Lacy's death with each installment treated as a
separate “payment” for purposes of Section 409A of the Code, such that any
payment that would otherwise be payable within 2 ½ months after Lacy’s taxable
year in which his employment with the Company is terminated or, if later, within
2 ½ months after the end of the Company’s taxable year in which Lacy’s
employment with the Company is terminated (the “Short Term Deferral Period”) is
exempt from Section 409A of the Code, and (b) all rights and benefits of Lacy
under the benefit plans and programs of the Company in which Lacy is a
participant, will be provided as determined in accordance with the terms and
provisions of such plans and programs. Any bonus (or amounts in lieu thereof)
pursuant to Section 5, payable for the fiscal year in which Lacy's death occurs,
shall be determined by the Compensation Committee at its meeting following the
end of such fiscal year pro rata to the date of death and promptly paid to
Lacy's estate. All awards of restricted stock, stock options and any other
benefits under the Long-Term Incentive Plans shall be handled in accordance with
the terms of the relevant plan and agreements entered into between Lacy and the
Company with respect to such awards.
9.2
Disability
. If Lacy
shall become permanently incapacitated by reasons of sickness, accident or other
physical or mental disability, as such incapacitation is certified by a
physician chosen by the Company and reasonably acceptable to Lacy (if he is then
able to exercise sound judgment), and shall therefore be unable to perform any
substantial gainful activity, then the employment of Lacy hereunder and this
Agreement may be terminated by Lacy or the Company upon thirty (30) days'
written notice to the other party following such certification. Should Lacy not
acquiesce (or should he be unable to acquiesce) in the selection of the
certifying doctor, a doctor chosen by Lacy (or if he is not then able to
exercise sound judgment, by his spouse or personal representative) and
reasonably acceptable to the Company shall be required to concur in the medical
determination of incapacitation, failing which the two doctors shall designate a
third doctor whose decision shall be determinative as of the end of the calendar
month in which such concurrence or third-doctor decision, as the case may be, is
made. After the final certification is made and the 30-day written notice is
provided, the Company shall pay to Lacy, at such times as Base Salary provided
for in Section 3 of this Agreement would normally be paid, 100% of Base Salary
for the first twelve months following such termination, 75% of Base Salary for
the next twelve-month period and 50% of Base Salary for the remaining period of
what would have constituted the current Term of employment but for termination
by reason of disability with each installment treated as a separate “payment”
for purposes of Section 409A of the Code, such that any payment that would
otherwise be payable during the Short Term Deferral Period is exempt from
Section 409A of the Code. Following the termination pursuant to this Section
9.2, the Company shall pay or provide to Lacy such other rights and benefits of
participation under the employee benefit plans and programs of the Company to
the extent that such continued participation is not otherwise prohibited by
applicable law or by the express terms and provisions of such plans and
programs. Furthermore, nothing contained in this Section 9.2 shall
preclude Lacy from receiving the benefit of his target MIP bonus for the initial
year in which a short-term disability occurs pursuant to the provisions of
Section 6. All benefits provided under this Section 9.2 shall be in
replacement of and not in addition to benefits payable under the Company's
short-term and long-term disability plans, except to the extent such disability
plans provide greater benefits than the disability benefits provided under this
Agreement, in which case the applicable disability plan(s) would supersede the
applicable provisions of this Agreement. All awards of restricted
stock, stock options and any other benefits under the Long-Term Incentive Plans
shall be handled in accordance with the terms of the relevant plan and
agreements entered into between Lacy and the Company with respect to such
awards.
9.3
Due
Cause
. The Company may terminate Lacy's employment, remove him
as an officer and director of the Company and terminate this Agreement at any
time for Due Cause. In the event of such termination for Due Cause,
Lacy shall continue to receive Base Salary payments provided for in this
Agreement only through the date of such termination for Due
Cause. Any bonus (or amounts in lieu thereof) pursuant to Section 5,
payable for the fiscal year in which a Due Cause termination occurs, shall be
determined by the Compensation Committee at its meeting following the end of
such fiscal year pro rata to the date of termination and promptly paid to Lacy,
and Lacy shall be entitled to no further benefits under this Agreement, except
that any rights and benefits Lacy may have under the employee benefit plans and
programs of the Company, in which Lacy is a participant, shall be determined in
accordance with the terms and provisions of such plans and
programs. Lacy understands and agrees that in the event of the
termination of employment, removal as an officer and director and termination of
this Agreement pursuant to this Section 9.3: (a) All awards of restricted
stock, stock options and any other benefits under the Long-Term Incentive Plans
shall be handled in accordance with the terms of the relevant plan and
agreements entered into between Lacy and the Company with respect to such awards
and (b) except as otherwise provided in this Section 9.3, the Company shall have
no further obligation to pay any bonus to Lacy under the terms of the MIP or
this Agreement, but that the obligations of Lacy under Section 10 shall remain
in full force and effect. The term “Due Cause” shall mean (i) the
willful and continued failure of Lacy to attempt to perform substantially his
duties with the Company (other than any such failure resulting from Disability),
after a demand for substantial performance is delivered to Lacy by the Board,
which specifically identifies the manner in which Lacy has not attempted to
substantially perform his duties, or (ii) the engaging by Lacy in willful
misconduct which is materially injurious to the Company, monetarily or
otherwise. For purposes of this definition, no act, or failure to
act, on the part of Lacy shall be considered “willful” unless it is done, or
omitted to be done, by Lacy in bad faith and without reasonable belief that
Lacy’s action or omission was in the best interests of the
Company. Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the Board or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by Lacy in good faith and in the best interests of the
Company. Notwithstanding the foregoing, Lacy shall not be deemed to
have been terminated for Due Cause unless and until there have been delivered to
him a copy of a resolution duly adopted by the affirmative vote of at least ¾ of
the Board (excluding Lacy) at a meeting of the Board called and held for such
purpose (after reasonable notice is provided to Lacy and he is given an
opportunity, together with counsel, to be heard before the Board) finding that
in the good faith opinion of the Board Lacy was guilty of conduct set forth
herein and specifying the particulars thereof.
9.4
Without Cause
. The
other provisions of this Agreement notwithstanding, the Company may terminate
Lacy's employment, remove him as an officer and director and terminate this
Agreement at any time for whatever reason it deems appropriate, with or without
cause and with or without prior notice. In the event of such a termination of
Lacy's employment and this Agreement, Lacy shall have no further obligations of
any kind under or arising out of the Agreement (except for the obligations of
Lacy under Section 10) and the Company shall be obligated only to promptly pay
Lacy within the Short Term Deferral Period the following in a lump sum payment:
(a) 200% of Base Salary through the end of the then current Term of this
Agreement (the “Remaining Term”) as provided for under Section 2 of this
Agreement, but no less than a total of twenty-four months of 200% of Base
Salary; and (b) any other amounts due and owing not then paid; provided,
however, that in the event that as a result of such termination of employment
Lacy would otherwise be entitled to a severance payment (a “Change of Control
Severance Payment”) under Section 4 of the Amended and Restated Severance
Agreement dated as of the
30th
day of
December
, 200
8
, between Lacy and
the Company, (the “Severance Agreement”), Lacy shall be entitled to the amounts
described in clause (b) above and the greater of: (i) the cash severance
benefits described in clause (a) of this sentence and (ii) the cash severance
benefits described in Section 4(a) of the Severance Agreement, but in no event
to both payments.
After the
date of termination under this Section 9.4 or Section 9.6, Lacy shall not be
treated as an employee for purposes of the Company's employee benefit plans or
programs even though he may continue to receive payments as provided in this
Section 9.4, except: that Lacy and his eligible dependents shall continue,
to the extent permitted by law, to be covered by health and welfare insurance
plans or programs in which Lacy and his eligible dependents participate
immediately prior to Lacy's termination of employment for the Remaining Term;
provided, however, that if during such time period Lacy should enter into
employment with a new employer and become eligible to receive comparable
insurance benefits, the continued insurance benefits described herein shall
automatically cease. In the event that Lacy is ineligible, for whatever reason,
to continue to be so covered with respect to any of the above-referenced plans
or programs, the Company shall provide substantially equivalent coverage through
other sources (determined on an after-tax basis). In the event Lacy would
otherwise be entitled to a Change of Control Severance Payment under the
Severance Agreement as a result of a termination of employment under this
Section 9.4, Lacy may elect to receive the continued health and welfare
insurance benefits under this Section 9.4 or under Section 4(b) of the Severance
Agreement, but in no event both benefits.
Furthermore,
in the event of a termination Without Cause, Lacy shall be presumed to have met
eligibility requirements specified in Section 2.4 of the Meredith Replacement
Benefit Plan and the Meredith Supplemental Benefit Plan or any successor
thereto. He shall be presumed to have met eligibility requirements for the
Company’s Retiree Health Care coverage at end of the Term provided, however,
that if subsequent to such termination Lacy should enter into employment with
another employer and become eligible for health insurance benefits, Lacy’s
eligibility for Retirement Health Care coverage shall automatically cease. All
awards of restricted stock and stock options shall automatically vest and be
exercisable for the full unexpired term of the option.
Lacy
agrees that the payments described in this Section 9.4 shall be full and
adequate compensation to Lacy for all damages Lacy may suffer as a result of the
termination of his employment pursuant to this Sections 9.4 or 9.6, and in
consideration of the payments and benefits provided in this Section 9.4, Lacy
agrees to execute a Waiver and Release Agreement in the form attached hereto as
Attachment A; provided, however, that, except as specifically provided for under
this Section 9.4, any rights and benefits Lacy may have under the employee
benefit plans and programs of the Company, in which Lacy is a participant, shall
be determined in accordance with the terms and provisions of such plans and
programs.
9.5
Employee
Voluntary
. In the event Lacy terminates his employment of his
own volition prior to the end of the term of this Agreement, except for a
termination as described in Section 9.6 and except for termination for Good
Reason as specifically provided otherwise in the Severance Agreement, such
termination shall constitute a voluntary termination and in such event the
Company's only obligation to Lacy shall be to make Base Salary payments provided
for in this Agreement through the date of such voluntary
termination. Any rights and benefits Lacy may have under the employee
benefit plans and programs of the Company, in which he is a participant, shall
be determined in accordance with the terms and provisions of such plans and
programs. Lacy understands and agrees that in the event of the
termination of employment pursuant to this Section 9.5: (a) All awards of
restricted stock, stock options and any other benefits under the Long-Term
Incentive Plans shall be handled in accordance with the terms of the relevant
plan and agreements entered into between Lacy and the Company with respect to
such awards; and (b) the Company shall have no further obligation to pay any
bonus to Lacy under the terms of the MIP or this Agreement.
9.6
Failure to Re-elect as Chief
Executive Officer or Director
. If at any time prior to the end of the
Term of this Agreement Lacy is not re-elected to or is removed from the office
of Chief Executive Officer or as a Director of the Company or the Company
materially violates Section 1.1 of this Agreement (for reasons other than Due
Cause), Lacy shall have the right to terminate his employment with the Company
after first giving the Company written notice of the violation within ninety
(90) days of its initial existence and providing a period of thirty (30) days in
which the violation may be cured and by thereafter, if such violation has not
been corrected or cured, by giving written notice within ninety (90) days of his
termination, and such termination shall be deemed to be termination by the
Company without “Due Cause,” and such termination shall be treated in accordance
with the terms of Section 9.4 above.
9.7 The
Company agrees to continue Lacy’s coverage under such directors and officers’
liability insurance policies as shall from time to time be in effect for active
officers and employees for not less than six years following Lacy’s termination
of employment.
10.
Covenants of
Lacy
.
10.1 Lacy
acknowledges that as a result of the services to be rendered to the Company
hereunder, Lacy will be brought into close contact with many confidential
affairs of the Company, its subsidiaries and affiliates, not readily available
to the public. Lacy further acknowledges that the services to be
performed under this Agreement are of a special, unique, unusual, extraordinary
and intellectual character; that the business of the Company is international in
scope; that its goods and services are marketed throughout the United States and
various parts of the world and that the Company competes with other
organizations that are or could be located in nearly any part of the United
States and in various parts of the world.
10.2 In
recognition of the foregoing, Lacy covenants and agrees that, except as is
necessary in providing services under this Agreement or to the extent necessary
to comply with law or the valid order of a court or government agency of
competent jurisdiction, Lacy will not knowingly use for his own benefit nor
knowingly divulge any Confidential Information and Trade Secrets of the Company,
its subsidiaries and affiliated entities, which are not otherwise in the public
domain and, so long as they remain Confidential Information and Trade Secrets
not in the public domain, will not intentionally disclose them to anyone outside
of the Company either during or after his employment. For the
purposes of this Agreement, "Confidential Information and Trade Secrets" of the
Company means information which is secret to the Company, its subsidiaries and
affiliated entities. It may include, but is not limited to,
information relating to the magazines, books, publications, products, services,
television stations, integrated marketing, interactive media, electronic
commerce, new and future concepts and business of the Company, its subsidiaries
and affiliates, in the form of memoranda, reports, computer software and data
banks, customer lists, employee lists, books, records, financial statements,
manuals, papers, contracts and strategic plans. As a guide, Lacy is
to consider information originated, owned, controlled or possessed by the
Company, its subsidiaries or affiliated entities which is not disclosed in
printed publications stated to be available for distribution outside the
Company, its subsidiaries and affiliated entities as being secret and
confidential. In instances where doubt does or should reasonably be
understood to exist in Lacy's mind as to whether information is secret and
confidential to the Company, its subsidiaries and affiliated entities, Lacy
agrees to request an opinion, in writing, from the Board of
Directors.
10.3 Anything
to the contrary in this Section 10 notwithstanding, Lacy shall disclose to the
public and discuss such information as is customary or legally required to be
disclosed by a Company whose stock is publicly traded, or that is otherwise
legally required to disclose, or that is in the best interests of the Company to
do so.
10.4 Lacy
will deliver promptly to the Company on the termination of his employment with
the Company, or at any other time the Company may so request, all memoranda,
notes, records, reports and other documents relating to the Company, its
subsidiaries and affiliated entities, and all property owned by the Company, its
subsidiaries and affiliated entities, which Lacy obtained while employed by the
Company, and which Lacy may then possess or have under his control.
10.5 During
and for a period of twenty-four (24) months after the termination of employment
with the Company (except that the time period of such restrictions shall be
extended by any period during which Lacy is in violation of this Section 10.5),
Lacy will not knowingly interfere with, disrupt or attempt to disrupt, any then
existing relationship, contractual or otherwise between the Company, its
subsidiaries or affiliated entities, and any customer, client, supplier, or
agent, or knowingly solicit, or assist any other entity in soliciting for
employment, any person known to Lacy to be an agent or executive employee of the
Company, its subsidiaries, or affiliated entities, it being understood that the
right to seek or enter into contractual arrangements with independent
contractors, including, without limitation, consultants, professionals, authors,
advertisers and the like, shall not be abridged by reason of this Section
10. In addition, in the event of a voluntary termination under
Section 9.5, during and for a period of twenty-four (24) months after the
termination of employment with the Company, Lacy will not render services
directly or indirectly as an employee, officer, director, consultant,
independent contractor or in any other capacity to any person or entity that is
a competitor of the Company.
10.6 Lacy
will promptly disclose to the Company all inventions, processes, original works
of authorship, trademarks, patents, improvements and discoveries related to the
business of the Company, its subsidiaries and affiliated entities (collectively
"Developments"), conceived or developed during Lacy's employment with the
Company and based upon information to which he had access during the term of
employment, whether or not conceived during regular working hours, through the
use of the Company time, material or facilities or otherwise. All
such Developments shall be the sole and exclusive property of the Company, and
upon request Lacy shall deliver to the Company all outlines, descriptions and
other data and records relating to such Developments, and shall execute any
documents deemed necessary by the Company to protect the Company's rights
hereunder. Lacy agrees upon request to assist the Company to obtain
United States or foreign letters patent and copyright registrations covering
inventions and original works of authorship belonging to the Company
hereunder. If the Company is unable because of Lacy's mental or
physical incapacity to secure Lacy's signature to apply for or to pursue any
application for any United States or foreign letters patent or copyright
registrations covering inventions and original works of authorship belonging to
the Company hereunder, then Lacy hereby irrevocably designates and appoints the
Company and its duly authorized officers and agents as his agent and attorney in
fact, to act for and in his behalf and stead to execute and file any such
applications and to do all other lawfully permitted acts to further the
prosecution and issuance of letters patent or copyright registrations thereon
with the same legal force and effect as if executed by him. Lacy
hereby waives and quitclaims to the Company any and all claims, of any nature
whatsoever, that he may hereafter have for infringement of any patents or
copyright resulting from any such application for letters patent or copyright
registrations belonging to the Company hereunder.
10.7 Lacy
agrees that the remedy at law for any breach or threatened breach of any
covenant contained in this Section 10 may be inadequate and that the Company, in
addition to such other remedies as may be available to it, in law or in equity,
shall be entitled to injunctive relief without bond or other
security.
10.8 Although
the restrictions contained in Sections 10.1, 10.2, 10.4 and 10.5 above are
considered by the parties hereto to be fair and reasonable in the circumstances,
it is recognized that restrictions of such nature may fail for technical
reasons, and accordingly it is hereby agreed that if any of such restrictions
shall be adjudged to be void or unenforceable for whatever reason, but would be
valid if part of the wording thereof were deleted, or the period thereof reduced
or the area dealt with thereby reduced in scope, the restrictions contained in
Section 10.1, 10.2, 10.4 and 10.5 shall be enforced to the maximum extent
permitted by law, and the parties consent and agree that such scope or wording
may be accordingly judicially modified in any proceeding brought to enforce such
restrictions.
10.9 Notwithstanding
that Lacy's employment hereunder may expire or be terminated as provided in
Sections 2 or 9 above, this Agreement shall continue in full force and effect
insofar as is necessary to enforce the covenants and agreements of Lacy
contained in this Section 10. In addition, the Company obligations
under Sections 9, 11 and 19 shall continue in full force and effect with respect
to Lacy or his estate.
11.
Arbitration
.
The
parties shall use their best efforts and good will to settle all disputes by
amicable negotiations. The Company and Lacy agree that, with the
express exception of any dispute or controversy arising under Section 9.2 or
Section 10 of this Agreement or as may be required under Section 3(g) of the
Severance Agreement, any controversy or claim arising out of or in any way
relating to Lacy's employment with the Company, including, without limitation,
any and all disputes concerning this Agreement and the termination of this
Agreement that are not amicably resolved by negotiation, shall be settled by
arbitration in Des Moines, Iowa, or such other place agreed to by the parties,
as follows:
(a)
Any such arbitration shall be heard before an arbitrator who shall be
impartial. Except as the parties may otherwise agree, the arbitrator
shall be appointed by the American Arbitration Association in accordance with
its rules and procedures. In determining the appropriate background
of the arbitrator, the appointing authority shall give due consideration to the
issues to be resolved, but its decision as to the identity of the arbitrator
shall be final.
(b)
An arbitration may be commenced by any party to this Agreement by the service of
a written Request for Arbitration upon the other affected party. Such
Request for Arbitration shall summarize the controversy or claim to be
arbitrated, and shall be referred by the complaining party to the appointing
authority for appointment of arbitrators ten (10) days following such
service. If an arbitrator is not appointed by the appointing
authority within sixty (60) days following such reference, any party may apply
to any court within the State of Iowa for an order appointing arbitrators
qualified as set forth below. No Request for Arbitration shall be
valid if it relates to a claim, dispute, disagreement or controversy that would
have been time barred under the applicable statute of limitations had such
claim, dispute, disagreement or controversy been submitted to the courts of the
State of Iowa.
(c)
Judgment on the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof.
(d)
It is intended that controversies or claims submitted to arbitration under this
Section 11 shall remain confidential, and to that end it is agreed by the
parties that neither the facts disclosed in the arbitration, the issues
arbitrated, nor the views or opinions of any persons concerning them, shall be
disclosed by third persons, any employees of the Company involved in such
arbitration proceedings, or Lacy’s or the Company’s representatives, at any
time, except to the extent necessary to enforce an award or judgment or as
required by law or in response to legal process or in connection with such
arbitration. In addition, Lacy shall be entitled to disclose the
facts disclosed in arbitration, the issues arbitrated, and the views or opinions
of any persons concerning them to legal and tax advisors so long as such
advisors agree to be bound by the terms of this Agreement.
12.
Successors and
Assigns
.
12.1
Assignment by the
Company
. This Agreement shall inure to the benefit of and
shall be binding upon the successors and assigns of the Company.
12.2
Assignment by
Lacy
. Lacy may not assign this Agreement or any part thereof;
provided, however, that nothing herein shall preclude one or more beneficiaries
of Lacy from receiving any amount that may be payable following the occurrence
of his legal incompetency or his death and shall not preclude the legal
representative of his estate from receiving such amount or from assigning any
right hereunder to the person or persons entitled thereto under his will or, in
the case of intestacy, to the person or persons entitled thereto under the laws
of the intestacy applicable to his estate.
13.
Governing
Law
.
This
Agreement shall be deemed a contract made under, and for all purposes shall be
construed in accordance with, the laws of the State of Iowa without reference to
the principles of conflict of laws.
14.
Entire
Agreement
.
This
Agreement and those plans and agreements referenced herein contain all the
understandings and representations between the parties hereto pertaining to the
subject of the employment of Lacy by the Company and supersede all undertakings
and agreements, whether oral or in writing, if any there be, previously entered
into by them with respect thereto.
15.
Amendment or Modification;
Waiver
.
No
provision of this Agreement may be amended or modified unless such amendment or
modification is agreed to in writing, signed by Lacy and by a duly authorized
officer of the Company and approved in advance by the Compensation
Committee. Except as otherwise specifically provided in this
Agreement, no waiver by either party hereto of any breach by the other party of
any condition or provision of the Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar provision or condition at
the same or any prior or subsequent time.
16.
Notices
.
Any
notice to be given hereunder shall be in writing and delivered personally or
sent by overnight mail, such as Federal Express, addressed to the party
concerned at the address indicated below or to such other address as such party
may subsequently give notice of hereunder in writing:
If to
Company:
Chairman
of the Compensation Committee
Board of
Directors
Meredith
Corporation
1716
Locust Street
Des
Moines, Iowa 50309-3023
with a
copy to:
John
Zieser, Esquire
Vice
President-General Counsel & Secretary
Meredith
Corporation
1716
Locust Street
Des
Moines, Iowa 50309-3023
If to
Lacy:
Stephen
M. Lacy
Chief
Executive Officer Meredith Corporation
1716
Locust Street
Des
Moines, Iowa 50309-3023
with a
copy to:
Margo C.
Soule, Esquire
Sonnenschein
Nath & Rosenthal LLP
4520 Main
Street
Kansas
City, Missouri 64111
17.
Severability
.
In the
event that any provision or portion of this Agreement shall be determined to be
invalid or unenforceable for any reason, the remaining provisions or portions of
this Agreement shall be unaffected thereby and shall remain in full force and
effect to the fullest extent permitted by law.
18.
Withholding
.
Anything
to the contrary notwithstanding, all payments required to be made by the Company
hereunder to Lacy or his beneficiaries, including his estate, shall be subject
to withholding and deductions as the Company may reasonably determine it should
withhold or deduct pursuant to any applicable law or regulation. In
lieu of withholding or deducting, such amounts, in whole or in part, the Company
may, in its sole discretion, accept other provision for payment as permitted by
law, provided it is satisfied in its sole discretion that all requirements of
law affecting its responsibilities to withhold such taxes have been
satisfied.
19.
Deferred
Payments
.
Any
amounts required under this Agreement to be paid to Lacy that Lacy can and does
elect to defer under any Company benefit plan or program shall be deemed to have
been paid to him for purposes of this Agreement; provided, however, that if the
Company breaches the terms of any deferred compensation plan, arrangement or
agreement with respect to which such amounts are to be paid, Lacy may claim a
breach of this Agreement.
Notwithstanding
anything in this Agreement or elsewhere to the contrary:
(a) If
payment or provision of any amount or other benefit that is “deferred
compensation” subject to Section 409A of the Code at the time otherwise
specified in this Agreement or elsewhere would subject such amount or benefit to
additional tax pursuant to Section 409A(a)(1)(B) of the Code, and if payment or
provision thereof at a later date would avoid any such additional tax, then the
payment or provision thereof shall be postponed to the earliest date on which
such amount or benefit can be paid or provided without incurring any such
additional tax. In the event this Section requires a deferral of any
payment, such payment shall be accumulated and paid in a single lump sum on such
earliest date together with interest for the period of delay, compounded
annually, equal to the prime rate (as published in The Wall Street Journal), and
in effect as of the date the payment should otherwise have been
provided.
(b) If
any payment or benefit permitted or required under this Agreement, or otherwise,
is reasonably determined by either party to be subject for any reason to a
material risk of additional tax pursuant to Section 409A(a)(1)(B) of the Code,
then the parties shall promptly agree in good faith on appropriate provisions to
avoid such risk without materially changing the economic value of this Agreement
to either party.
20.
Survivorship
.
The
respective rights and obligations of the parties hereunder shall survive any
termination of this Agreement to the extent necessary to the intended
preservation of such rights and obligations.
21.
Duty to Mitigate:
Set-off
.
Lacy
shall not be required to seek employment, nor shall the amount of any payment
provided for under this Agreement be reduced by any compensation earned by Lacy
as the result of employment by another employer after the date of termination of
Lacy's employment, or otherwise, except as may be provided under Section 9.4
with respect to health and welfare insurance benefits. The Company's
obligation to make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any set off,
counterclaim, recoupment, defense, or other claim, right or action that the
Company may have against Lacy or others, except to be extent such employment
violates Section 10.5.
22.
Headings
.
Headings
of the sections of this Agreement are intended solely for convenience and no
provision of this Agreement is to be construed by reference to the title of any
section.
23.
Knowledge and
Representation
.
Lacy
acknowledges that the terms of this Agreement have been fully explained to him,
that Lacy understands the nature and extent of the rights and obligations
provided under this Agreement, and that Lacy has been represented by legal
counsel in the negotiation and preparation of this Agreement.
IN
WITNESS WHEREOF, the parties hereto have re-executed and acknowledged this
Agreement as of the date set forth below.
MEREDITH
CORPORATION
By:
_/s/ John S.
Zieser______________
John S. Zieser
Chief Development Officer,
General Counsel and
Secretary
STEPHEN
M. LACY
/s/ Stephen M.
Lacy
Date: August
24, 2009
Exhibit
10.16
EMPLOYMENT
AGREEMENT
AGREEMENT
entered into as of March 9, 2008, by and between MEREDITH CORPORATION, an Iowa
corporation (the "Company"), and JACK GRIFFIN ("Griffin"), to become effective
March 6, 2008 (“Effective Date”).
WITNESSETH:
WHEREAS,
Griffin has been employed by the Company as President, Meredith Publishing
Group; and
WHEREAS,
the Company wishes to continue to employ Griffin pursuant to the terms and
conditions hereof, and in order to induce Griffin to enter into this agreement
(the "Agreement") and to secure the benefits to accrue from his performance
hereunder is willing to undertake the obligations assigned to it herein;
and
WHEREAS,
Griffin is willing to continue his employment with the Company under the terms
hereof and to enter into the Agreement;
NOW
THEREFORE, in consideration of the premises and mutual covenants contained
herein and for other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1.
Position; Duties;
Responsibilities
.
1.1 Meredith
shall employ Griffin in New York, New York, as President, Meredith Publishing
Group, reporting to Steve Lacy (or his successor, if
applicable). While employed hereunder, Griffin shall have such
responsibility and authority as has historically attached to being President of
Meredith Publishing Group.
1.2 During
the course of his employment, Griffin agrees to devote his full time and
attention and give his best efforts and skills to furthering the business and
interests of the Company, which, subject to the mutual agreement of Griffin and
Steve Lacy (or his successor, if applicable), which shall not be unreasonably
withheld, may include Griffin volunteering his time and efforts on behalf of
charitable, civic, professional organizations and boards of other
corporations.
2.
Term
.
The term
of employment under this Agreement shall commence as of March 6, 2008, and shall
continue through June 30, 2011, unless sooner terminated in accordance with this
Agreement, and thereafter as herein provided. Griffin's term of employment shall
automatically renew for subsequent one (1) year terms, the first of which would
begin on July 1, 2011, subject to the terms of this Agreement unless either
party gives written notice six (6) months or more prior to the expiration of the
then existing term of its decision not to renew (the "Term").
In the
event this Agreement expires at the end of the Term, as extended if applicable,
after the Company has delivered a Non-Renewal Notice to Griffin, such
termination of Griffin’s employment with the Company will be treated for all
purposes hereunder as a termination of employment by the Company Without Cause
pursuant to Section 9.4.
3.
Base
Salary
.
3.1 The
Company shall pay Griffin a base salary at the annual rate of Seven Hundred
Twenty-Five Thousand Dollars ($725,000) ("Base Salary"), beginning on the
Effective Date and continuing through June 30, 2009, payable in accordance with
the standard payroll practices of the Company.
3.2 It
is understood that the Base Salary is to be Griffin's minimum annual
compensation during the Term. The Base Salary may increase beginning July 1,
2009 at the discretion of the Compensation Committee of the Company's Board of
Directors ("Compensation Committee"). Base Salary shall include all
such increased amounts, and, if increased, Base Salary shall not thereafter be
decreased.
4.
Long-Term Incentive
Plans
.
During
the Term of this Agreement, Griffin shall be eligible to participate in all
long-term incentive plans, including, without limitation, stock incentive plans
adopted by the Company and in effect (collectively, "Long-Term Incentive
Plans"), at levels of awards to be granted by the Compensation Committee
commensurate with the level of Griffin's responsibilities and performance
thereof. At its regular August 2008 meeting, the Compensation
Committee, in the exercise of its discretion, shall approve an award to Griffin
of: (a) 50,000 non-qualified stock options with a three (3) year cliff vesting
schedule and a strike price equal to the fair market value of Meredith common
stock on the date of such award, and (b) 7,500 Restricted Stock Units of
Meredith common stock with a three (3) year cliff vesting schedule.
5.
Bonus
.
5.1 During
the Term of this Agreement, Griffin shall be eligible to participate in the
Meredith Management Incentive Plan (or any successor or replacement annual
incentive plan of the Company) ("MIP"), for such periods as it continues in
effect, subject to the terms of the MIP, and to the discretion vested in the
Compensation Committee under the MIP; provided, however, that the percentage of
Base Salary payable as a target bonus under the MIP shall not be less than
eighty percent (80%) (actual Company financial results may result in an actual
bonus paid to Griffin equal to less than or more than eighty percent (80%) of
Base Salary).
5.2 The
MIP bonus pursuant to this Section 5.1 shall be paid to Griffin in conformance
with the Company's normal MIP bonus pay policies following the end of the
respective fiscal year. For the purpose of Section 5.1, MIP bonuses paid with
respect to the fiscal year shall include payments made outside of the fiscal
year but for such fiscal year and shall exclude payments made in the fiscal year
that are for another fiscal year.
5.3 For
each year during the term of this Agreement, Griffin will receive an annual Stay
Bonus ("Stay Bonus") of Seventy-Five Thousand Dollars ($75,000) less applicable
withholdings and deductions, to be payable in twelve (12) equal installments of
Six Thousand Two Hundred Fifty Dollars ($6,250) on the first regular payday of
each month, thereafter conditioned on Griffin's continuing employment with
Meredith on each such payday.
6.
Short-Term
Disability
.
During
any period of short-term disability, the Company will continue to pay to Griffin
the Base Salary throughout the period of short-term disability, but in no event
beyond the end of Term. In addition, Griffin will continue to receive
all rights and benefits under the benefit plans and programs of the Company in
which Griffin is a participant as determined in accordance with the terms of
such plans and programs, and Griffin shall be eligible to receive the benefit of
his target MIP and Stay Bonuses for the initial year in which the short-term
disability occurs without reduction for the period of short-term
disability. In the event of Griffin's death during a period of
short-term disability, the provisions of Section 9.1 shall apply. For the
purposes of this Agreement, short-term disability shall be defined as the
incapacitation of Griffin by reason of sickness, accident or other physical or
mental disability which continues for a period not to exceed the fifth month
anniversary of the date of the cause or onset of such
incapacitation. All benefits provided under this Section 6 shall be
in replacement of and not in addition to benefits payable under the Company’s
short-term and long-term disability plan(s), except to the extent such
disability plan(s) provide greater benefits than the disability benefits
provided under this Agreement, in which case the applicable disability plan(s)
would supersede the applicable provisions of this Agreement. In the
event Griffin is determined to be permanently disabled (as determined under
Section 9.2), the provisions of Section 9.2 shall apply.
7.
Employee Benefit
Plans
.
7.1 During
the Term of this Agreement and subject to all eligibility requirements, and to
the extent permitted by law, Griffin will have the opportunity to participate in
all employee benefit plans and programs generally available to the Company's
employees in accordance with the provisions thereof as in effect from time to
time, including, without limitation, medical coverage, group life insurance,
holidays and vacations, Meredith Savings and Investment Plan (401k) and the
Meredith Employees' Retirement Income Plan, but not including the Company's
short-term and long-term disability plans, except to the extent that such
disability plans provide greater benefits than the disability benefits provided
under this Agreement, in which case the applicable disability plan would
supersede the applicable provisions of this Agreement.
7.2 In
addition to benefits described in Section 7.1 during the Term of this Agreement,
Griffin shall also receive or participate in, to the extent permitted by law,
the various perquisites and plans generally available to officers of the Company
in accordance with the provisions thereof as in effect from time to time
including, without limitation, the following perquisites to the extent the
Company continues to offer them: an automobile or automobile allowance, tax and
estate planning, and executive life insurance (if insurable). Griffin shall also
be reimbursed for the regular annual dues for the Yale Club and the New York
Athletic Club and for the initiation fees and regular annual dues at a mutually
agreed upon country club incurred by Griffin in furtherance of the Company's
business. All such reimbursements or in-kind benefits shall be
payable by the Company on or before the last day of Griffin’s taxable year
following the taxable year in which the expense was incurred. The
expenses paid or in-kind benefits provided by the Company during any taxable
year of Griffin will not affect the expenses paid or in-kind benefits provided
by the Company in another taxable year. This right to reimbursement
or in-kind benefits is not subject to liquidation or exchange for another
benefit. In addition, Griffin shall participate in the Meredith
Replacement Benefit Plan and the Meredith Supplemental Benefit
Plan.
8.
Expense
Reimbursements
.
During
Griffin's employment with the Company, Griffin will be entitled to receive
reimbursement by the Company for all reasonable, out-of-pocket expenses incurred
by him (in accordance with policies and procedures established by the Company),
in connection with his performing services hereunder, provided Griffin properly
accounts therefor. All such reimbursements shall be payable by the
Company on or before the last day of Griffin’s taxable year following the
taxable year in which the expense was incurred. The expenses paid by the Company
during any taxable year of Griffin will not affect the expenses paid by the
Company in another taxable year. This right to reimbursement is not
subject to liquidation or exchange for another benefit.
9.
Consequences of Termination
of Employment
.
9.1
Death
. In the event
of the death of Griffin during the Term of this Agreement or during the period
when payments are being made pursuant to Sections 6 or 9.2, this Agreement shall
terminate and all obligations to Griffin shall cease as of the date of death
except that, (a) the Company will pay to the legal representative of his estate
in substantially equal installments the Base Salary and Stay Bonus under Section
5.3 until the end of the month of the first anniversary of Griffin's death (but
not beyond June 30, 2011) with each installment treated as a separate “payment”
for purposes of Section 409A of the Code, such that any payment that would
otherwise be payable within 2 ½ months after Griffin’s taxable year in
which his employment with the Company is terminated or, if later, within 2 ½
months after the end of the Company’s taxable year in which Griffin’s employment
with the Company is terminated (the “Short Term Deferral Period”) is exempt from
Section 409A of the Code, and (b) all rights and benefits of Griffin under the
benefit plans and programs of the Company in which Griffin is a participant,
will be provided as determined in accordance with the terms and provisions of
such plans and programs. Any MIP bonus (or amounts in lieu thereof) pursuant to
Section 5, payable for the fiscal year in which Griffin's death occurs, shall be
determined by the Compensation Committee at its meeting following the end of
such fiscal year pro rata to the date of death and promptly paid to Griffin's
estate. All awards of restricted stock, stock options and any other benefits
under the Long-Term Incentive Plans shall be handled in accordance with the
terms of the relevant plan and agreements entered into between Griffin and the
Company with respect to such awards.
9.2
Disability
. If
Griffin shall become permanently incapacitated by reasons of sickness, accident
or other physical or mental disability, as such incapacitation is certified by a
physician chosen by the Company and reasonably acceptable to Griffin (if he is
then able to exercise sound judgment), and shall therefore be unable to perform
any substantial gainful activity, then the employment of Griffin hereunder and
this Agreement may be terminated by Griffin or the Company upon thirty (30)
days' written notice to the other party following such certification. Should
Griffin not acquiesce (or should he be unable to acquiesce) in the selection of
the certifying doctor, a doctor chosen by Griffin (or if he is not then able to
exercise sound judgment, by his spouse or personal representative) and
reasonably acceptable to the Company shall be required to concur in the medical
determination of incapacitation, failing which the two doctors shall designate a
third doctor whose decision shall be determinative as of the end of the calendar
month in which such concurrence or third-doctor decision, as the case may be, is
made. After the final certification is made and the 30-day written notice is
provided, the Company shall pay to Griffin, at such times as Base Salary
provided for in Section 3 of this Agreement would normally be paid, 100% of Base
Salary for the first twelve months following such termination, 75% of Base
Salary for the next twelve-month period and 50% of Base Salary for the remaining
period of what would have constituted the current Term of employment but for
termination by reason of disability (but in no event beyond June 30, 2011) with
each installment treated as a separate “payment” for purposes of Section 409A of
the Code, such that any payment that would otherwise be payable during the Short
Term Deferral Period is exempt from Section 409A of the Code. Following the
termination pursuant to this Section 9.2, the Company shall pay or provide to
Griffin such other rights and benefits of participation under the employee
benefit plans and programs of the Company to the extent that such continued
participation is not otherwise prohibited by applicable law or by the express
terms and provisions of such plans and programs. Furthermore, nothing contained
in this Section 9.2 shall preclude Griffin from receiving the benefit of his
target MIP bonus and Stay Bonus for the initial year in which a short-term
disability occurs pursuant to the provisions of Section 6. All benefits provided
under this Section 9.2 shall be in replacement of and not in addition to
benefits payable under the Company's short-term and long-term disability plans,
except to the extent such disability plans provide greater benefits than the
disability benefits provided under this Agreement, in which case the applicable
disability plan(s) would supersede the applicable provisions of this Agreement.
All awards of restricted stock, stock options and any other benefits under the
Long-Term Incentive Plans shall be handled in accordance with the terms of the
relevant plan and agreements entered into between Griffin and the Company with
respect to such awards.
9.3
Due
Cause
. The Company may terminate Griffin's employment, remove
him as an officer of the Company and terminate this Agreement at any time for
Due Cause. In the event of such termination for Due Cause, Griffin shall
continue to receive Base Salary and Stay Bonus payments provided for in this
Agreement only through the date of such termination for Due
Cause. Griffin shall be entitled to no further benefits under this
Agreement, except that any rights and benefits Griffin may have under the
employee benefit plans and programs of the Company, in which Griffin is a
participant, shall be determined in accordance with the terms and provisions of
such plans and programs. Griffin understands and agrees that in the event of the
termination of employment, removal as an officer and termination of this
Agreement pursuant to this Section 9.3: (a) All awards of restricted stock,
stock options and any other benefits under the Long-Term Incentive Plans shall
be handled in accordance with the terms of the relevant plan and agreements
entered into between Griffin and the Company with respect to such awards and (b)
the Company shall have no further obligation to pay any bonus to Griffin under
the terms of the MIP or this Agreement, but that the obligations of Griffin
under Section 10 shall remain in full force and effect. The term “Due Cause”
shall mean (i) the willful and continued failure of Griffin to attempt to
perform substantially his duties with the Company (other than any such failure
resulting from Disability), after a demand for substantial performance is
delivered to Griffin, which specifically identifies the manner in which Griffin
has not attempted to substantially perform his duties and for those matters
which are subject to cure, a ten (10) day notice to cure is provided, or (ii)
the engaging by Griffin in willful misconduct which is materially injurious to
the Company, monetarily or otherwise. For purposes of this
definition, no act, or failure to act, on the part of Griffin shall be
considered “willful” unless it is done, or omitted to be done, by Griffin in bad
faith and without reasonable belief that Griffin’s action or omission was in the
best interests of the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or based upon
the advice of counsel for the Company shall be conclusively presumed to be done,
or omitted to be done, by Griffin in good faith and in the best interests of the
Company.
9.4
Without Cause
. The
other provisions of this Agreement notwithstanding, the Company may terminate
Griffin's employment, remove him as an officer and terminate this Agreement at
any time for whatever reason it deems appropriate, with or without cause and
with or without prior notice. In the event of such a termination of Griffin's
employment and this Agreement, Griffin shall have no further obligations of any
kind under or arising out of the Agreement (except for the obligations of
Griffin under Section 10) and the Company shall be obligated only to promptly
pay Griffin within the Short Term Deferral Period the following in a lump sum
payment: (a) 180 percent of Base Salary, and the Stay Bonus amounts provided in
Section 5 of this Agreement through the end of the then current Term of this
Agreement (the "Remaining Term") as provided for under Section 2 of this
Agreement, but no less than a total of twenty-one months of 180 percent of Base
Salary, and Stay Bonus; and (b) any other amounts due and owing not then paid;
provided, however, that in the event that as a result of such termination of
employment Griffin would otherwise be entitled to a severance payment (a "Change
of Control Severance Payment") under Section 4 of the Amended and Restated
Severance Agreement dated as of the
30th
day of
December
, 200
8
, between Griffin
and the Company (the "Severance Agreement"), Griffin shall be entitled to the
amounts described in clause (b) above and the greater of: (i) the cash severance
benefits described in clause (a) of this sentence and (ii) the cash severance
benefits described in Section 4(a) of the Severance Agreement, but in no event
to both payments.
After the
date of termination under this Section 9.4 or Section 9.6, Griffin shall not be
treated as an employee for purposes of the Company's employee benefit plans or
programs even though he may continue to receive payments as provided in this
Section 9.4, except: that Griffin and his eligible dependents shall
continue, to the extent permitted by law, to be covered by health and welfare
insurance plans or programs in which Griffin and his eligible dependents
participate immediately prior to Griffin's termination of employment for the
Remaining Term; provided, however, that if during such time period Griffin
should enter into employment with a new employer and become eligible to receive
comparable insurance benefits, the continued insurance benefits described herein
shall automatically cease. In the event that Griffin is ineligible, for whatever
reason, to continue to be so covered with respect to any of the above-referenced
plans or programs, the Company shall provide substantially equivalent coverage
through other sources (determined on an after-tax basis). In the
event Griffin would otherwise be entitled to a Change of Control Severance
Payment under the Severance Agreement as a result of a termination of employment
under this Section 9.4, Griffin may elect to receive the continued health and
welfare insurance benefits under this Section 9.4 or under Section 4(b) of the
Severance Agreement, but in no event both benefits.
Furthermore,
in the event of a termination Without Cause, Griffin shall be presumed to have
met eligibility requirements specified in Section 2.4 of the Meredith
Replacement Benefit Plan and the Meredith Supplemental Benefit Plan or any
successor thereto and he shall be entitled to the amounts that have accrued
under such plans through the date of his termination without
cause. All awards of restricted stock and stock options shall
automatically vest and be exercisable for the full unexpired term of the
option.
Griffin
agrees that the payments described in this Section 9.4 shall be full and
adequate compensation to Griffin for all damages Griffin may suffer as a result
of the termination of his employment pursuant to this Sections 9.4 or 9.6, and
in consideration of the payments and benefits provided in this Section 9.4,
Griffin agrees to execute a Waiver and Release Agreement in the form attached
hereto as Attachment A; provided, however, that, except as specifically provided
for under this Section 9.4, any rights and benefits Griffin may have under the
employee benefit plans and programs of the Company, in which Griffin is a
participant, shall be determined in accordance with the terms and provisions of
such plans and programs.
9.5
Employee
Voluntary
. In the event Griffin terminates his employment of
his own volition prior to the end of the term of this Agreement, except for a
termination as described in Section 9.6 and except for termination for Good
Reason as specifically provided otherwise in the Severance Agreement, such
termination shall constitute a voluntary termination and in such event the
Company's only obligation to Griffin shall be to make Base Salary payments
provided for in this Agreement through the date of such voluntary
termination. Any rights and benefits Griffin may have under the
employee benefit plans and programs of the Company, in which he is a
participant, shall be determined in accordance with the terms and provisions of
such plans and programs. Griffin understands and agrees that in the
event of the termination of employment pursuant to this Section 9.5: (a) All
awards of restricted stock, stock options and any other benefits under the
Long-Term Incentive Plans shall be handled in accordance with the terms of the
relevant plan and agreements entered into between Griffin and the Company with
respect to such awards; and (b) the Company shall have no further obligation to
pay any bonuses to Griffin under the terms of the MIP or this
Agreement.
9.6
Change in Title, Duties,
Reporting Relationship or Location
. If at any time prior to the end of
the Term of this Agreement (a) an adverse change is made to Griffin's title as
President, Meredith Publishing Group, (b) an adverse material change is made
with respect to Griffin's having such responsibility and authority as has
historically attached to being President, Meredith Publishing Group, (c) a
change is made in Griffin's reporting relationship to Steve Lacy or his
successor, or (d) an involuntary change is made to the location of Griffin's
principal office more than twenty-five (25) miles from its current location or
more than twenty-five (25) miles from where he maintains his primary residence,
Griffin shall have the right to terminate his employment with the Company after
first giving the Company written notice of the violation within ninety (90) days
of its initial existence and providing a period of thirty (30) days in which the
violation may be cured and by thereafter, if such violation has not been
corrected or cured, by giving written notice within ninety (90) days of his
termination, and such termination shall be deemed to be termination by the
Company without "Due Cause," and such termination shall be treated in accordance
with the terms of Section 9.4 above.
9.7 The
Company agrees to continue Griffin’s coverage under such directors and officers’
liability insurance policies as shall from time to time be in effect for active
officers and employees for not less than six years following Griffin’s
termination of employment.
10.
Covenants of
Griffin
.
10.1 Griffin
acknowledges that as a result of the services to be rendered to the Company
hereunder, Griffin will be brought into close contact with many confidential
affairs of the Company, its subsidiaries and affiliates, not readily available
to the public. Griffin further acknowledges that the services to be performed
under this Agreement are of a special, unique, unusual, extraordinary and
intellectual character; that the business of the Company is international in
scope; that its goods and services are marketed throughout the United States and
various parts of the world and that the Company competes with other
organizations that are or could be located in nearly any part of the United
States and in various parts of the world.
10.2 In
recognition of the foregoing, Griffin covenants and agrees that, except as is
necessary in providing services under this Agreement or to the extent necessary
to comply with law or the valid order of a court or government agency of
competent jurisdiction, Griffin will not knowingly use for his own benefit nor
knowingly divulge any Confidential Information and Trade Secrets of the Company,
its subsidiaries and affiliated entities, which are not otherwise in the public
domain and, so long as they remain Confidential Information and Trade Secrets
not in the public domain, will not intentionally disclose them to anyone outside
of the Company either during or after his employment. For the purposes of this
Agreement, "Confidential Information and Trade Secrets" of the Company means
information which is secret to the Company, its subsidiaries and affiliated
entities. It may include, but is not limited to, information relating to the
magazines, books, publications, products, services, television stations, real
estate franchise operations, new and future concepts and business of the
Company, its subsidiaries and affiliates, in the form of memoranda, reports,
computer software and data banks, customer lists, employee lists, books,
records, financial statements, manuals, papers, contracts and strategic plans.
As a guide, Griffin is to consider information originated, owned, controlled or
possessed by the Company, its subsidiaries or affiliated entities which is not
disclosed in printed publications stated to be available for distribution
outside the Company, its subsidiaries and affiliated entities as being secret
and confidential. In instances where doubt does or should reasonably be
understood to exist in Griffin's mind as to whether information is secret and
confidential to the Company, its subsidiaries and affiliated entities, Griffin
agrees to request an opinion, in writing, from Meredith's Chief Executive
Officer.
10.3 Anything
to the contrary in this Section 10 notwithstanding, Griffin shall disclose to
the public and discuss such information as is customary or legally required to
be disclosed by a Company whose stock is publicly traded, or that is otherwise
legally required to disclose, or that is in the best interests of the Company to
do so.
10.4 Griffin
will deliver promptly to the Company on the termination of his employment with
the Company, or at any other time the Company may so request, all memoranda,
notes, records, reports and other documents relating to the Company, its
subsidiaries and affiliated entities, and all property owned by the Company, its
subsidiaries and affiliated entities, which Griffin obtained while employed by
the Company, and which Griffin may then possess or have under his
control.
10.5 During
and for a period of twenty-four (24) months after the termination of employment
with the Company (except that the time period of such restrictions shall be
extended by any period during which Griffin is in violation of this Section
10.5), Griffin will not knowingly interfere with, disrupt or attempt to disrupt,
any then existing relationship, contractual or otherwise between the Company,
its subsidiaries or affiliated entities, and any customer, client, supplier, or
agent, or knowingly solicit, or assist any other entity in soliciting for
employment, any person known to Griffin to be an agent or executive employee of
the Company, its subsidiaries, or affiliated entities, it being understood that
the right to seek or enter into contractual arrangements with independent
contractors, including, without limitation, consultants, professionals, authors,
advertisers and the like, shall not be abridged by reason of this Section 10. In
addition, in the event of a voluntary termination under Section 9.5, during and
for a period of twenty-four (24) months after the termination of employment with
the Company, Griffin will not render services directly or indirectly as an
employee, officer, director, consultant, independent contractor or in any other
capacity to any person or entity that is a competitor of the Company, including,
but not limited to, those entities identified on Schedule A.
10.6 Griffin
will promptly disclose to the Company all inventions, processes, original works
of authorship, trademarks, patents, improvements and discoveries related to the
business of the Company, its subsidiaries and affiliated entities (collectively
"Developments"), conceived or developed during Griffin's employment with the
Company and based upon information to which he had access during the term of
employment, whether or not conceived during regular working hours, through the
use of the Company time, material or facilities or otherwise. All such
Developments shall be the sole and exclusive property of the Company, and upon
request Griffin shall deliver to the Company all outlines, descriptions and
other data and records relating to such Developments, and shall execute any
documents deemed necessary by the Company to protect the Company's rights
hereunder. Griffin agrees upon request to assist the Company to
obtain United States or foreign letters patent and copyright registrations
covering inventions and original works of authorship belonging to the Company
hereunder. If the Company is unable because of Griffin's mental or physical
incapacity to secure Griffin's signature to apply for or to pursue any
application for any United States or foreign letters patent or copyright
registrations covering inventions and original works of authorship belonging to
the Company hereunder, then Griffin hereby irrevocably designates and appoints
the Company and its duly authorized officers and agents as his agent and
attorney in fact, to act for and in his behalf and stead to execute and file any
such applications and to do all other lawfully permitted acts to further the
prosecution and issuance of letters patent or copyright registrations thereon
with the same legal force and effect as if executed by him. Griffin hereby
waives and quitclaims to the Company any and all claims, of any nature
whatsoever, that he may hereafter have for infringement of any patents or
copyright resulting from any such application for letters patent or copyright
registrations belonging to the Company hereunder.
10.7 Griffin
agrees that the remedy at law for any breach or threatened breach of any
covenant contained in this Section 10 may be inadequate and that the Company, in
addition to such other remedies as may be available to it, in law or in equity,
shall be entitled to injunctive relief without bond or other
security.
10.8 Although
the restrictions contained in Sections 10.1, 10.2, 10.4 and 10.5 above are
considered by the parties hereto to be fair and reasonable in the circumstances,
it is recognized that restrictions of such nature may fail for technical
reasons, and accordingly it is hereby agreed that if any of such restrictions
shall be adjudged to be void or unenforceable for whatever reason, but would be
valid if part of the wording thereof were deleted, or the period thereof reduced
or the area dealt with thereby reduced in scope, the restrictions contained in
Section 10.1, 10.2, 10.4 and 10.5 shall be enforced to the maximum extend
permitted by law, and the parties consent and agree that such scope or wording
may be accordingly judicially modified in any proceeding brought to enforce such
restrictions.
10.9 Notwithstanding
that Griffin's employment hereunder may expire or be terminated as provided in
Sections 2 or 9 above, this Agreement shall continue in full force and effect
insofar as is necessary to enforce the covenants and agreements of Griffin
contained in this Section 10. In addition, the Company obligations under
Sections 9, 11 and 19 shall continue in full force and effect with respect to
Griffin or his estate.
11.
Arbitration
.
The
parties shall use their best efforts and good will to settle all disputes by
amicable negotiations. The Company and Griffin agree that, with the
express exception of any dispute or controversy arising under Section 9.2 or
Section 10 of this Agreement or as may be required under Section 3(g) of the
Severance Agreement, any controversy or claim arising out of or in any way
relating to Griffin's employment with the Company, including, without
limitation, any and all disputes concerning this Agreement and the termination
of this Agreement that are not amicably resolved by negotiation, shall be
settled by arbitration in New York, New York, or such other place agreed to by
the parties, as follows:
(a) Any
such arbitration shall be heard before an arbitrator who shall be
impartial. Except as the parties may otherwise agree, the arbitrator
shall be appointed by the American Arbitration Association, from its panel of
commercial arbitrators, in accordance with its rules and procedures. In
determining the appropriate background of the arbitrator, the appointing
authority shall give due consideration to the issues to be resolved, but its
decision as to the identity of the arbitrator shall be final.
(b) An
arbitration may be commenced by any party to this Agreement by the service of a
written Request for Arbitration upon the other affected party. Such
Request for Arbitration shall summarize the controversy or claim to be
arbitrated, and shall be referred by the complaining party to the appointing
authority for appointment of arbitrators ten (10) days following such
service. If an arbitrator is not appointed by the appointing
authority within sixty (60) days following such reference, any party may apply
to any court within the State of New York for an order appointing arbitrators
qualified as set forth below. No Request for Arbitration shall be
valid if it relates to a claim, dispute, disagreement or controversy that would
have been time barred under the applicable statute of limitations had such
claim, dispute, disagreement or controversy been submitted to the courts of the
State of New York.
(c) Judgment
on the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof.
(d) It
is intended that controversies or claims submitted to arbitration under this
Section 11 shall remain confidential, and to that end it is agreed by the
parties that neither the facts disclosed in the arbitration, the issues
arbitrated, nor the views or opinions of any persons concerning them, shall be
disclosed by third persons at any time, except to the extent necessary to
enforce an award or judgment or as required by law or in response to legal
process or in connection with such arbitration. In addition, Griffin shall be
entitled to disclose the facts disclosed in arbitration, the issues arbitrated,
and the views or opinions of any persons concerning them to legal and tax
advisors so long as such advisors agree to be bound by the terms of this
Agreement.
12.
Successors and
Assigns
.
12.1
Assignment by the
Company
. This Agreement shall inure to the benefit of and
shall be binding upon the successors and assigns of the Company.
12.2
Assignment by
Griffin
. Griffin may not assign this Agreement or any part
thereof; provided, however, that nothing herein shall preclude one or more
beneficiaries of Griffin from receiving any amount that may be payable following
the occurrence of his legal incompetency or his death and shall not preclude the
legal representative of his estate from receiving such amount or from assigning
any right hereunder to the person or persons entitled thereto under his will or,
in the case of intestacy, to the person or persons entitled thereto under the
laws of the intestacy applicable to his estate.
13.
Governing
Law
.
This
Agreement shall be deemed a contract made under, and for all purposes shall be
construed in accordance with, the laws of the State of New York without
reference to the principles of conflict of laws.
14.
Entire
Agreement
.
This
Agreement and those plans and agreements referenced herein, including, but not
limited to, the Severance Agreement entered into between the Company and Griffin
on the
30th
day
of
December
,
200
8
, contain
all the understandings and representations between the parties hereto pertaining
to the subject of the employment of Griffin by the Company and supersede all
undertakings and agreements, whether oral or in writing, if any there be,
previously entered into by them with respect thereto.
15.
Amendment or Modification;
Waiver
.
No
provision of this Agreement may be amended or modified unless such amendment or
modification is agreed to in writing, signed by Griffin and by a duly authorized
officer of the Company and approved in advance by the Compensation
Committee. Except as otherwise specifically provided in this
Agreement, no waiver by either party hereto of any breach by the other party of
any condition or provision of the Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar provision or condition at
the same or any prior or subsequent time.
16.
Notices
.
Any
notice to be given hereunder shall be in writing and delivered personally or
sent by overnight mail, such as Federal Express, addressed to the party
concerned at the address indicated below or to such other address as such party
may subsequently give notice of hereunder in writing:
If to
Company:
Steve
Lacy
President
and CEO
Meredith
Corporation
1716
Locust Street
Des
Moines, Iowa 50309-3023
with a
copy to:
John
Zieser, Esquire
Chief
Development Officer, General Counsel
&
Secretary
Meredith
Corporation
1716
Locust Street
Des
Moines, Iowa 50309-3023
If to
Griffin:
Jack
Griffin
271
Westway Road
Southport,
CT 06890
with a
copy to:
Martin
Edel
Miller
& Wrubel P.C.
250 Park
Avenue
New York,
New York 10177
17.
Severability
.
In the
event that any provision or portion of this Agreement shall be determined to be
invalid or unenforceable for any reason, the remaining provisions or portions of
this Agreement shall be unaffected thereby and shall remain in full force and
effect to the fullest extent permitted by law.
18.
Withholding
.
Anything
to the contrary notwithstanding, all payments required to be made by the Company
hereunder to Griffin or his beneficiaries, including his estate, shall be
subject to withholding and deductions as the Company may reasonably determine it
should withhold or deduct pursuant to any applicable law or regulation. In lieu
of withholding or deducting, such amounts, in whole or in part, the Company may,
in its sole discretion, accept other provision for payment as permitted by law,
provided it is satisfied in its sole discretion that all requirements of law
affecting its responsibilities to withhold such taxes have been
satisfied.
19.
Deferred
Payments
.
Any
amounts required under this Agreement to be paid to Griffin that Griffin can and
does elect to defer under any Company benefit plan or program shall be deemed to
have been paid to him for purposes of this Agreement; provided, however, that if
the Company breaches the terms of any deferred compensation plan, arrangement or
agreement with respect to which such amounts are to be paid, Griffin may claim a
breach of this Agreement.
Notwithstanding
anything in this Agreement or elsewhere to the contrary:
(a) If
payment or provision of any amount or other benefit that is “deferred
compensation” subject to Section 409A of the Code at the time otherwise
specified in this Agreement or elsewhere would subject such amount or benefit to
additional tax pursuant to Section 409A(a)(1)(B) of the Code, and if payment or
provision thereof at a later date would avoid any such additional tax, then the
payment or provision thereof shall be postponed to the earliest date on which
such amount or benefit can be paid or provided without incurring any such
additional tax. In the event this Section requires a deferral of any
payment, such payment shall be accumulated and paid in a single lump sum on such
earliest date together with interest for the period of delay, compounded
annually, equal to the prime rate (as published in The Wall Street Journal), and
in effect as of the date the payment should otherwise have been
provided.
(b) If
any payment or benefit permitted or required under this Agreement, or otherwise,
is reasonably determined by either party to be subject for any reason to a
material risk of additional tax pursuant to Section 409A(a)(1)(B) of the Code,
then the parties shall promptly agree in good faith on appropriate provisions to
avoid such risk without materially changing the economic value of this Agreement
to either party.
20.
Survivorship
.
The
respective rights and obligations of the parties hereunder shall survive any
termination of this Agreement to the extent necessary to the intended
preservation of such rights and obligations.
21.
Duty to Mitigate:
Set-off
.
Griffin
shall not be required to seek employment, nor shall the amount of any payment
provided for under this Agreement be reduced by any compensation earned by
Griffin as the result of employment by another employer after the date of
termination of Griffin's employment, or otherwise, except as may be provided
under Section 9.4 with respect to health and welfare insurance benefits. The
Company's obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any set
off, counterclaim, recoupment, defense, or other claim, right or action that the
Company may have against Griffin or others, except to be extent such employment
violates Section 10.5.
22.
Headings
.
Headings
of the sections of this Agreement are intended solely for convenience and no
provision of this Agreement is to be construed by reference to the title of any
section.
23.
Knowledge and
Representation
.
Griffin
acknowledges that the terms of this Agreement have been fully explained to him,
that Griffin understands the nature and extent of the rights and obligations
provided under this Agreement, and that Griffin has been represented by legal
counsel in the negotiation and preparation of this Agreement.
IN
WITNESS WHEREOF, the parties hereto have re-executed and acknowledged this
Agreement as of the date set forth below.
MEREDITH
CORPORATION
By:
/s/ Stephen M.
Lacy
JACK
GRIFFIN
/s/ Jack
Griffin
Date: August
24, 2009
Exhibit
10.17
EMPLOYMENT
AGREEMENT
AGREEMENT
entered into as of August
14th
, 2008, by and
between MEREDITH CORPORATION, an Iowa corporation (the "Company"), and JOHN S.
ZIESER ("Executive"), to become effective August 12, 2008 ("Effective
Date").
WITNESSETH:
WHEREAS,
Executive has been employed by the Company as Chief Development Officer, General
Counsel & Secretary, Meredith Corporation; and
WHEREAS,
the Company wishes to continue to employ Executive pursuant to the terms and
conditions hereof, and in order to induce Executive to enter into this agreement
(the "Agreement") and to secure the benefits to accrue from his performance
hereunder is willing to undertake the obligations assigned to it herein;
and
WHEREAS,
Executive is willing to continue his employment with the Company under the terms
hereof and to enter into the Agreement;
NOW
THEREFORE, in consideration of the premises and mutual covenants contained
herein and for other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1.
Position; Duties;
Responsibilities
.
1.1
Meredith shall employ Executive as its Chief Development Officer, General
Counsel & Secretary, reporting to Steve Lacy (or his successor, if
applicable). While employed hereunder, Executive shall have such responsibility
and authority as has historically attached to being Meredith's Chief Development
Officer, General Counsel & Secretary.
1.2
During the course of his employment, Executive agrees to devote his full time
and attention and give his best efforts and skills to furthering the business
and interests of the Company, which, subject to the mutual agreement of
Executive and Steve Lacy (or his successor, if applicable), which shall not be
unreasonably withheld, may include Executive volunteering his time and efforts
on behalf of charitable, civic, professional organizations and boards of other
corporations.
2.
Term
.
The term
of employment under this Agreement shall commence as the Effective Date, and
shall continue through June 30, 2011, unless sooner terminated in accordance
with this Agreement, and thereafter as herein provided. Executive's term of
employment shall automatically renew for subsequent one (1) year terms, the
first of which would begin on July 1, 2011, subject to the terms of this
Agreement unless either party gives written notice six (6) months or more prior
to the expiration of the then existing term of its decision not to renew (the
"Term").
In the
event this Agreement expires at the end of the Term, as extended if applicable,
after the Company has delivered a Non-Renewal Notice to Executive, such
termination of Executive's employment with the Company will be treated for all
purposes hereunder as a termination of employment by the Company Without Cause
pursuant to Section 9.4.
3.
Base
Salary
.
3.1 The
Company shall pay Executive a base salary at the annual rate of Six Hundred
Thousand Dollars ($600,000.00) ("Base Salary"), retroactive to July 1, 2008 and
continuing through June 30, 2009, payable in accordance with the standard
payroll practices of the Company.
3.2 It is
understood that the Base Salary is to be Executive's minimum annual compensation
during the Term. The Base Salary may increase beginning July 1, 2009 at the
discretion of the Compensation Committee of the Company's Board of Directors
("Compensation Committee"). Base Salary shall include all such increased
amounts, and, if increased, Base Salary shall not thereafter be
decreased.
4.
Long-Term Incentive
Plans
.
During
the Term of this Agreement, Executive shall be eligible to participate in all
long-term incentive plans, including, without limitation, stock incentive plans
adopted by the Company and in effect (collectively, "Long-Term Incentive
Plans"), at levels of awards to be granted by the Compensation Committee
commensurate with the level of Executive's responsibilities and performance
thereof. At its regular August 2008 meeting, the Compensation Committee, in the
exercise of its discretion, shall approve an award to Executive of:
(a) 65,000 non-qualified stock options with a three (3) year cliff vesting
schedule and a strike price equal to the fair market value of Meredith common
stock on the date of such award, and (b) 10,000 Restricted Stock of
Meredith common stock with a three (3) year cliff vesting schedule.
5.
Bonus
.
5.1
During the Term of this Agreement, Executive shall be eligible to participate in
the Meredith Management Incentive Plan (or any successor or replacement annual
incentive plan of the Company) ("MIP"), for such periods as it continues in
effect, subject to the terms of the MIP, and to the discretion vested in the
Compensation Committee under the MIP; provided, however, that the percentage of
Base Salary payable as a target bonus under the MIP shall not be less than
Seventy Percent (70%) (actual Company financial results may result in an actual
bonus paid to Executive equal to less than or more than Seventy Percent (70%) of
Base Salary).
5.2 The
MIP bonus pursuant to this Section 5.1 shall be paid to Executive in conformance
with the Company's normal MIP bonus pay policies following the end of the
respective fiscal year. For the purpose of Section 5.1, MIP bonuses paid with
respect to the fiscal year shall include payments made outside of the fiscal
year but for such fiscal year and shall exclude payments made in the fiscal year
that are for another fiscal year.
6.
Short-Term
Disability
.
During
any period of short-term disability, the Company will continue to pay to
Executive the Base Salary throughout the period of short-term disability, but in
no event beyond the end of Term. In addition, Executive will continue
to receive all rights and benefits under the benefit plans and programs of the
Company in which Executive is a participant as determined in accordance with the
terms of such plans and programs, and Executive shall be eligible to receive the
benefit of his target MIP for the initial year in which the short-term
disability occurs without reduction for the period of short-term
disability. In the event of Executive's death during a period of
short-term disability, the provisions of Section 9.1 shall apply. For
the purposes of this Agreement, short-term disability shall be defined as the
incapacitation of Executive by reason of sickness, accident or other physical or
mental disability which continues for a period not to exceed the fifth month
anniversary of the date of the cause or onset of such
incapacitation. All benefits provided under this Section 6 shall be
in replacement of and not in addition to benefits payable under the Company's
short-term and long-term disability plan(s), except to the extent such
disability plan(s) provide greater benefits than the disability benefits
provided under this Agreement, in which case the applicable disability plan(s)
would supersede the applicable provisions of this Agreement. In the event
Executive is determined to be permanently disabled (as determined under Section
9.2), the provisions of Section 9.2 shall apply.
7.
Employee Benefit
Plans
.
7.1
During the Term of this Agreement and subject to all eligibility requirements,
and to the extent permitted by law, Executive will have the opportunity to
participate in all employee benefit plans and programs generally available to
the Company's employees in accordance with the provisions thereof as in effect
from time to time, including, without limitation, medical coverage, group life
insurance, holidays and vacations, Meredith Savings and Investment Plan (401k)
and the Meredith Employees' Retirement Income Plan, but not including the
Company's short-term and long-term disability plans, except to the extent that
such disability plans provide greater benefits than the disability benefits
provided under this Agreement, in which case the applicable disability plan
would supersede the applicable provisions of this Agreement.
7.2 In
addition to benefits described in Section 7.1 during the Term of this Agreement,
Executive shall also receive or participate in, to the extent permitted by law,
the various perquisites and plans generally available to officers of the Company
in accordance with the provisions thereof as in effect from time to time
including, without limitation, the following perquisites to the extent the
Company continues to offer them: an automobile or automobile allowance, tax and
estate planning, and executive life insurance (if insurable). Executive shall
also be reimbursed for the regular annual dues for one country club incurred by
Executive in furtherance of the Company's business. All such
reimbursements or in-kind benefits shall be payable by the Company on or before
the last day of Executive’s taxable year following the taxable year in which the
expense was incurred. The expenses paid or in-kind benefits provided
by the Company during any taxable year of Executive will not affect the expenses
paid or in-kind benefits provided by the Company in another taxable
year. This right to reimbursement or in-kind benefits is not subject
to liquidation or exchange for another benefit. In addition, Executive shall
participate in the Meredith Replacement Benefit Plan and the Meredith
Supplemental Benefit Plan.
8.
Expense
Reimbursements
.
During
Executive's employment with the Company, Executive will be entitled to receive
reimbursement by the Company for all reasonable, out-of-pocket expenses incurred
by him (in accordance with policies and procedures established by the Company),
in connection with his performing services hereunder, provided Executive
properly accounts therefor. All such reimbursements shall be payable
by the Company on or before the last day of Executive’s taxable year following
the taxable year in which the expense was incurred. The expenses paid by the
Company during any taxable year of Executive will not affect the expenses paid
by the Company in another taxable year. This right to reimbursement
is not subject to liquidation or exchange for another benefit.
9.
Consequences of Termination
of Employment
.
9.1
Death
. In the event
of the death of Executive during the Term of this Agreement or during the period
when payments are being made pursuant to Sections 6 or 9.2, this Agreement shall
terminate and all obligations to Executive shall cease as of the date of death
except that, (a) the Company will pay to the legal representative of his estate
in substantially equal installments the Base Salary until the end of the month
of the first anniversary of Executive's death with each installment treated as a
separate “payment” for purposes of Section 409A of the Code, such that any
payment that would otherwise be payable within 2 ½ months after Executive’s
taxable year in which his employment with the Company is terminated or, if
later, within 2 ½ months after the end of the Company’s taxable year in which
Executive’s employment with the Company is terminated (the “Short Term Deferral
Period”), is exempt from Section 409A of the Code, and (b) all rights and
benefits of Executive under the benefit plans and programs of the Company in
which Executive is a participant, will be provided as determined in accordance
with the terms and provisions of such plans and programs. Any MIP bonus (or
amounts in lieu thereof) pursuant to Section 5, payable for the fiscal year in
which Executive's death occurs, shall be determined by the Compensation
Committee at its meeting following the end of such fiscal year pro rata to the
date of death and promptly paid to Executive's estate. All awards of restricted
stock, stock options and any other benefits under the Long-Term Incentive Plans
shall be handled in accordance with the terms of the relevant plan and
agreements entered into between Executive and the Company with respect to such
awards.
9.2
Disability
. If
Executive shall become permanently incapacitated by reasons of sickness,
accident or other physical or mental disability, as such incapacitation is
certified by a physician chosen by the Company and reasonably acceptable to
Executive (if he is then able to exercise sound judgment), and shall therefore
be unable to perform any substantial gainful activity, then the employment of
Executive hereunder and this Agreement may be terminated by Executive or the
Company upon thirty (30) days' written notice to the other party following such
certification. Should Executive not acquiesce (or should he be unable to
acquiesce) in the selection of the certifying doctor, a doctor chosen by
Executive (or if he is not then able to exercise sound judgment, by his spouse
or personal representative) and reasonably acceptable to the Company shall be
required to concur in the medical determination of incapacitation, failing which
the two doctors shall designate a third doctor whose decision shall be
determinative as of the end of the calendar month in which such concurrence or
third-doctor decision, as the case may be, is made. After the final
certification is made and the 30-day written notice is provided, the Company
shall pay to Executive, at such times as Base Salary provided for in Section 3
of this Agreement would normally be paid, 100% of Base Salary for the first
twelve months following such termination, 75% of Base Salary for the next
twelve-month period and 50% of Base Salary for the remaining period of what
would have constituted the current Term of employment but for termination by
reason of disability with each installment treated as a separate “payment” for
purposes of Section 409A of the Code, such that any payment that would otherwise
be payable during the Short Term Deferral Period is exempt from Section 409A of
the Code. Following the termination pursuant to this Section 9.2, the Company
shall pay or provide to Executive such other rights and benefits of
participation under the employee benefit plans and programs of the Company to
the extent that such continued participation is not otherwise prohibited by
applicable law or by the express terms and provisions of such plans and
programs. Furthermore, nothing contained in this Section 9.2 shall preclude
Executive from receiving the benefit of his target MIP bonus for the initial
year in which a short-term disability occurs pursuant to the provisions of
Section 6. All benefits provided under this Section 9.2 shall be in replacement
of and not in addition to benefits payable under the Company's short-term and
long-term disability plans, except to the extent such disability plans provide
greater benefits than the disability benefits provided under this Agreement, in
which case the applicable disability plan(s) would supersede the applicable
provisions of this Agreement. All awards of restricted stock, stock options and
any other benefits under the Long-Term Incentive Plans shall be handled in
accordance with the terms of the relevant plan and agreements entered into
between Executive and the Company with respect to such awards.
9.3
Due Cause
. The
Company may terminate Executive's employment, remove him as an officer of the
Company and terminate this Agreement at any time for Due Cause. In the event of
such termination for Due Cause, Executive shall continue to receive Base Salary
provided for in this Agreement only through the date of such termination for Due
Cause. Executive shall be entitled to no further benefits under this Agreement,
except that any rights and benefits Executive may have under the employee
benefit plans and programs of the Company, in which Executive is a participant,
shall be determined in accordance with the terms and provisions of such plans
and programs. Executive understands and agrees that in the event of the
termination of employment, removal as an officer and termination of this
Agreement pursuant to this Section 9.3: (a) All awards of restricted stock,
stock options and any other benefits under the Long-Term Incentive Plans shall
be handled in accordance with the terms of the relevant plan and agreements
entered into between Executive and the Company with respect to such awards and
(b) the Company shall have no further obligation to pay any bonus to Executive
under the terms of the MIP or this Agreement, but that the obligations of
Executive under Section 10 shall remain in full force and effect. The term "Due
Cause" shall mean (i) the willful and continued failure of Executive to attempt
to perform substantially his duties with the Company (other than any such
failure resulting from Disability), after a demand for substantial performance
is delivered to Executive, which specifically identifies the manner in which
Executive has not attempted to substantially perform his duties and for those
matters which are subject to cure, a ten (10) day notice to cure is provided, or
(ii) the engaging by Executive in willful misconduct which is materially
injurious to the Company, monetarily or otherwise. For purposes of this
definition, no act, or failure to act, on the part of Executive shall be
considered "willful" unless it is done, or omitted to be done, by Executive in
bad faith and without reasonable belief that Executive's action or omission was
in the best interests of the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or based upon
the advice of counsel for the Company shall be conclusively presumed to be done,
or omitted to be done, by Executive in good faith and in the best interests of
the Company.
9.4
Without Cause
. The
other provisions of this Agreement notwithstanding, the Company may terminate
Executive's employment, remove him as an officer and terminate this Agreement at
any time for whatever reason it deems appropriate, with or without cause and
with or without prior notice. In the event of such a termination of Executive's
employment and this Agreement, Executive shall have no further obligations of
any kind under or arising out of the Agreement (except for the obligations of
Executive under Section 10) and the Company shall be obligated only to promptly
pay Executive within the Short Term Deferral Period the following in a lump sum
payment: (a) 170 percent of Base Salary through the end of the then current Term
of this Agreement (the "Remaining Term") as provided for under Section 2 of this
Agreement, but no less than a total of eighteen (18) months of 170 percent of
Base Salary; and (b) any other amounts due and owing not then paid; provided,
however, that in the event that as a result of such termination of employment
Executive would otherwise be entitled to a severance payment (a "Change of
Control Severance Payment") under Section 4 of the Amended and Restated
Severance Agreement dated as of the
30th
day of
December
, 200
8
, between Executive
and the Company (the "Severance Agreement"), Executive shall be entitled to the
amounts described in clause (b) above and the greater of: (i) the cash severance
benefits described in clause (a) of this sentence and (ii) the cash severance
benefits described in Section 4(a) of the Severance Agreement, but in no event
to both payments.
After the
date of termination under this Section 9.4 or Section 9.6, Executive shall not
be treated as an employee for purposes of the Company's employee benefit plans
or programs even though he may continue to receive payments as provided in this
Section 9.4, except: that Executive and his eligible dependents shall
continue, to the extent permitted by law, to be covered by health and welfare
insurance plans or programs in which Executive and his eligible dependents
participate immediately prior to Executive's termination of employment for the
Remaining Term; provided, however, that if during such time period Executive
should enter into employment with a new employer and become eligible to receive
comparable insurance benefits, the continued insurance benefits described herein
shall automatically cease. In the event that Executive is ineligible, for
whatever reason, to continue to be so covered with respect to any of the
above-referenced plans or programs, the Company shall provide substantially
equivalent coverage through other sources (determined on an after-tax basis). In
the event Executive would otherwise be entitled to a Change of Control Severance
Payment under the Severance Agreement as a result of a termination of employment
under this Section 9.4, Executive may elect to receive the continued health and
welfare insurance benefits under this Section 9.4 or under Section 4(b) of the
Severance Agreement, but in no event both benefits.
Furthermore,
in the event of a termination Without Cause, Executive shall be presumed to have
met eligibility requirements specified in Section 2.4 of the Meredith
Replacement Benefit Plan and the Meredith Supplemental Benefit Plan or any
successor thereto and he shall be entitled to the amounts that have accrued
under such plans through the date of his termination without cause. All awards
of restricted stock and stock options shall automatically vest and be
exercisable for the full unexpired term of the option.
Executive
agrees that the payments described in this Section 9.4 shall be full and
adequate compensation to Executive for all damages Executive may suffer as a
result of the termination of his employment pursuant to this Sections 9.4 or
9.6, and in consideration of the payments and benefits provided in this Section
9.4, Executive agrees to execute a Waiver and Release Agreement in the form
attached hereto as Attachment A; provided, however, that, except as specifically
provided for under this Section 9.4, any rights and benefits Executive may have
under the employee benefit plans and programs of the Company, in which Executive
is a participant, shall be determined in accordance with the terms and
provisions of such plans and programs.
9.5
Employee Voluntary
.
In the event Executive terminates his employment of his own volition prior to
the end of the term of this Agreement, except for a termination as described in
Section 9.6 and except for termination for Good Reason as specifically provided
otherwise in the Severance Agreement, such termination shall constitute a
voluntary termination and in such event the Company's only obligation to
Executive shall be to make Base Salary payments provided for in this Agreement
through the date of such voluntary termination. Any rights and benefits
Executive may have under the employee benefit plans and programs of the Company,
in which he is a participant, shall be determined in accordance with the terms
and provisions of such plans and programs. Executive understands and agrees that
in the event of the termination of employment pursuant to this Section 9.5: (a)
All awards of restricted stock, stock options and any other benefits under the
Long-Term Incentive Plans shall be handled in accordance with the terms of the
relevant plan and agreements entered into between Executive and the Company with
respect to such awards; and (b) the Company shall have no further obligation to
pay any bonuses to Executive under the terms of the MIP or this
Agreement.
9.6
Change in Title, Duties or
Reporting Relationship
. If at any time prior to the end of the Term of
this Agreement (a) an adverse change is made to Executive's title as Chief
Development Officer, General Counsel & Secretary, (b) an adverse material
change is made with respect to Executive's having such responsibility and
authority as has historically attached to being Chief Development Officer,
General Counsel & Secretary, or (c) a change is made in Executive's
reporting relationship to Steve Lacy or his successor, Executive shall have the
right to terminate his employment with the Company after first giving the
Company written notice of the violation within ninety (90) days of its initial
existence and providing a period of thirty (30) days in which the violation may
be cured and by thereafter, if such violation has not been corrected or cured,
by giving written notice within ninety (90) days of his termination,
and such termination shall be deemed to be termination by the Company without
"Due Cause," and such termination shall be treated in accordance with the terms
of Section 9.4 above.
9.7 The
Company agrees to continue Executive's coverage under such directors and
officers' liability insurance policies as shall from time to time be in effect
for active officers and employees for not less than six years following
Executive's termination of employment.
10.
Covenants of
Executive
.
10.1
Executive acknowledges that as a result of the services to be rendered to the
Company hereunder, Executive will be brought into close contact with many
confidential affairs of the Company, its subsidiaries and affiliates, not
readily available to the public. Executive further acknowledges that the
services to be performed under this Agreement are of a special, unique, unusual,
extraordinary and intellectual character; that the business of the Company is
international in scope; that its goods and services are marketed throughout the
United States and various parts of the world and that the Company competes with
other organizations that are or could be located in nearly any part of the
United States and in various parts of the world.
10.2 In
recognition of the foregoing, Executive covenants and agrees that, except as is
necessary in providing services under this Agreement or to the extent necessary
to comply with law or the valid order of a court or government agency of
competent jurisdiction, Executive will not knowingly use for his own benefit nor
knowingly divulge any Confidential Information and Trade Secrets of the Company,
its subsidiaries and affiliated entities, which are not otherwise in the public
domain and, so long as they remain Confidential Information and Trade Secrets
not in the public domain, will not intentionally disclose them to anyone outside
of the Company either during or after his employment. For the purposes of this
Agreement, "Confidential Information and Trade Secrets" of the Company means
information which is secret to the Company, its subsidiaries and affiliated
entities. It may include, but is not limited to, information relating to the
magazines, books, publications, products, services, television stations, real
estate franchise operations, new and future concepts and business of the
Company, its subsidiaries and affiliates, in the form of memoranda, reports,
computer software and data banks, customer lists, employee lists, books,
records, financial statements, manuals, papers, contracts and strategic plans.
As a guide, Executive is to consider information originated, owned, controlled
or possessed by the Company, its subsidiaries or affiliated entities which is
not disclosed in printed publications stated to be available for distribution
outside the Company, its subsidiaries and affiliated entities as being secret
and confidential. In instances where doubt does or should reasonably be
understood to exist in Executive's mind as to whether information is secret and
confidential to the Company, its subsidiaries and affiliated entities, Executive
agrees to request an opinion, in writing, from Meredith's Chief Executive
Officer.
10.3
Anything to the contrary in this Section 10 notwithstanding, Executive shall
disclose to the public and discuss such information as is customary or legally
required to be disclosed by a Company whose stock is publicly traded, or that is
otherwise legally required to disclose, or that is in the best interests of the
Company to do so.
10.4
Executive will deliver promptly to the Company on the termination of his
employment with the Company, or at any other time the Company may so request,
all memoranda, notes, records, reports and other documents relating to the
Company, its subsidiaries and affiliated entities, and all property owned by the
Company, its subsidiaries and affiliated entities, which Executive obtained
while employed by the Company, and which Executive may then possess or have
under his control.
10.5
During and for a period of twenty-four (24) months after the termination of
employment with the Company (except that the time period of such restrictions
shall be extended by any period during which Executive is in violation of this
Section 10.5), Executive will not knowingly interfere with, disrupt or attempt
to disrupt, any then existing relationship, contractual or otherwise between the
Company, its subsidiaries or affiliated entities, and any customer, client,
supplier, or agent, or knowingly solicit, or assist any other entity in
soliciting for employment, any person known to Executive to be an agent or
executive employee of the Company, its subsidiaries, or affiliated entities, it
being understood that the right to seek or enter into contractual arrangements
with independent contractors, including, without limitation, consultants,
professionals, authors, advertisers and the like, shall not be abridged by
reason of this Section 10. In addition, in the event of a voluntary termination
under Section 9.5, during and for a period of twenty-four (24) months after the
termination of employment with the Company, Executive will not render services
directly or indirectly as an employee, officer, director, consultant,
independent contractor or in any other capacity to any person or entity that is
a competitor of the Company.
10.6
Executive will promptly disclose to the Company all inventions, processes,
original works of authorship, trademarks, patents, improvements and discoveries
related to the business of the Company, its subsidiaries and affiliated entities
(collectively "Developments"), conceived or developed during Executive's
employment with the Company and based upon information to which he had access
during the term of employment, whether or not conceived during regular working
hours, through the use of the Company time, material or facilities or otherwise.
All such Developments shall be the sole and exclusive property of the Company,
and upon request Executive shall deliver to the Company all outlines,
descriptions and other data and records relating to such Developments, and shall
execute any documents deemed necessary by the Company to protect the Company's
rights hereunder. Executive agrees upon request to assist the Company to obtain
United States or foreign letters patent and copyright registrations covering
inventions and original works of authorship belonging to the Company hereunder.
If the Company is unable because of Executive's mental or physical incapacity to
secure Executive's signature to apply for or to pursue any application for any
United States or foreign letters patent or copyright registrations covering
inventions and original works of authorship belonging to the Company hereunder,
then Executive hereby irrevocably designates and appoints the Company and its
duly authorized officers and agents as his agent and attorney in fact, to act
for and in his behalf and stead to execute and file any such applications and to
do all other lawfully permitted acts to further the prosecution and issuance of
letters patent or copyright registrations thereon with the same legal force and
effect as if executed by him. Executive hereby waives and quitclaims to the
Company any and all claims, of any nature whatsoever, that he may hereafter have
for infringement of any patents or copyright resulting from any such application
for letters patent or copyright registrations belonging to the Company
hereunder.
10.7
Executive agrees that the remedy at law for any breach or threatened breach of
any covenant contained in this Section 10 may be inadequate and that the
Company, in addition to such other remedies as may be available to it, in law or
in equity, shall be entitled to injunctive relief without bond or other
security.
10.8
Although the restrictions contained in Sections 10.1, 10.2, 10.4 and 10.5 above
are considered by the parties hereto to be fair and reasonable in the
circumstances, it is recognized that restrictions of such nature may fail for
technical reasons, and accordingly it is hereby agreed that if any of such
restrictions shall be adjudged to be void or unenforceable for whatever reason,
but would be valid if part of the wording thereof were deleted, or the period
thereof reduced or the area dealt with thereby reduced in scope, the
restrictions contained in Section 10.1, 10.2, 10.4 and 10.5 shall be enforced to
the maximum extend permitted by law, and the parties consent and agree that such
scope or wording may be accordingly judicially modified in any proceeding
brought to enforce such restrictions.
10.9
Notwithstanding that Executive's employment hereunder may expire or be
terminated as provided in Sections 2 or 9 above, this Agreement shall continue
in full force and effect insofar as is necessary to enforce the covenants and
agreements of Executive contained in this Section 10. In addition, the Company
obligations under Sections 9, 11 and 19 shall continue in full force and effect
with respect to Executive or his estate.
11.
Arbitration
.
The
parties shall use their best efforts and good will to settle all disputes by
amicable negotiations. The Company and Executive agree that, with the express
exception of any dispute or controversy arising under Section 9.2 or Section 10
of this Agreement or as may be required under Section 3(g) of the Severance
Agreement, any controversy or claim arising out of or in any way relating to
Executive's employment with the Company, including, without limitation, any and
all disputes concerning this Agreement and the termination of this Agreement
that are not amicably resolved by negotiation, shall be settled by arbitration
in Des Moines, Iowa, or such other place agreed to by the parties, as
follows:
(a) Any
such arbitration shall be heard before an arbitrator who shall be impartial.
Except as the parties may otherwise agree, the arbitrator shall be appointed by
the American Arbitration Association, from its panel of commercial arbitrators,
in accordance with its rules and procedures. In determining the appropriate
background of the arbitrator, the appointing authority shall give due
consideration to the issues to be resolved, but its decision as to the identity
of the arbitrator shall be final.
(b) An
arbitration may be commenced by any party to this Agreement by the service of a
written Request for Arbitration upon the other affected party. Such Request for
Arbitration shall summarize the controversy or claim to be arbitrated, and shall
be referred by the complaining party to the appointing authority for appointment
of arbitrators ten (10) days following such service. If an arbitrator is not
appointed by the appointing authority within sixty (60) days following such
reference, any party may apply to any court within the State of Iowa for an
order appointing arbitrators qualified as set forth below. No Request for
Arbitration shall be valid if it relates to a claim, dispute, disagreement or
controversy that would have been time barred under the applicable statute of
limitations had such claim, dispute, disagreement or controversy been submitted
to the courts of the State of Iowa.
(c)
Judgment on the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof.
(d) It is
intended that controversies or claims submitted to arbitration under this
Section 11 shall remain confidential, and to that end it is agreed by the
parties that neither the facts disclosed in the arbitration, the issues
arbitrated, nor the views or opinions of any persons concerning them, shall be
disclosed by third persons at any time, except to the extent necessary to
enforce an award or judgment or as required by law or in response to legal
process or in connection with such arbitration. In addition, Executive shall be
entitled to disclose the facts disclosed in arbitration, the issues arbitrated,
and the views or opinions of any persons concerning them to legal and tax
advisors so long as such advisors agree to be bound by the terms of this
Agreement.
12.
Successors and
Assigns
.
12.1
Assignment by the
Company
. This Agreement shall inure to the benefit of and shall be
binding upon the successors and assigns of the Company.
12.2
Assignment by
Executive
. Executive may not assign this Agreement or any part thereof;
provided, however, that nothing herein shall preclude one or more beneficiaries
of Executive from receiving any amount that may be payable following the
occurrence of his legal incompetency or his death and shall not preclude the
legal representative of his estate from receiving such amount or from assigning
any right hereunder to the person or persons entitled thereto under his will or,
in the case of intestacy, to the person or persons entitled thereto under the
laws of the intestacy applicable to his estate.
13.
Governing
Law
.
This
Agreement shall be deemed a contract made under, and for all purposes shall be
construed in accordance with, the laws of the State of Iowa without reference to
the principles of conflict of laws.
14.
Entire
Agreement
.
This
Agreement and those plans and agreements referenced herein, including, but not
limited to, the Severance Agreement entered into between the Company and
Executive on the
30th
day of
December
, 200
8
, contain all the
understandings and representations between the parties hereto pertaining to the
subject of the employment of Executive by the Company and supersede all
undertakings and agreements, whether oral or in writing, if any there be,
previously entered into by them with respect thereto.
15.
Amendment or Modification;
Waiver
.
No
provision of this Agreement may be amended or modified unless such amendment or
modification is agreed to in writing, signed by Executive and by a duly
authorized officer of the Company and approved in advance by the Compensation
Committee. Except as otherwise specifically provided in this Agreement, no
waiver by either party hereto of any breach by the other party of any condition
or provision of the Agreement to be performed by such other party shall be
deemed a waiver of a similar or dissimilar provision or condition at the same or
any prior or subsequent time.
16.
Notices
.
Any
notice to be given hereunder shall be in writing and delivered personally or
sent by overnight mail, such as Federal Express, addressed to the party
concerned at the address indicated below or to such other address as such party
may subsequently give notice of hereunder in writing:
If to
Company:
Steve
Lacy
President
and CEO
Meredith
Corporation
1716
Locust Street
Des
Moines, Iowa 50309-3023
If to
Executive:
John S.
Zieser
3721
Turnberry
West Des
Moines, Iowa 50265
17.
Severability
.
In the
event that any provision or portion of this Agreement shall be determined to be
invalid or unenforceable for any reason, the remaining provisions or portions of
this Agreement shall be unaffected thereby and shall remain in full force and
effect to the fullest extent permitted by law.
18.
Withholding
.
Anything
to the contrary notwithstanding, all payments required to be made by the Company
hereunder to Executive or his beneficiaries, including his estate, shall be
subject to withholding and deductions as the Company may reasonably determine it
should withhold or deduct pursuant to any applicable law or regulation. In lieu
of withholding or deducting, such amounts, in whole or in part, the Company may,
in its sole discretion, accept other provision for payment as permitted by law,
provided it is satisfied in its sole discretion that all requirements of law
affecting its responsibilities to withhold such taxes have been
satisfied.
19.
Deferred
Payments
.
Any
amounts required under this Agreement to be paid to Executive that Executive can
and does elect to defer under any Company benefit plan or program shall be
deemed to have been paid to him for purposes of this Agreement; provided,
however, that if the Company breaches the terms of any deferred compensation
plan, arrangement or agreement with respect to which such amounts are to be
paid, Executive may claim a breach of this Agreement.
Notwithstanding
anything in this Agreement or elsewhere to the contrary:
(a) If
payment or provision of any amount or other benefit that is "deferred
compensation" subject to Section 409A of the Code at the time otherwise
specified in this Agreement or elsewhere would subject such amount or benefit to
additional tax pursuant to Section 409A(a)(1)(B) of the Code, and if payment or
provision thereof at a later date would avoid any such additional tax, then the
payment or provision thereof shall be postponed to the earliest date on which
such amount or benefit can be paid or provided without incurring any such
additional tax. In the event this Section requires a deferral of any payment,
such payment shall be accumulated and paid in a single lump sum on such earliest
date together with interest for the period of delay, compounded annually, equal
to the prime rate (as published in The Wall Street Journal), and in effect as of
the date the payment should otherwise have been provided.
(b) If
any payment or benefit permitted or required under this Agreement, or otherwise,
is reasonably determined by either party to be subject for any reason to a
material risk of additional tax pursuant to Section 409A(a)(1)(B) of the Code,
then the parties shall promptly agree in good faith on appropriate provisions to
avoid such risk without materially changing the economic value of this Agreement
to either party.
20.
Survivorship
.
The
respective rights and obligations of the parties hereunder shall survive any
termination of this Agreement to the extent necessary to the intended
preservation of such rights and obligations.
21.
Duty to Mitigate:
Set-off
.
Executive
shall not be required to seek employment, nor shall the amount of any payment
provided for under this Agreement be reduced by any compensation earned by
Executive as the result of employment by another employer after the date of
termination of Executive's employment, or otherwise, except as may be provided
under Section 9.4 with respect to health and welfare insurance benefits. The
Company's obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any set
off, counterclaim, recoupment, defense, or other claim, right or action that the
Company may have against Executive or others, except to be extent such
employment violates Section 10.5.
22.
Headings
.
Headings
of the sections of this Agreement are intended solely for convenience and no
provision of this Agreement is to be construed by reference to the title of any
section.
23.
Knowledge and
Representation
.
Executive
acknowledges that the terms of this Agreement have been fully explained to him,
that Executive understands the nature and extent of the rights and obligations
provided under this Agreement, and that Executive has been represented by legal
counsel in the negotiation and preparation of this Agreement.
IN
WITNESS WHEREOF, the parties hereto have re-executed and acknowledged this
Agreement as of the date set forth below.
MEREDITH
CORPORATION
By:
/s/ Stephen M.
Lacy
JOHN
S. ZIESER
/s/ John S.
Zieser
Date:
August 24, 2009
Exhibit
21
|
|
Subsidiaries
of the Registrant
|
|
|
|
|
|
|
|
|
Significant
Subsidiary
|
State
of Incorporation
|
Percentage
Owned
|
|
|
|
|
|
|
|
Meredith
Holding Company (MHC)
|
Iowa
|
100%
|
|
|
|
|
|
|
|
Locust
Street Insurance Company
|
New
York
|
100%
by MHC
|
All other
subsidiaries of the Company, considered in the aggregate as a single subsidiary,
would not constitute a significant subsidiary.
Exhibit
23
Consent
of Independent Registered Public Accounting Firm
The Board
of Directors
Meredith
Corporation:
We
consent to the incorporation by reference in the registration statement No.
333-72635 on Form S-3 and No. 333-87888, No. 333-21979, No. 333-04033, No.
33-2094, No. 2-54974, No. 33-59258, and No. 333-125675, each on Form S-8 of
Meredith Corporation of our report dated August 24, 2009, with respect to the
consolidated balance sheets of Meredith Corporation and subsidiaries as of
June 30, 2009 and 2008, and the related consolidated statements of earnings
(loss), shareholders’ equity, and cash flows for each of the years in the
three-year period ended June 30, 2009, and the related financial statement
schedule, and the effectiveness of internal control over financial reporting as
of June 30, 2009, which report appears in the June 30, 2009 annual
report on Form 10-K of Meredith Corporation.
/s/ KPMG
LLP
Des
Moines, Iowa
August
24, 2009
Exhibit
31.1
CERTIFICATION
I,
Stephen M. Lacy, certify that:
|
1.
|
I
have reviewed this Annual Report on Form 10-K of Meredith
Corporation;
|
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
|
|
3.
|
Based
on my knowledge, the financial statements and other financial information
included in this report fairly present, in all material respects, the
financial condition, results of operations, and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
|
|
4.
|
The
registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
|
|
a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
|
|
|
b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
|
|
c)
|
Evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
|
|
|
|
d)
|
Disclosed
in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
|
|
|
5.
|
The
registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent
functions):
|
|
|
|
a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize, and report financial information; and
|
|
|
|
b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
|
|
|
Date: August
24, 2009
|
/s/
Stephen M. Lacy
|
|
|
|
|
|
|
|
Stephen
M. Lacy, President and
Chief
Executive Officer and Director
(Principal
Executive Officer)
|
|
A
signed original of this written statement required by Section 302 has been
provided to Meredith and will be retained by Meredith and furnished to the
Securities and Exchange Commission or its staff upon request.
Exhibit
31.2
CERTIFICATION
I, Joseph
H. Ceryanec, certify that:
|
1.
|
I
have reviewed this Annual Report on Form 10-K of Meredith
Corporation;
|
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
|
|
3.
|
Based
on my knowledge, the financial statements and other financial information
included in this report fairly present, in all material respects, the
financial condition, results of operations, and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
|
|
4.
|
The
registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
|
|
a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
|
|
|
b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
|
|
c)
|
Evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
|
|
|
|
d)
|
Disclosed
in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
|
|
|
5.
|
The
registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent
functions):
|
|
|
|
a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize, and report financial information; and
|
|
|
|
b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
|
|
|
Date: August
24, 2009
|
/s/
Joseph H. Ceryanec
|
|
|
|
|
|
|
|
Joseph
H. Ceryanec, Vice President -
Chief
Financial Officer (Principal
Financial
and Accounting Officer)
|
|
A
signed original of this written statement required by Section 302 has been
provided to Meredith and will be retained by Meredith and furnished to the
Securities and Exchange Commission or its staff upon request.
Exhibit 32
CERTIFICATION
PURSUANT TO
18 U.S.C.
SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Annual Report on Form 10-K of Meredith Corporation (the
Company) for the fiscal year ended June 30, 2009, as filed with the Securities
and Exchange Commission on the date hereof (the Report), we the undersigned
certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
|
1)
|
The
Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
|
|
|
|
|
2)
|
The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
|
|
/s/ Stephen
M. Lacy
|
|
/s/
Joseph H. Ceryanec
|
|
|
Stephen
M. Lacy, President and
Chief
Executive Officer and Director
(Principal
Executive Officer)
|
|
Joseph
H. Ceryanec, Vice President -
Chief
Financial Officer (Principal
Financial
and Accounting Officer)
|
|
|
|
|
|
|
|
Dated: August
24, 2009
|
|
|
|
A
signed original of this written statement required by Section 906 has been
provided to Meredith and will be retained by Meredith and furnished to the
Securities and Exchange Commission or its staff upon request.
