-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FAVRnGeyxCjV+C88FQDBbGE40jj6t0kUTFTzk8IpZyox+dlNYr2WrMTSltLLTL0Y wREOb4NibZWuQ4jxyJCWZg== 0000950134-00-001969.txt : 20000316 0000950134-00-001969.hdr.sgml : 20000316 ACCESSION NUMBER: 0000950134-00-001969 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 20 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000315 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BELO A H CORP CENTRAL INDEX KEY: 0000356080 STANDARD INDUSTRIAL CLASSIFICATION: NEWSPAPERS: PUBLISHING OR PUBLISHING & PRINTING [2711] IRS NUMBER: 750135890 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-08598 FILM NUMBER: 570661 BUSINESS ADDRESS: STREET 1: 400 S RECORD ST STREET 2: COMMUNICATIONS CENTER CITY: DALLAS STATE: TX ZIP: 75202 BUSINESS PHONE: 2149776600 MAIL ADDRESS: STREET 1: P O BOX 655237 CITY: DALLAS STATE: TX ZIP: 75265 10-K 1 FORM 10-K FOR FISCAL YEAR END DECEMBER 31, 1999 1 - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NO. 1-8598 A. H. BELO CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 75-0135890 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) P. O. BOX 655237 DALLAS, TEXAS 75265-5237 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (214) 977-6606 Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED ------------------- ----------------------------------------- SERIES A COMMON STOCK, $1.67 PAR VALUE NEW YORK STOCK EXCHANGE PREFERRED SHARE PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: SERIES B COMMON STOCK, $1.67 PAR VALUE -------------------------------------- (Title of class) 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 --- --- 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. [ ] The aggregate market value of the registrant's voting stock held by nonaffiliates on February 29, 2000, based on the closing price for the registrant's Series A Common Stock on such date as reported on the New York Stock Exchange, was approximately $1,360,866,000. * Shares of Common Stock outstanding at February 29, 2000: 118,769,176 shares. (Consisting of 99,681,964 shares of Series A Common Stock and 19,087,212 shares of Series B Common Stock.) * For purposes of this calculation, the market value of a share of Series B Common Stock was assumed to be the same as the share of Series A Common Stock into which it is convertible. Documents incorporated by reference: Portions of the registrant's Proxy Statement relating to the Annual Meeting of Shareholders to be held May 10, 2000 are incorporated by reference into Part III (Items 10, 11, 12 and 13). Also incorporated by reference into Part II are certain items included in the Company's 1999 Annual Report to Shareholders (Items 5, 6, 7, 7A and 8). 2 A. H. BELO CORPORATION FORM 10-K TABLE OF CONTENTS
PAGE ---- PART I Item 1. Business.......................................................................................... 1 Item 2. Properties........................................................................................ 8 Item 3. Legal Proceedings................................................................................. 8 Item 4. Submission of Matters to a Vote of Security Holders............................................... 8 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters............................. 9 Item 6. Selected Financial Data........................................................................... 9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations............. 9 Item 7A. Quantitative and Qualitative Disclosures about Market Risks....................................... 9 Item 8. Financial Statements and Supplementary Data (see Index to Financial Statements below)............. 9 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.............. 9 PART III Item 10. Directors and Executive Officers of the Registrant................................................ 9 Item 11. Executive Compensation............................................................................ 9 Item 12. Security Ownership of Certain Beneficial Owners and Management.................................... 10 Item 13. Certain Relationships and Related Transactions.................................................... 10 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................................... 10 Signatures .................................................................................................. 13
1 3 PART I ITEM 1. BUSINESS Belo (the "Company") is one of the nation's largest media companies, with a diversified group of television broadcasting, newspaper publishing, interactive media and cable news operations. The Company's group of 18 television stations currently reaches 14 percent of U.S. television households. In addition, the Company manages two television stations through local marketing agreements ("LMA"). Six of the Company's television stations are located in four major metropolitan areas which are among the fastest growing in the country: WFAA-TV (ABC) in Dallas/Fort Worth, KHOU-TV (CBS) in Houston, KING-TV (NBC) and KONG-TV (Independent or "IND") in Seattle/Tacoma and KTVK-TV (IND) and KASW-TV (Warner Brothers Network or "WB") in Phoenix. These stations are located in the top 17 television markets. Belo has nine stations in the top 30 markets, 13 stations in the top 50 markets, and network affiliations as follows: four ABC affiliates, six CBS affiliates, four NBC affiliates, two independent stations, one WB affiliate and one FOX affiliate. Fourteen of the Company's 18 stations are ranked either number one or two in overall sign-on/sign-off audience delivery. Belo's television stations have been recognized with numerous local, state and national awards for outstanding news coverage. Since 1957, Belo's television stations have garnered 14 Alfred I. duPont-Columbia Awards, 11 George Foster Peabody Awards and 21 Edward R. Murrow Awards - the industry's most prestigious honors. Belo's Publishing Division is headed by The Dallas Morning News, which has the country's seventh-largest Sunday circulation and ninth-largest daily circulation, and The Providence Journal, the leading newspaper in terms of both advertising and circulation in Rhode Island and southeastern Massachusetts. Belo also owns The Press-Enterprise, a daily newspaper serving Riverside, California, and other daily newspapers as follows: the Messenger-Inquirer in Owensboro, Kentucky; The Eagle in Bryan-College Station, Texas; the Denton Record-Chronicle in Denton, Texas; and The Gleaner in Henderson, Kentucky. In addition, the Company publishes the Arlington Morning News, eight community newspapers (seven in the Dallas/Fort Worth area and one in the Riverside suburban area) and operates certain commercial printing businesses. The Dallas Morning News is one of the leading newspaper franchises in America. The Dallas Morning News' success is founded upon the highest standards of journalistic excellence, with an emphasis on comprehensive news, information and community service. The newspaper's reporting and photography initiatives have earned six Pulitzer Prizes since 1986. The Providence Journal also has a long history of journalistic excellence and service to its community. It is America's oldest major daily newspaper of general circulation and continuous publication. The Providence Journal has earned four Pulitzer Prizes since 1945. Belo Interactive, Inc. ("Belo Interactive"), Belo's Internet subsidiary, includes the Web site operations of Belo's television stations and newspapers, interactive alliances and partnerships, and a broad range of Internet-based products and services. Belo's cable news operations utilize the news resources of KING-TV, KGW-TV, KREM-TV and KTVB-TV in the Pacific Northwest and WFAA-TV, KHOU-TV, KENS-TV, KVUE-TV, The Dallas Morning News and The Eagle in Texas. Northwest Cable News ("NWCN") and Texas Cable News ("TXCN") provide regional news coverage in a comprehensive 24-hour a day format. The Company believes the success of its media franchises is built upon providing local and regional news, information and community service of the highest caliber. These principles have attracted and built relationships with viewers, readers and advertisers and have guided Belo's success for 158 years. Note 14 to the Consolidated Financial Statements, which is incorporated by reference to Belo's Annual Report to Shareholders, contains information about the Company's industry segments for the years ended December 31, 1999, 1998 and 1997. 1 4 TELEVISION BROADCASTING The Company's television broadcast operations began in 1950 with the acquisition of WFAA-TV shortly after the station commenced operations. In 1984, the Company expanded its television operations with the purchase of stations in Houston, Sacramento, Hampton/Norfolk and Tulsa. In June 1994 and February 1995, the Company acquired stations in New Orleans and Seattle/Tacoma, respectively. The Providence Journal Company ("PJC") acquisition in February 1997 added nine television stations, including NBC-affiliated KING-TV in Seattle/Tacoma. In accordance with Federal Communications Commission ("FCC" or "Commission") regulations, which at that time prohibited ownership of two or more stations in a single market, Belo exchanged its United Paramount Network ("UPN") affiliate, KIRO-TV, in Seattle/Tacoma for CBS affiliate KMOV-TV in St. Louis in June 1997. In October 1997, Belo acquired CBS affiliate KENS-TV in San Antonio. In June 1999, Belo acquired KVUE-TV, the ABC affiliate in Austin in exchange for KXTV, the Company's ABC affiliate in Sacramento. KASA-TV (FOX) in Albuquerque and KHNL-TV (NBC) in Honolulu were sold in October 1999, and KTVK-TV (IND) in Phoenix was acquired in November 1999. On March 1, 2000, Belo acquired KONG-TV (IND) in Seattle/Tacoma and KASW-TV (WB) in Phoenix, which were previously operated by Belo under LMAs. The following table sets forth information for each of the Company's stations (including stations with which it has an LMA) and their markets:
- ------------------------------------------------------------------------------------------------------------------------- Number of Station Station Market Commercial Rank in Audience Rank Year Network Stations in Market Share in Market (1) Station Acquired Affiliation Channel Market(2) (3) Market(4) - -------------------------------- -------- ------------ --------- ----------- --------- -------------- --------- ---------- Dallas/Fort Worth 7 WFAA-TV 1950 ABC 8 15 1 16 Houston 11 KHOU-TV 1984 CBS 11 15 2 14 Seattle/Tacoma 12 KING-TV 1997 NBC 5 10 1* 15 Seattle/Tacoma 12 KONG-TV 2000 IND 16 10 7* 2 Phoenix 17 KTVK-TV 1999 IND 3 12 2* 11 Phoenix 17 KASW-TV 2000 WB 61 12 6 5 St. Louis 21 KMOV-TV 1997 CBS 4 8 2 16 Portland 23 KGW-TV 1997 NBC 8 8 2* 14 Charlotte 28 WCNC-TV 1997 NBC 36 8 3 9 San Antonio 37 KENS-TV 1997 CBS 5 9 2 13 New Orleans 41 WWL-TV 1994 CBS 4 8 1 21 Hampton/Norfolk 42 WVEC-TV 1984 ABC 13 7 2 11 Louisville 48 WHAS-TV 1997 ABC 11 7 1* 14 Tulsa 58 KOTV 1984 CBS 6 10 2 19 Austin 61 KVUE-TV 1999 ABC 24 6 1 17 Tucson 72 KMSB-TV 1997 FOX 11 7 3 7 Tucson [LMA] 72 KTTU-TV --- UPN 18 7 4* 2 Spokane 78 KREM-TV 1997 CBS 2 6 2 15 Spokane [LMA] 78 KSKN-TV --- UPN/WB 22 6 3* 2 Boise 125 KTVB-TV 1997 NBC 7 5 1 23 - -------------------------------- -------- ------------ --------- ---------- --------- -------------- --------- ----------
* Tied with one or more other stations in the market. (1) Market rank is based on the relative size of the television market Designated Market Area ("DMA"), among the 210 generally recognized DMAs in the United States, based on November 1999 Nielsen estimates. (2) Represents the number of television stations (both VHF and UHF) broadcasting in the market, excluding public stations, low power broadcast stations and national cable channels. (3) Station rank is derived from the station's rating, which is based on November 1999 Nielsen estimates of the number of television households tuned to the Company's station for the Sunday-Saturday 7:00 a.m. to 1:00 a.m. period ("sign-on/sign-off") as a percentage of the number of television households in the market. (4) Station audience share is based on November 1999 Nielsen estimates of the number of television households tuned to the Company's station as a percentage of the number of television households with sets in use in the market for the sign-on/sign-off period. Commercial television stations generally fall into one of three categories. The first category of stations includes those affiliated with one of the four major national networks (ABC, CBS, NBC and FOX). The second category is comprised of stations affiliated with newer national networks, such as UPN, WB, and Paxson Communications Corporation ("PAX TV"). The third category includes independent stations that are not affiliated with any network and rely principally on local and syndicated programming. Affiliation with a television network can have a significant influence on the revenues of a television station because the audience ratings generated by a network's programming can affect the rates at which a station can sell advertising time. Generally, rates for national and local spot advertising sold by the Company are determined by each station, which receives all of the revenues, net of 2 5 agency commissions, for that advertising. Rates are influenced by the demand for advertising time, the popularity of the station's programming and market size. The Company's network affiliation agreements generally provide the station with the exclusive right to broadcast in its local service area all programs transmitted by the network with which the station is affiliated. In return, the network has the right to sell most of the advertising time during such broadcasts. Stations generally receive a specified amount of network compensation for broadcasting network programming. To the extent that a station's preemptions of network programming exceed a designated amount, that compensation may be reduced. These payments are also subject to decreases by the network during the term of an affiliation agreement under other circumstances, with provisions for advance notice. The Company has network affiliation agreements in place with ABC, CBS, NBC, FOX and WB. Belo's two stations with which it has LMAs have affiliation agreements with UPN and one has a secondary affiliation with WB. NEWSPAPER PUBLISHING The Company's principal newspaper, The Dallas Morning News, was established in 1885. In late 1995 and early 1996, the Company expanded its Publishing Division by acquiring daily newspapers serving Bryan-College Station, Texas and Owensboro, Kentucky. The Providence Journal was acquired in February 1997 and The Gleaner, serving Henderson, Kentucky, was acquired in March 1997. In July 1997, Belo completed the acquisition of The Press-Enterprise, a daily newspaper serving Riverside, California. In June 1999, Belo acquired the Denton Record-Chronicle, in Denton, Texas. The following table sets forth information concerning the Company's daily newspaper operations:
- ------------------------------------------------------------------------------------------------------------------------ 1999 1998 ------------------------------ ----------------------------- Daily Sunday Daily Sunday Newspaper Location Circulation(1) Circulation(1) Circulation(1) Circulation(1) - ---------------------------- -------------------------- --------------- -------------- -------------- -------------- The Dallas Morning News Dallas, TX 518,548 781,959 515,181 780,084 The Providence Journal Providence, RI 166,888 237,629 167,381 239,193 The Press-Enterprise Riverside, CA 165,043 171,813 161,612 168,222 Messenger-Inquirer Owensboro, KY 31,764 34,574 31,767 34,991 The Eagle Bryan-College Station, TX 23,493 28,295 22,449 27,219 Denton Record-Chronicle Denton, TX 15,967 18,808 15,843 19,005 The Gleaner Henderson, KY 11,109 13,044 11,152 13,167 - ---------------------------- -------------------------- --------------- -------------- --- -------------- --------------
(1) Average paid circulation for the six months ended September 30, 1999 and 1998, respectively, according to the Audit Bureau of Circulation's FAS-FAX report, except for the Denton Record-Chronicle, for which circulation data is taken from the Certified Audit of Circulations Report for the twelve-month periods ended December 31, 1999 (unaudited) and 1998. The Company's three largest newspapers, The Dallas Morning News, The Providence Journal and The Press-Enterprise, provide coverage of local, state, national and international news. The Dallas Morning News is distributed throughout the Southwest, though its circulation is concentrated primarily in the 12 counties surrounding Dallas. The Providence Journal is the leading newspaper in Rhode Island and southeastern Massachusetts. The Press-Enterprise is distributed throughout Riverside County and the inland southern California area. The basic material used in publishing Belo's newspapers is newsprint. During 1999, Belo's publishing operations consumed approximately 266,000 metric tons of newsprint at an average cost of $487 per metric ton. Consumption of newsprint in the previous year was approximately 253,000 metric tons at an average cost per metric ton of $566. At present, newsprint is generally purchased from eight suppliers. In addition, The Providence Journal and The Press-Enterprise purchased approximately 50 percent and 80 percent, respectively, of their newsprint from other suppliers under long-term contracts. These contracts provide for certain minimum purchases per year at rates commonly available throughout the region. Management believes its sources of newsprint, along with available alternate sources, are adequate for its current needs. COMPETITION The success of broadcast operations depends on a number of factors, including the general strength of the economy, the ability to provide attractive programming, audience ratings, relative cost efficiency for advertisers in 3 6 reaching audiences as compared to other advertising media, technical capabilities and governmental regulations and policies. Competition for advertising revenues at Belo's television stations, as well as its daily newspapers, Web sites and cable news stations, include other television stations and newspapers (including those owned and operated by Belo), digital broadcast satellite ("DBS"), radio stations, cable television systems, outdoor advertising, the Internet, magazines and direct mail advertising. The four major national television networks are represented in each television market in which Belo has a television station. Competition for advertising sales and local viewers within each market is intense, particularly among the network-affiliated television stations. The Dallas Morning News' primary competitor in certain smaller cities located between Dallas and Fort Worth is the Fort Worth Star-Telegram. The Providence Journal has five competing daily newspapers in the Rhode Island market and The Press-Enterprise has four daily newspaper competitors in the Riverside County market. The entry of local telephone companies and other multichannel video programming distributors into the market for video programming services can be expected to have an impact on competition in the television industry. Belo is unable to predict the effect that these or other technological and related regulatory changes will have on the television industry or on the future results of Belo's operations. FCC REGULATION GENERAL. Belo's television broadcast operations are subject to the jurisdiction of the FCC under the Communications Act of 1934, as amended (the "Act"). Among other things, the Act empowers the FCC to assign frequency bands; determine stations' operating frequencies, location and power; issue, renew, revoke and modify station licenses; regulate equipment used by stations; impose penalties for violation of the Act or of FCC regulations; impose fees for processing applications and other administrative functions; and adopt regulations to carry out the Act's provisions. The Act also prohibits the assignment of a broadcast license or the transfer of control of a broadcast licensee without prior FCC approval. Under the Act, the FCC also regulates certain aspects of the operation of cable television systems and other electronic media that compete with television stations. The Act would prohibit Belo's subsidiaries from continuing as broadcast licensees if record ownership or power to vote more than one-fourth of Belo's stock were to be held by aliens, foreign governments or their representatives, or by corporations formed under the laws of foreign countries. STATION LICENSES. Under the Act, as amended in the Telecommunications Act of 1996 (the "1996 Act"), the FCC grants television station licenses for terms of up to eight years. In January 1997, the FCC adopted specific procedures to extend television license terms to the eight-year limit. The 1996 Act also requires renewal of a television license if the FCC finds that: o the station has served the public interest, convenience, and necessity; o there have been no serious violations of either the Act or the FCC's rules and regulations by the licensee; and o there have been no other violations of either the Act or the FCC's rules and regulations by the licensee which, taken together, constitute a pattern of abuse. In making its determination, the FCC cannot consider whether the public interest would be better served by a party other than the renewal applicant. Under the 1996 Act, competing applications for the same frequency may be accepted only after the Commission has denied an incumbent's application for renewal of license. The current license expiration dates for each of Belo's television broadcast stations are as follows: WVEC-TV, October 1, 2004; WCNC-TV, December 1, 2004; WWL-TV, June 1, 2005; WHAS-TV, August 1, 2005; KMOV-TV, February 1, 2006; KOTV, June 1, 2006; KENS-TV, August 1, 2006; KHOU-TV, August 1, 2006; KVUE-TV, August 1, 2006; WFAA-TV, August 1, 2006; KASW-TV, October 1, 2006; KMSB-TV, October 1, 2006; KTVB-TV, October 1, 2006; KTVK-TV, October 1, 2006; KING-TV, February 1, 2007; KONG-TV, February 1, 2007; KGW-TV, February 1, 2007; and KREM-TV, February 1, 2007. The current license expiration dates for each of the television broadcast stations with which the Company has an LMA are as follows: KTTU-TV, October 1, 2006; and KSKN-TV, February 1, 2007. 4 7 OWNERSHIP RULES. The FCC's ownership rules, as modified pursuant to the 1996 Act and in a recently concluded FCC rulemaking proceeding, limit the aggregate audience reach of television stations that may be under common ownership, operation and control, or in which a single person or entity may hold office or have more than a specified interest or percentage of voting power, to 35 percent of the total national audience. FCC rules also place certain limits on common ownership, operation and control of, or cognizable or "attributable" interests or voting power in: o television stations serving the same area; o television stations and radio stations serving the same area; o television stations and daily newspapers serving the same area; and o television stations and cable systems serving the same area. The FCC's ownership rules affect the number, type and location of newspaper, broadcast and cable television properties that Belo might acquire in the future. For example, under current FCC rules, Belo generally may not acquire any daily newspaper or cable television property in a market where it now owns or has an interest in a television station deemed attributable under FCC rules. Belo's ownership of The Dallas Morning News and WFAA-TV, which are both located in the Dallas/Fort Worth DMA, predates the adoption of the FCC's rules regarding newspaper/broadcast cross-ownership and was "grandfathered" by the FCC. The 1996 Act requires the Commission to review all of its broadcast ownership rules biennially, beginning in 1998, to determine if they remain necessary in the public interest. In August 1999, the FCC concluded long-standing proceedings to review and revise certain of its rules regulating television station ownership and the standards used to determine what types of interests are considered to be attributable under its rules. The revised rules became effective in November 1999. To date, the FCC has not completed its 1998 biennial review of its remaining rules affecting ownership of broadcast stations. Under the FCC's new television "duopoly" rules, a party may own two or more television stations that (1) are located in separate DMAs or (2) are located in the same DMA, but do not have overlapping Grade B service contours. In addition, a party may acquire a second television station in the same DMA where it already owns or has an interest in a television station, if (1) at least eight television "voices" (independently owned and operated stations, excluding LMAs) will remain in the market following the acquisition of the new television station and (2) one of the two stations is not ranked among the top four stations in the market based on Nielsen audience share ratings. It is pursuant to this new rule that on March 1, 2000, Belo acquired KONG-TV and KASW-TV, which are located in the same DMA as Belo's stations KING-TV and KTVK-TV, respectively. In addition, the FCC's rules provide that future waivers of the duopoly restrictions will be available to permit acquisition of "failed" or "failing" stations or unbuilt stations, subject to certain conditions. In its August 1999 decision, the FCC also relaxed its restrictions on the common ownership of television and radio stations. The new FCC rules generally permit the common ownership of up to two television and six radio stations, or one television and seven radio stations, provided at least 20 independent media "voices" would remain in the market. In addition, the FCC's new rules provide that future waivers of the television/radio ownership restrictions generally will be available to permit the acquisition of "failed" stations. Under the FCC's revised rules, the following relationships and interests generally are attributable for purposes of the agency's broadcast ownership restrictions: o all officers and directors of a licensee and its direct or indirect parent(s); o voting stock interests of at least five percent; o stock interests of at least 20 percent, if the holder is a passive institutional investor (investment companies, banks, insurance companies); o any equity interest in a limited partnership or limited liability company, unless properly "insulated" from management activities; and o equity and/or debt interests which in the aggregate exceed 33 percent of a licensee's total assets, if the interest holder supplies more than 15 percent of the station's total weekly programming, or is a same-market broadcast company, cable operator or newspaper. PROGRAMMING AND OPERATIONS. The FCC has significantly reduced its regulation of the programming and other operations of broadcast stations in recent years, including elimination of formal ascertainment requirements and 5 8 guidelines concerning the amounts of certain types of programming and commercial matter that may be broadcast. There are, however, FCC rules and policies, and rules and policies of other federal agencies, that regulate matters such as network/affiliate relations, cable systems' carriage of syndicated and network television programming on distant stations, political advertising practices, obscene and indecent programming, application procedures and other areas affecting the business or operations of broadcast stations. The U.S. Supreme Court refused to review a lower court decision that upheld FCC action invalidating most aspects of the Fairness Doctrine, which had required broadcasters to present contrasting views on controversial issues of public importance. The FCC may, however, continue to regulate other aspects of fairness obligations in connection with certain types of broadcasts. The Children's Television Act of 1990 limits the permissible amount of commercial matter in children's television programs and requires each television station to present educational and informational children's programming. In August 1996, the Commission adopted stricter children's programming requirements, including a requirement that television broadcasters provide a minimum of three hours of children's educational programming per week. In April 1998, the U.S. Court of Appeals for the D.C. Circuit concluded that the FCC's Equal Employment Opportunity ("EEO") regulations were unconstitutional. The FCC responded to the court's ruling in September 1998 by suspending certain reporting requirements and commencing a proceeding to consider new rules that would not be subject to the court's constitutional objections. In January 2000, the FCC adopted new EEO rules, which: o require broadcast licensees to widely disseminate information about job openings to all segments of the community; and o give broadcasters the choice of implementing two FCC-suggested supplemental recruitment measures or, alternatively, designing their own broad recruitment/outreach programs. The Commission also reinstated its former requirement that broadcasters file annual employment reports with the FCC. The FCC has adopted various regulations to implement certain provisions of the Cable Television Consumer Protection and Competition Act of 1992 ("1992 Cable Act") which, among other matters, includes provisions respecting the carriage of television stations' signals by cable systems. In March 1997, the Supreme Court upheld a statutory provision of the 1992 Cable Act requiring cable systems to devote a specified portion of their channel capacity to the carriage of the signals of local television stations. The 1996 Act amended the 1992 Cable Act in certain important respects. Most notably, the 1996 Act repealed the cross-ownership ban between cable and telephone entities, and established certain means by which common carriers may enter into the video programming marketplace (including common carriage of video traffic, cable systems and open video systems). These actions, among other regulatory developments, permit involvement by telephone companies and cable companies in providing video services. DIGITAL TELEVISION SERVICE. In April 1997, the FCC adopted rules for implementing digital television ("DTV") service in the United States. Implementation of DTV will improve the technical quality of television signals received by viewers and will give television broadcasters the flexibility to provide new services, including high-definition television or multiple programs of standard definition television and data transmission. On April 3, 1997, a second channel on which to initially provide separate DTV programming or simulcast its analog programming was assigned to all broadcasters holding a license to operate a full-power television station or a construction permit for such a station. These second channels are assigned for an eight-year transition period scheduled to end in 2006. Stations were required to construct their DTV facilities and be on the air with a digital signal according to a schedule set by the FCC based on the type of station and the size of the market in which it is located. For example, all ABC, CBS, NBC and FOX network affiliates in the 10 largest markets were required to be on the air with a digital signal by May 1, 1999. Several stations in large markets voluntarily committed in writing to the FCC to build DTV facilities by November 1, 1998. The Company's stations in Dallas, Houston and Seattle met the accelerated schedule. Affiliates of the four major networks in the top 30 markets were required to begin transmitting digital signals by November 1999. Belo's stations in St. Louis, Portland and Charlotte each met this schedule. All other commercial broadcasters must follow suit by May 1, 2002. At the end of the transition period, analog television transmissions will cease, and DTV channels will be reassigned to a smaller segment of the broadcasting spectrum. Some of the vacated spectrum has been allocated to public safety transmissions, while the remainder will be auctioned for use by other telecommunications services. 6 9 The FCC hopes to complete the full transition to DTV by 2006. Although the FCC has targeted December 31, 2006 as the date by which all television broadcasters must return their analog licenses, the Balanced Budget Act of 1997 allows broadcasters to keep both their analog and digital licenses until at least 85 percent of the television households in their respective markets can receive a digital signal. Local zoning laws and the lack of qualified tall-tower builders to construct the facilities needed for DTV operations, as well as other factors including the pace of DTV receiver production and sales, may cause delays in this transition. The Commission has announced that it will review the progress of DTV every two years and make adjustments to the 2006 target date, if necessary. In addition, the FCC commenced, but has not completed, a proceeding to consider setting strict time limits within which local zoning authorities must act on zoning petitions by local television stations. The Commission is currently considering whether cable television system operators should be required to carry stations' DTV signals in addition to the currently required carriage of stations' analog signals. In July 1998, the Commission issued a Notice of Proposed Rulemaking posing seven different options for the carriage of digital signals and solicited comments from all interested parties. The Commission has yet to issue a decision on this matter. In December 1999, the FCC commenced a proceeding seeking comment on the public interest obligations of television broadcast licensees. Specifically, the Commission requested information in four general areas: o the new flexibility and capabilities of digital television, such as multiple channel transmission; o service to local communities including information on public interest activities and disaster relief; o enhancing access to the media by persons with disabilities and using DTV to encourage diversity in the digital era; and o enhancing the quality of political discourse. The FCC has not proposed specific new rules or policies, but states that it is seeking to create a forum for public debate on how broadcasters can best serve the public interest during and after the transition to DTV. SATELLITE TRANSMISSION OF LOCAL TELEVISION SIGNALS. In November 1999, Congress enacted the Satellite Home Viewer Improvement Act of 1999 ("SHVIA"), which established a copyright licensing system for limited distribution of television network programming to DBS viewers and directed the FCC to initiate rulemaking proceedings to implement the new system. Under SHVIA, satellite carriers are permitted to retransmit local signals of television broadcasters for a period of six months from the November 29, 1999 enactment of SHVIA, without receiving retransmission consent. After the six-month period, satellite carriers will be required to enter into retransmission consent agreements to allow for satellite carriage of local television stations. SHVIA also contemplates a market-specific requirement for mandatory carriage of local television stations, similar to that applicable to cable systems, for those markets in which a satellite carrier chooses to provide any local signal, beginning January 1, 2002. In addition, SHVIA extends the current system of satellite distribution of distant network signals to unserved households (i.e., those that do not receive a Grade B signal from a local network affiliate). Finally, SHVIA directs the FCC to conduct a series of rulemaking proceedings to implement these requirements. The foregoing does not purport to be a complete summary of all the provisions of the Act or the regulations and policies of the FCC thereunder. Proposals for additional or revised regulations and requirements are pending before and are considered by Congress and federal regulatory agencies from time to time. Belo cannot predict the effect of existing and proposed federal legislation, regulations and policies on its broadcast business. Also, various of the foregoing matters are now, or may become, the subject of court litigation, and Belo cannot predict the outcome of any such litigation or the impact on its broadcast business. EMPLOYEES As of December 31, 1999, the Company had 7,612 full-time employees. Belo has approximately 1,000 employees who are represented by various employee unions. Approximately one-half of these employees are located in Providence, Rhode Island, with the remaining union employees working at various television stations. Belo believes its relations with its employees are satisfactory. 7 10 ITEM 2. PROPERTIES At December 31, 1999, Belo owned broadcast operating facilities in the following U. S. cities: Dallas, Texas (WFAA); Houston, Texas (KHOU); Seattle, Washington (KING); Phoenix, Arizona (KTVK); Portland, Oregon (KGW); Charlotte, North Carolina (WCNC); San Antonio, Texas (KENS); New Orleans, Louisiana (WWL); Norfolk, Virginia (WVEC); Louisville, Kentucky (WHAS); Tulsa, Oklahoma (KOTV); Austin, Texas (KVUE); Tucson, Arizona (KMSB); Spokane, Washington (KREM); and Boise, Idaho (KTVB). The Company also leases broadcast facilities for the operations of KMOV in St. Louis, Missouri. Four of the Company's broadcast facilities use broadcast towers that are jointly owned with another television station in the same market (WFAA, KGW, KENS and KOTV). The broadcast towers associated with the Company's other television stations are wholly-owned by the Company. The Company leases a facility in Washington, D.C. that is used by its broadcasting and publishing operations for the gathering and distribution of news from the nation's capital. This facility includes a broadcast studio as well as general office space. The Company owns and operates a newspaper printing facility and distribution center in Plano, Texas where seven high-speed offset presses are housed to print The Dallas Morning News. An eighth press, which will provide improved production capacity and greater flexibility, is being installed and Belo expects to begin initial testing in second quarter 2000. Certain other operations of The Dallas Morning News are housed in a Company-owned, four-story building in downtown Dallas. The Company also owns and operates a newspaper printing facility in Providence, Rhode Island, where three high-speed flexographic presses are housed to print The Providence Journal. The remainder of The Providence Journal's operations is housed in a Company-owned, five-story building in downtown Providence. The Company owns and operates a newspaper publishing facility, a commercial printing facility and various other properties in southern California. The newspaper publishing facility is located in downtown Riverside, California and is equipped with three high-speed offset presses to print The Press-Enterprise. Each of Belo's three large-market newspapers' facilities is equipped with computerized input and photocomposition equipment and other equipment that is used in the production of both news and advertising copy. The Company owns other newspaper production facilities in Owensboro and Henderson, Kentucky and Bryan-College Station and Denton, Texas. TXCN's cable news operations are conducted from a fully-equipped digital television facility located in downtown Dallas. NWCN conducts its regional cable news operations from the KING facility. The Company's corporate operations, several departments of The Dallas Morning News, certain broadcast administrative functions and Belo Interactive have offices located in downtown Dallas in office buildings owned by the Company. All of the foregoing operations have additional leasehold and other interests that are used in their respective activities. The Company believes its properties are in satisfactory condition and are well maintained, and that such properties are adequate for present operations. ITEM 3. LEGAL PROCEEDINGS There are legal proceedings pending against the Company, including a number of actions for alleged libel and slander. In the opinion of management, liabilities, if any, arising from these actions would not have a material adverse effect on the consolidated results of operations, liquidity or financial position of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of shareholders, through the solicitation of proxies or otherwise, during the fourth quarter of the fiscal year covered by this Form 10-K. 8 11 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information set forth under the heading "Market Data" and "Note 9: Common and Preferred Stock" contained in the 1999 Annual Report to Shareholders is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA The information set forth under the heading "Selected Financial Data" contained in the 1999 Annual Report to Shareholders is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information set forth under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the 1999 Annual Report to Shareholders is incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS The information set forth under the heading "Market Risks" contained in the 1999 Annual Report to Shareholders is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information set forth under the headings "Consolidated Statements of Earnings", "Consolidated Balance Sheets", "Consolidated Statements of Shareholders' Equity", "Consolidated Statements of Cash Flows" and "Notes to Consolidated Financial Statements," together with the "Report of Independent Auditors" contained in the 1999 Annual Report to Shareholders is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information set forth under the headings "Outstanding Capital Stock and Stock Ownership of Directors, Certain Executive Officers and Principal Shareholders," "Executive Officers of the Company," "Election of Directors" and "Executive Compensation and Other Matters" contained in the definitive Proxy Statement for the Company's Annual Meeting of Shareholders to be held on May 10, 2000, is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information set forth under the heading "Executive Compensation and Other Matters" contained in the definitive Proxy Statement for the Company's Annual Meeting of Shareholders to be held on May 10, 2000, is incorporated herein by reference. 9 12 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information set forth under the heading "Outstanding Capital Stock and Stock Ownership of Directors, Certain Executive Officers and Principal Shareholders" contained in the definitive Proxy Statement for the Company's Annual Meeting of Shareholders to be held on May 10, 2000, is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information set forth under the heading "Certain Transactions" contained in the definitive Proxy Statement for the Company's Annual Meeting of Shareholders to be held on May 10, 2000, is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) (1) The financial statements referenced in Item 8 are incorporated herein by reference to the 1999 Annual Report to Shareholders, a portion of which is filed as Exhibit 13 to this Form 10-K. (2) The financial schedules required by Regulation S-X are either not applicable or are included in the information provided in the Notes to Consolidated Financial Statements, which are incorporated herein by reference to the 1999 Annual Report to Shareholders. (3) Exhibits Exhibits marked with an asterisk (*) are incorporated by reference to documents previously filed by the Company with the Securities and Exchange Commission, as indicated. Exhibits marked with a tilde (~) are management contracts or compensatory plan contracts or arrangements filed pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K. All other documents are filed with this report. 2.1 * Amended and Restated Agreement and Plan of Merger, dated as of September 26, 1996 (Appendix A of the Joint Proxy Statement/Prospectus of Belo and Providence Journal Company included in Belo's Registration Statement on Form S-4 (Registration No. 333-19337) filed with the Commission on January 8, 1997) 3.1 Certificate of Incorporation of the Company 3.2 Certificate of Correction to Certificate of Incorporation dated May 13, 1987 3.3 Certificate of Designation of Series A Junior Participating Preferred Stock of the Company dated April 16, 1987 3.4 Certificate of Amendment of Certificate of Incorporation of the Company dated May 4, 1988 3.5 Certificate of Amendment of Certificate of Incorporation of the Company dated May 3, 1995 3.6 * Certificate of Amendment of Certificate of Incorporation of the Company dated May 15, 1998 (Exhibit 3.6 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1998 (the "2nd Quarter 1998 Form 10-Q")) 3.7 Amended Certificate of Designation of Series A Junior Participating Preferred Stock of the Company dated May 4, 1988 3.8 Certificate of Designation of Series B Common Stock of the Company dated May 4, 1988 3.9 Amended and Restated Bylaws of the Company, effective February 10, 2000 10 13
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 4.1 Certain rights of the holders of the Company's Common Stock are set forth in Exhibits 3.1-3.9 above. 4.2 *Specimen Form of Certificate representing shares of the Company's Series A Common Stock (Exhibit 4.2 to the Company's Annual Report on Form 10-K dated March 18, 1998 (the "1997 Form 10-K")) 4.3 *Specimen Form of Certificate representing shares of the Company's Series B Common Stock (Exhibit 4.3 to the 1997 Form 10-K) 4.4 Amended and Restated Form of Rights Agreement as of February 28, 1996 between the Company and Chemical Mellon Shareholder Services, L.L.C., a New York banking corporation 4.5 *Supplement No. 1 to Amended and Restated Rights Agreement between the Company and The First National Bank of Boston dated as of November 11, 1996 (Exhibit 4.5 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1996) 4.6 Instruments defining rights of debt securities: (1) * Indenture dated as of June 1, 1997 between the Company and The Chase Manhattan Bank, as Trustee (Exhibit 4.6(1) to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997 (the "2nd Quarter 1997 Form 10-Q")) (2) * (a) $200 million 6-7/8% Senior Note due 2002 (Exhibit 4.6(2)(a) to the 2nd Quarter 1997 Form 10-Q) * (b) $50 million 6-7/8% Senior Note due 2002 (Exhibit 4.6(2)(b) to the 2nd Quarter 1997 Form 10-Q) (3) * (a) $200 million 7-1/8% Senior Note due 2007 (Exhibit 4.6(3)(a) to the 2nd Quarter 1997 Form 10-Q) * (b) $100 million 7-1/8% Senior Note due 2007 (Exhibit 4.6(3)(b) to the 2nd Quarter 1997 Form 10-Q) (4) * $200 million 7-3/4% Senior Debenture due 2027 (Exhibit 4.6(4) to the 2nd Quarter 1997 Form 10-Q) (5) * Officer's Certificate dated June 13, 1997 establishing terms of debt securities pursuant to Section 3.1 of the Indenture (Exhibit 4.6(5) to the 2nd Quarter 1997 Form 10-Q) (6) * (a) $200 million 7-1/4% Senior Debenture due 2027 (Exhibit 4.6 (6)(a) to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1997 (the "3rd Quarter 1997 Form 10-Q")) * (b) $50 million 7-1/4% Senior Debenture due 2027 (Exhibit 4.6 (6)(b) to the 3rd Quarter 1997 Form 10-Q) (7) * Officer's Certificate dated September 26, 1997 establishing terms of debt securities pursuant to Section 3.1 of the Indenture (Exhibit 4.6(7) to the 3rd Quarter 1997 Form 10-Q) 10.1 Financing agreements: (1) *Amended and Restated Credit Agreement (Five-year $1,000,000,000 revolving credit and competitive advance facility dated as of August 29, 1997 among the Company and The Chase Manhattan Bank, as Administrative Agent and Competitive Advance Facility Agent, Bank of America National Trust and Savings Association and Bank of Tokyo-Mitsubishi, Ltd., as Co-Syndication Agents, and NationsBank, as Documentation Agent) (Exhibit 10.2(1) to the 3rd Quarter 1997 Form 10-Q)
11 14
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 10.2 Compensatory plans: ~(1) A. H. Belo Corporation Employee Savings and Investment Plan: * (a) A. H. Belo Corporation Employee Savings and Investment Plan Amended and Restated January 1, 1998 (Exhibit 10.3(1)(a) to the 1997 Form 10-K) * (b) First Amendment to A. H. Belo Corporation Employee Savings and Investment Plan (Exhibit 10.3(1)(b) to the Company's Annual Report on Form 10-K dated March 17, 1999 (the "1998 Form 10-K")) * (c) Second Amendment to A. H. Belo Corporation Employee Savings and Investment Plan (Exhibit 10.3(1)(c) to the 1998 Form 10-K) * (d) Third Amendment to A. H. Belo Corporation Employee Savings and Investment Plan (Exhibit 10.3(1)(d) to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1999) (e) Fourth Amendment to A. H. Belo Corporation Employee Savings and Investment Plan * (f) Restated Master Trust Agreement between the Company and Fidelity Management Trust Company, as restated and dated March 13, 1998 (Exhibit 10.3(1)(b) to the 1997 Form 10-K) ~(2) The A. H. Belo Corporation 1986 Long-Term Incentive Plan: * (a) The A. H. Belo Corporation 1986 Long-Term Incentive Plan (Effective May 3, 1989, as amended by Amendments 1, 2, 3, 4, and 5) (Exhibit 10.3(2) to the Company's Annual Report on Form 10-K dated March 10, 1997 (the "1996 Form 10-K")) * (b) Amendment No. 6 to 1986 Long-Term Incentive Plan (Exhibit 10.3(2)(b) to the 1997 Form 10-K) (c) Amendment No. 7 to 1986 Long-Term Incentive Plan * (d) Amendment No. 8 to 1986 Long-Term Incentive Plan (Exhibit 10.3(2)(d) to the 2nd Quarter 1998 Form 10-Q) ~(3) * A. H. Belo Corporation 1995 Executive Compensation Plan, as restated to incorporate amendments through December 4, 1997 (Exhibit 10.3(3) to the 1997 Form 10-K) * (a) Amendment to A. H. Belo Corporation 1995 Executive Compensation Plan, dated July 21, 1998 (Exhibit 10.3 (3)(a) to the 2nd Quarter 1998 Form 10-Q) (b) Amendment to A. H. Belo Corporation 1995 Executive Compensation Plan, dated December 16, 1999 ~(4) * Management Security Plan (Exhibit 10.3(1) to the 1996 Form 10-K) (a)Amendment to Management Security Plan of A. H. Belo Corporation and Affiliated Companies (as Restated Effective January 1, 1982) ~(5) Belo Supplemental Executive Retirement Plan As Amended and Restated Effective January 1, 2000 12 Ratio of Earnings to Fixed Charges 13 Portions of the 1999 Annual Report to Shareholders (Items 5, 6, 7, 7A, and 8) 21 Subsidiaries of the Company 23 Consent of Ernst & Young LLP 27 Financial Data Schedule
(b) Reports on Form 8-K. During the last quarter covered by this report, there were no reports on Form 8-K filed. 12 15 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. A. H. BELO CORPORATION By: /s/ ROBERT W. DECHERD ------------------------------------ Robert W. Decherd Chairman of the Board, President & Chief Executive Officer Dated: March 15, 2000 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 Company and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE --------- ----- ---- /s/ ROBERT W. DECHERD Chairman of the Board, President March 15, 2000 - ------------------------------------ & Chief Executive Officer Robert W. Decherd /s/ WARD L. HUEY, JR. Vice Chairman of the March 15, 2000 - ------------------------------------ Board and President/ Ward L. Huey, Jr. Broadcast Division /s/ BURL OSBORNE Director, President/Publishing March 15, 2000 - ------------------------------------ Division and Publisher/ Burl Osborne The Dallas Morning News /s/ JOHN W. BASSETT, JR. Director March 15, 2000 - ------------------------------------ John W. Bassett, Jr. /s/ HENRY P. BECTON, JR. Director March 15, 2000 - ------------------------------------ Henry P. Becton, Jr. /s/ JUDITH L. CRAVEN, M.D., M.P.H. Director March 15, 2000 - ------------------------------------ Judith L. Craven, M.D., M.P.H. /s/ ROGER A. ENRICO - ------------------------------------ Director March 15, 2000 Roger A. Enrico /s/ STEPHEN HAMBLETT Director March 15, 2000 - ------------------------------------ Stephen Hamblett /s/ DEALEY D. HERNDON Director March 15, 2000 - ------------------------------------ Dealey D. Herndon /s/ LAURENCE E. HIRSCH Director March 15, 2000 - ------------------------------------ Laurence E. Hirsch
13 16
SIGNATURE TITLE DATE --------- ----- ---- /s/ ARTURO MADRID, PH.D. Director March 15, 2000 - ------------------------------------ Arturo Madrid, Ph.D. /s/ JAMES M. MORONEY, JR. Director and Former March 15, 2000 - ------------------------------------ Chairman of the Board James M. Moroney, Jr. /s/ HUGH G. ROBINSON Director March 15, 2000 - ------------------------------------ Hugh G. Robinson /s/ WILLIAM T. SOLOMON Director March 15, 2000 - ------------------------------------ William T. Solomon /s/ J. MCDONALD WILLIAMS Director March 15, 2000 - ------------------------------------ J. McDonald Williams /s/ DUNIA A. SHIVE Senior Vice President/ March 15, 2000 - ------------------------------------ Chief Financial Officer Dunia A. Shive
14 17 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 2.1 * Amended and Restated Agreement and Plan of Merger, dated as of September 26, 1996 (Appendix A of the Joint Proxy Statement/Prospectus of Belo and Providence Journal Company included in Belo's Registration Statement on Form S-4 (Registration No. 333-19337) filed with the Commission on January 8, 1997) 3.1 Certificate of Incorporation of the Company 3.2 Certificate of Correction to Certificate of Incorporation dated May 13, 1987 3.3 Certificate of Designation of Series A Junior Participating Preferred Stock of the Company dated April 16, 1987 3.4 Certificate of Amendment of Certificate of Incorporation of the Company dated May 4, 1988 3.5 Certificate of Amendment of Certificate of Incorporation of the Company dated May 3, 1995 3.6 * Certificate of Amendment of Certificate of Incorporation of the Company dated May 15, 1998 (Exhibit 3.6 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1998 (the "2nd Quarter 1998 Form 10-Q")) 3.7 Amended Certificate of Designation of Series A Junior Participating Preferred Stock of the Company dated May 4, 1988 3.8 Certificate of Designation of Series B Common Stock of the Company dated May 4, 1988 3.9 Amended and Restated Bylaws of the Company, effective February 10, 2000
18
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 4.1 Certain rights of the holders of the Company's Common Stock are set forth in Exhibits 3.1-3.9 above. 4.2 * Specimen Form of Certificate representing shares of the Company's Series A Common Stock (Exhibit 4.2 to the Company's Annual Report on Form 10-K dated March 18, 1998 (the "1997 Form 10-K")) 4.3 * Specimen Form of Certificate representing shares of the Company's Series B Common Stock (Exhibit 4.3 to the 1997 Form 10-K) 4.4 Amended and Restated Form of Rights Agreement as of February 28, 1996 between the Company and Chemical Mellon Shareholder Services, L.L.C., a New York banking corporation 4.5 * Supplement No. 1 to Amended and Restated Rights Agreement between the Company and The First National Bank of Boston dated as of November 11, 1996 (Exhibit 4.5 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1996) 4.6 Instruments defining rights of debt securities: (1) * Indenture dated as of June 1, 1997 between the Company and The Chase Manhattan Bank, as Trustee (Exhibit 4.6(1) to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997 (the "2nd Quarter 1997 Form 10-Q")) (2) * (a) $200 million 6-7/8% Senior Note due 2002 (Exhibit 4.6(2)(a) to the 2nd Quarter 1997 Form 10-Q) * (b) $50 million 6-7/8% Senior Note due 2002 (Exhibit 4.6(2)(b) to the 2nd Quarter 1997 Form 10-Q) (3) * (a) $200 million 7-1/8% Senior Note due 2007 (Exhibit 4.6(3)(a) to the 2nd Quarter 1997 Form 10-Q) * (b) $100 million 7-1/8% Senior Note due 2007 (Exhibit 4.6(3)(b) to the 2nd Quarter 1997 Form 10-Q) (4) * $200 million 7-3/4% Senior Debenture due 2027 (Exhibit 4.6(4) to the 2nd Quarter 1997 Form 10-Q) (5) * Officer's Certificate dated June 13, 1997 establishing terms of debt securities pursuant to Section 3.1 of the Indenture (Exhibit 4.6(5) to the 2nd Quarter 1997 Form 10-Q) (6) * (a) $200 million 7-1/4% Senior Debenture due 2027 (Exhibit 4.6 (6)(a) to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1997 (the "3rd Quarter 1997 Form 10-Q")) * (b) $50 million 7-1/4% Senior Debenture due 2027 (Exhibit 4.6 (6)(b) to the 3rd Quarter 1997 Form 10-Q) (7) * Officer's Certificate dated September 26, 1997 establishing terms of debt securities pursuant to Section 3.1 of the Indenture (Exhibit 4.6(7) to the 3rd Quarter 1997 Form 10-Q) 10.1 Financing agreements: (1) *Amended and Restated Credit Agreement (Five-year $1,000,000,000 revolving credit and competitive advance facility dated as of August 29, 1997 among the Company and The Chase Manhattan Bank, as Administrative Agent and Competitive Advance Facility Agent, Bank of America National Trust and Savings Association and Bank of Tokyo-Mitsubishi, Ltd., as Co-Syndication Agents, and NationsBank, as Documentation Agent) (Exhibit 10.2(1) to the 3rd Quarter 1997 Form 10-Q)
19
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 10.2 Compensatory plans: (1) A. H. Belo Corporation Employee Savings and Investment Plan: * (a) A. H. Belo Corporation Employee Savings and Investment Plan Amended and Restated January 1, 1998 (Exhibit 10.3(1)(a) to the 1997 Form 10-K) * (b) First Amendment to A. H. Belo Corporation Employee Savings and Investment Plan (Exhibit 10.3(1)(b) to the Company's Annual Report on Form 10-K dated March 17, 1999 (the "1998 Form 10-K")) * (c) Second Amendment to A. H. Belo Corporation Employee Savings and Investment Plan (Exhibit 10.3(1)(c) to the 1998 Form 10-K) * (d) Third Amendment to A. H. Belo Corporation Employee Savings and Investment Plan (Exhibit 10.3(1)(d) to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1999) (e) Fourth Amendment to A. H. Belo Corporation Employee Savings and Investment Plan * (f) Restated Master Trust Agreement between the Company and Fidelity Management Trust Company, as restated and dated March 13, 1998 (Exhibit 10.3(1)(b) to the 1997 Form 10-K) (2) The A. H. Belo Corporation 1986 Long-Term Incentive Plan: * (a) The A. H. Belo Corporation 1986 Long-Term Incentive Plan (Effective May 3, 1989, as amended by Amendments 1, 2, 3, 4, and 5) (Exhibit 10.3(2) to the Company's Annual Report on Form 10-K dated March 10, 1997 (the "1996 Form 10-K")) * (b) Amendment No. 6 to 1986 Long-Term Incentive Plan (Exhibit 10.3(2)(b) to the 1997 Form 10-K) (c) Amendment No. 7 to 1986 Long-Term Incentive Plan * (d) Amendment No. 8 to 1986 Long-Term Incentive Plan (Exhibit 10.3(2)(d) to the 2nd Quarter 1998 Form 10-Q) (3) * A. H. Belo Corporation 1995 Executive Compensation Plan, as restated to incorporate amendments through December 4, 1997 (Exhibit 10.3(3) to the 1997 Form 10-K) * (a) Amendment to A. H. Belo Corporation 1995 Executive Compensation Plan, dated July 21, 1998 (Exhibit 10.3 (3)(a) to the 2nd Quarter 1998 Form 10-Q) (b) Amendment to A. H. Belo Corporation 1995 Executive Compensation Plan, dated December 16, 1999 (4) * Management Security Plan (Exhibit 10.3(1) to the 1996 Form 10-K) (a)Amendment to Management Security Plan of A. H. Belo Corporation and Affiliated Companies (as Restated Effective January 1, 1982) (5) Belo Supplemental Executive Retirement Plan As Amended and Restated Effective January 1, 2000 12 Ratio of Earnings to Fixed Charges 13 Portions of the 1999 Annual Report to Shareholders (Items 5, 6, 7, 7A, and 8) 21 Subsidiaries of the Company 23 Consent of Ernst & Young LLP 27 Financial Data Schedule
* Exhibits marked with an asterisk (*) are incorporated by reference to documents previously filed by the company with the Securities and Exchange Commission, as indicated. EX-3.1 2 CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.1 [STATE OF DELWARE SECRETARY OF STATE LETTERHEAD] I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF DELAWARE DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF INCORPORATION OF A.H. BELO CORPORATION FILED IN THIS OFFICE ON THE SECOND DAY OF MARCH, A.D. 1987, AT 12 O'CLOCK P.M. [DELAWARE SECRETARY OF STATE SEAL] /s/ MICHAEL HARKINS ----------------------------------- Michael Harkins, Secretary of State AUTHENTICATION: 1148366 870610132 DATE: 3/02/1987 2 CERTIFICATE OF INCORPORATION OF A.H. BELO CORPORATION ARTICLE ONE The name of the corporation is A.H. Belo Corporation. ARTICLE TWO The address of its registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. ARTICLE THREE The nature of the business or purpose to be conducted or promoted by the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. ARTICLE FOUR The aggregate number of shares of stock which the corporation shall have the authority to issue is 35,000,000 shares, of which 5,000,000 shares shall be Preferred Stock, par value $1.00 per share, and 30,000,000 shares shall be Common Stock, par value $1.67 per share. The following is a statement of the designations and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof, in respect of the shares of Preferred Stock and Common Stock or any series of any class of stock of the corporation, and of the authority expressly granted hereby to the Board of Directors of the corporation to fix by resolution or resolutions any of such designations and powers, preferences and rights, and qualifications, limitations and restrictions thereof that may be desired but which shall not be fixed by this Certificate of Incorporation. (A) Common Stock. The Board of Directors of the corporation is hereby expressly vested with authority to issue 30,000,000 shares of Common Stock, par value $1.67 per share, from time to time. Shares of Common Stock, upon issuance, shall be fully paid and nonassessable. Such dividends (payable in cash, stock or otherwise) as may be determined by the Board of Directors may be declared and paid on the Common Stock from time to time out of any funds legally available therefor. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the corporation, the remaining assets and funds of the corporation available for distribution to holders of Common Stock shall be distributed among the holders of the Common Stock according to their respective shares. (B) Preferred Stock. The Board of Directors of the corporation is hereby expressly vested with authority to issue 5,000,000 shares of Preferred Stock, par value $1.00 per share, in series, and by filing a 3 certificate of designations pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, and to fix the designations, powers, preferences, and rights of each such series and the qualifications, limitations or restrictions thereof. The authority of the Board of Directors with respect to each series shall include, but not be limited to, determination of the following: (a) The number of shares constituting that series and the distinctive designation of that series; (b) The dividend rate on the shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series; (c) Whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights; (d) Whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine; (e) Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or date upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; (f) Whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund; (g) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the corporation, and the relative rights of priority, if any, of payment of shares of that series; (h) Any other relative rights, preferences and limitations of that series. Dividends on outstanding shares of Preferred Stock shall be paid or declared and set apart for payment before any dividends shall be paid or declared and set apart for payment on the shares of Common Stock with respect to the same dividend period. If upon any voluntary or involuntary liquidation, dissolution or winding up of the corporation, the assets available for distribution to holders of shares of Preferred Stock of all series shall be insufficient to pay such holders the full preferential amount to which they are entitled, then such assets shall be distributed ratably among the shares -2- 4 of all series of Preferred Stock in accordance with the respective preferential amounts (including unpaid cumulative dividends, if any) payable with respect thereto. Shares of Preferred Stock which have been redeemed or converted, or which have been issued and reacquired in any manner and retired, shall have the status of authorized and unissued Preferred Stock and may be reissued by the Board of Directors as shares of the same or any other series, unless otherwise provided with respect to any series in the resolution or resolutions of the Board of Directors creating such series. (C) General. The Board of Directors may in its discretion issue from time to time authorized but unissued shares for such consideration as it may determine, and holders of Common Stock and Preferred Stock shall have no preemptive rights, as such holders, to purchase any shares or securities of any class, including treasury shares, which may at any time be issued or sold or offered for sale by the corporation. At each election of directors, every stockholder entitled to vote at any meeting shall have the right to vote, in person or by proxy, the number of shares owned by him for as many persons as there are directors to be elected. Cumulative voting of shares of stock of the corporation, whether Common Stock or Preferred Stock, is hereby prohibited. The corporation shall be entitled to treat the person in whose name any share or other security is registered as the owner thereof, for all purposes, and shall not be bound to recognize any equitable or other claim to or interest in such share or other security on the part of any other person, whether or not the corporation shall have notice thereof. ARTICLE FIVE The name and mailing address of the sole incorporator is: Guy H. Kerr 3600 RepublicBank Dallas Tower Dallas, Texas 75201-3989 ARTICLE SIX The number of directors constituting the initial Board of Directors is fourteen (14); however, hereafter the Bylaws of the corporation shall fix the number from time to time. The name and mailing address of each person who is to serve as a director until the first annual meeting of the stockholders or until a successor is elected and qualified are as follows: Name Address ---- ------- Robert W. Decherd 5323 Falls Road Dallas, Texas 75220 -3- 5 James P. Sheehan 6310 Meadowcreek Drive Dallas, Texas 75240 Ward L. Huey, Jr. 4340 Rheims Place Dallas, Texas 75205 Burl Osborne 7609 Southwestern Blvd. Dallas, Texas 75225 John W. Bassett, Jr. 602 Rosemary Lane Roswell, New Mexico 88201 Joe M. Dealey 4332 Arcady Dallas, Texas 75205 Dealey D. Herndon 2903 Tarry Trail Austin, Texas 78703 Lester A. Levy 12114 Vendome Place Dallas, Texas 75230 James M. Moroney, Jr. 4425 Bordeaux Dallas, Texas 75205 Reece A. Overcash, Jr. P. O. Box 222822 Dallas, Texas 75222 William H. Seay 4512 Belclaire Dallas, Texas 75205 William T. Solomon 3830 Windsor Lane Dallas, Texas 75205 Thomas B. Walker, Jr. 4332 Belclaire Dallas, Texas 75205 J. McDonald Williams 4004 Euclid Dallas, Texas 75205 -4- 6 ARTICLE SEVEN The corporation is to have perpetual existence. ARTICLE EIGHT The Board of Directors may exercise all such powers and do all such lawful acts and things as are not by statute, the Bylaws, or this Certificate of Incorporation directed or required to be exercised and done by the stockholders. ARTICLE NINE The initial Bylaws of the corporation shall be adopted by the Board of Directors. The power to alter, amend or repeal the corporation's Bylaws, and to adopt new Bylaws, is hereby vested in the Board of Directors, subject, however, to repeal or change by the affirmative vote of the holders of at least two-thirds of the outstanding shares entitled to vote thereon. Notwithstanding any other provisions of this Certificate of Incorporation, or any provision of law which might otherwise permit a lesser vote or no vote, the affirmative vote of the holders of at least two-thirds of the voting power of all of the then-outstanding shares of the voting stock, voting together as a single class, shall be required to alter, amend, or repeal this Article Nine. ARTICLE TEN The corporation reserves the right to amend, alter or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by law, and all rights conferred upon officers, directors, and stockholders herein are granted subject to this reservation. ARTICLE ELEVEN Except as otherwise provided in this Certificate of Incorporation, for purposes of Sections 251, 253, 271, 275, and 311 of the Delaware General Corporation Law (or any successor provisions of Delaware law), where applicable the affirmative vote of the holders of at least two-thirds, rather than a majority, of the outstanding stock, or any class or series thereof, entitled to vote in accordance therewith shall be required. Notwithstanding any other provisions of this Certificate of Incorporation, or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of voting stock required by law, this Certificate of Incorporation or any Preferred Stock Designation, the affirmative vote of the holders of at least two-thirds of the voting power of all of the then-outstanding shares of the voting stock, voting together as a single class, shall be required to alter, amend, or repeal this Article Eleven. ARTICLE TWELVE The stockholder vote required to approve Business Combinations (as hereinafter defined) shall be as set forth in this Article Twelve. -5- 7 Section A. (1) Except as otherwise expressly provided in Section B of this Article Twelve: (i) any merger or combination of the corporation or any Subsidiary (as hereinafter defined) with (a) any Interested Stockholder (as hereinafter defined), or (b) any other corporation (whether or not itself an Interested Stockholder) which is, or after such merger or consolidation would be, an Affiliate (as hereinafter defined) of an Interested Stockholder; or (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Stockholder or any Affiliate of any Interested Stockholder of any assets of the corporation or any Subsidiary having an aggregate Fair Market Value (as hereinafter defined) of $25,000,000 or more; or (iii) the issuance or transfer by the corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the corporation or any Subsidiary to any Interested Stockholder or any Affiliate of any Interested Stockholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of $25,000,000 or more; or (iv) the adoption of any plan or proposal for the liquidation or dissolution of the corporation proposed by or on behalf of any Interested Stockholder or any Affiliate of any Interested Stockholder; or (v) any reclassification of securities (including any reverse stock split), or recapitalization of the corporation, or any merger or consolidation of the corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving any Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the corporation or any Subsidiary which is directly or indirectly owned by any Interested Stockholder or any Affiliate of any Interested Stockholder; shall require the affirmative vote of the holders of at least eighty percent (80%) of all of the then outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors (hereinafter in this Article Twelve referred to as the "Voting Stock"), voting together as a single class (it being understood that, for purposes of this Article Twelve, each share of Preferred Stock shall have the number of votes granted to it pursuant to any designation of the rights, powers and preferences of any class or series of Preferred Stock made pursuant to Article Four of this Certificate of Incorporation (a "Preferred Stock Designation"). Such affirmative vote shall be required notwithstanding any other provisions of this Certificate of Incorporation -6- 8 or any provision of law or of any agreement with any national securities exchange which might otherwise permit a lesser vote or no vote, but such affirmative vote shall be required in addition to any affirmative vote of the holders of any particular class or series of the Voting Stock required by law, this Certificate of Incorporation or any Preferred Stock Designation. (2) The term "Business Combination" as used in this Article Twelve shall mean any transaction which is referred to in any one or more of subparagraphs (i) through (v) of paragraph A(l). Section B. The provisions of Section A of this Article Twelve shall not be limited to any particular Business Combination, and a Business Combination shall require only such affirmative vote as is required by law, any other provision of this Certificate of Incorporation, any Preferred Stock Designation, or any agreement with any national securities exchange, if, in the case of a Business Combination that does not involve any cash or other consideration being received by the stockholders of the corporation solely in their respective capacities as stockholders of the corporation, the condition specified in the following paragraph B(l) is met, or, in the case of any other Business Combination, the conditions specified in either of the following paragraphs B(l) and B(2) are met: (1) The Business Combination shall have been approved by a majority of the Continuing Directors (as hereinafter defined), it being understood that this condition shall not be capable of satisfaction unless there is at least one Continuing Director; or (2) All of the following conditions shall have been met: (i) the consideration to be received by holders of shares of a particular class of outstanding Voting Stock shall be in cash or in the same form as the Interested Stockholder has paid for shares of such class of Voting Stock within the two-year period ending on and including the date on which the Interested Stockholder became an Interested Stockholder (the "Determination Date"). If within such two-year period the Interested Stockholder has paid for shares of any class of Voting Stock with varying forms of consideration, the form of consideration to be received per share by holders of shares of such class of Voting Stock shall be either cash or the form used to acquire the largest number of shares of such class of Voting Stock acquired by the Interested Stockholder within such two-year period. (ii) the aggregate amount of the cash and the Fair Market Value, as of the date (the "Consummation Date") of the consummation of the Business Combination, of the consideration other than cash to be received per share by holders of Common Stock in such Business Combination shall be at least equal to the highest of the following (it being intended that the requirements of this paragraph B(2)(ii) shall be required to be met with respect to all shares of Common -7- 9 Stock outstanding whether or not the Interested Stockholder has previously acquired any shares of Common Stock): (a) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder for any shares of Common Stock acquired by it within the two-year period immediately prior to the first public announcement of the proposal of the Business Combination (the "Announcement Date"), or in the transaction in which it became an Interested Stockholder, whichever is higher; plus interest compounded annually from the Determination Date through the Consummation Date at the prime rate of interest of InterFirst Bank Dallas, N.A., Dallas, Texas (or such other major bank headquartered in the City of Dallas as may be selected by the Continuing Directors) from time to time in effect in the City of Dallas, less the aggregate amount of any cash dividends paid, and the Fair Market Value of any dividends paid in form other than cash, on each share of Common Stock from the Determination Date through the Consummation Date in an amount up to but not exceeding the amount of interest so payable per share of Common Stock; or (b) the Fair Market Value per share of Common Stock on the Announcement Date or on the Determination Date, whichever is higher; or (c) (if applicable) the price per share equal to the Fair Market Value per share of the Common Stock determined pursuant to paragraph B(2)(ii)(b) above, multiplied by the ratio of (1) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder for any shares of Common Stock acquired by it within the two-year period immediately prior to the Announcement Date to (2) the Fair Market Value per share of Common Stock on the first day in such two-year period upon which the Interested Stockholder acquired any shares of Common Stock; or (d) an amount per share determined by multiplying the earnings per share of Common Stock for the four full consecutive fiscal quarters of the corporation immediately preceding the Consummation Date of such Business Combination by the then price/earnings multiple (if any) of such Interested Stockholder as customarily computed and reported in the financial community; provided, that for the purposes of this paragraph B(2)(ii)(d), if more than one person constitutes the Interested Stockholder involved in the Business Combination, the price/earnings multiple (if any) of the person having the highest price/earnings multiple shall be used for the computation in this paragraph B(2)(ii)(d). -8- 10 (iii) the aggregate amount of the cash and the Fair Market Value as of the Consummation Date of the Business Combination of consideration other than cash to be received per share by holders of shares of any other class of outstanding Voting Stock shall be at least equal to the highest of the following (it being intended that the requirements of this paragraph B(2)(iii) shall be required to be met with respect to every class of outstanding Voting Stock whether or not the Interested Stockholder has previously acquired any shares of a particular class of Voting Stock): (a) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder for any shares of such class of Voting Stock acquired by it within the two-year period immediately prior to the Announcement Date or in the transaction in which it became an Interested Stockholder, whichever is higher, plus interest compounded annually from the Determination Date through the Consummation Date at the prime rate of interest of InterFirst Bank Dallas, N.A., Dallas, Texas (or such other major bank headquartered in the City of Dallas as may be selected by the Continuing Directors) from time to time in effect in the City of Dallas, less the aggregate amount of any cash dividends paid and the Fair Market Value of any dividends paid in form other than cash, on each share of Voting Stock from the Determination Date through the Consummation Date in an amount up to but not exceeding the amount of interest so payable per share of Voting Stock; or (b) (if applicable) the highest preferential amount per share to which the holders of shares of such class of Voting Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the corporation; or (c) the Fair Market Value per share of such class of Voting Stock on the Announcement Date or on the Determination Date, whichever is higher; or (d) (if applicable) the price per share equal to the Fair Market Value per share of such class of Voting Stock determined pursuant to paragraph B(2)(ii)(c) above, multiplied by the ratio of (1) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder for any shares of such class of Voting Stock acquired by it within the two-year period immediately prior to the Announcement Date to (2) the Fair Market Value per share of such class of Voting Stock on the first day in such two-year period upon which the Interested Stockholder acquired any shares of such class of Voting Stock. (iv) After such Interested Stockholder has become an Interested Stockholder and prior to the Consummation Date of such Business Combination: (a) except as approved by a majority of the Continuing -9- 11 Directors, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on the outstanding Preferred Stock, if any, (b) there shall have been (1) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock), except as approved by a majority of the Continuing Directors, and (2) an increase in such annual rate of dividends as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of Common Stock, unless the failure so to increase such annual rate is approved by a majority of the Continuing Directors, and (c) such Interested Stockholder shall have not become the beneficial owner of any additional shares of Voting Stock except as part of the transaction which results in such Interested Stockholder becoming an Interested Stockholder. (v) After such Interested Stockholder has become an Interested Stockholder, such Interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately as a stockholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantage provided by the corporation, whether in anticipation of or in connection with such Business Combination or otherwise. (vi) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to public stockholders of the corporation at least thirty (30) days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). Section C. For the purposes of this Article Twelve: (1) A "person" shall mean any individual, firm, corporation, or other entity. (2) "Interested Stockholder" shall mean any person (other than the corporation or any Subsidiary and other than any one or a group or more than one Continuing Director) who or which: (i) is the beneficial owner, directly or indirectly, of more than ten per cent of the voting power of the outstanding Voting Stock; or (ii) is an Affiliate of the corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of ten per cent or more of the voting power of the then-outstanding Voting Stock; or -10- 12 (iii) is an assignee of or has otherwise succeeded to any shares of the Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by any Interested Stockholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. For the purposes of determining whether a person is an Interested Stockholder pursuant to paragraph C(2) immediately above, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned through application of paragraph C(3) below, but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. (3) A person shall be a "beneficial owner" of any Voting Stock which: (i) such person or any of its Affiliates or Associates (as hereinafter defined) beneficially owns, directly or indirectly; or (ii) such person or any of its Affiliates or Associates has (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) the right to vote pursuant to any agreement, arrangement or understanding; or (iii) is beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock. (4) "Affiliate" or "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on February 22, 1984. (5) "Subsidiary" means any corporation of which a majority of any class of equity securities is owned, directly or indirectly, by the corporation; provided, however, that for the purposes of the definition of Interested Stockholder set forth in paragraph C(2) the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity securities is owned, directly or indirectly, by the corporation. (6) "Continuing Director" means any member of the Board of Directors of the corporation (the "Board") who is unaffiliated with the Interested Stockholder and was a member of the Board prior to the time that the Interested Stockholder became an Interested Stockholder, and any -11- 13 successor of a Continuing Director who is unaffiliated with the Interested Stockholder and is recommended to succeed a Continuing Director by a majority of the Continuing Directors then on the Board. (7) "Fair Market Value" means: (i) in the case of stock, the highest closing price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use or, if no such quotations are available, the Fair Market Value on the date in question of a share of such stock as determined by the Board in good faith; and (ii) in the case of property other than cash or stock, the Fair Market Value of such property on the date in question as determined by the Board in good faith. (8) In the event of any Business Combination in which the corporation survives, the phrase "consideration other than cash to be received" as used in paragraphs B(2)(ii) and B(2)(iii) of this Article Twelve shall include the shares of Common Stock and/or the shares of any other class of outstanding Voting Stock retained by the holders of such shares. Section D. A majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such determination as is hereinafter in this Section D specified to be made by the Board) shall have the power to determine, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance with this Article Twelve, including, without limitation, (1) whether a person is an Interested Stockholder, (2) the number of shares of Voting Stock beneficially owned by any person, (3) whether a person is an Affiliate or an Associate of another, (4) whether the applicable conditions set forth in paragraph B(2) have been met with respect to any Business Combination, and (5) whether the assets which are the subject of any Business Combination referred to in paragraph A(l)(ii) have, or the consideration to be received for the issuance or transfer of securities by the corporation or any Subsidiary in any Business Combination referred to in paragraph A(l)(iii) has, an aggregate Fair Market Value of $25,000,000 or more. Section E. Nothing contained in this Article Twelve shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law. Section F. Notwithstanding any other provisions of this Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the -12- 14 holders of any particular class or series of the Voting Stock required by law, this Certificate of Incorporation or any Preferred Stock Designation, the affirmative vote of the holders of at least 80% of the voting power of all of the then-outstanding shares of the Voting Stock, voting together as a single class, shall be required to alter, amend or repeal this Article Twelve. ARTICLE THIRTEEN Meetings of stockholders may be held within or without the State of Delaware as the Bylaws may provide. Elections of directors need not be by written ballot. ARTICLE FOURTEEN No action required to be taken or which may be taken at any annual or special meeting of stockholders of the corporation may be taken without a meeting, and the power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied. ARTICLE FIFTEEN No director of the corporation shall be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. Any repeal or modification of the foregoing provisions of this Article Fifteen by the stockholders of the corporation shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification. THE UNDERSIGNED, being the sole incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, does make this Certificate of Incorporation, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly I have hereunto set my hand this 25th day of February, 1987. /s/ GUY H. KERR ------------------------- Guy H. Kerr -13- 15 THE STATE OF TEXAS COUNTY OF DALLAS BEFORE ME, the undersigned authority, on this day personally appeared Guy H. Kerr, known to me to be the person whose name is subscribed to the foregoing instrument, and being by me first duly sworn, declared to me that the statements therein contained are true and correct and that he executed the same as his act and deed for purposes and consideration therein expressed. GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 25th day of February, 1987. /s/ MARY ANN HENDRIX ----------------------------------- (SEAL) Notary Public in and for Dallas County, Texas My Commission Expires July 11, 1987 - ------------------------- -14- EX-3.2 3 CORRECTION TO CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.2 PAGE 1 STATE OF DELAWARE [LOGO] OFFICE OF SECRETARY OF STATE I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF DELAWARE DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF CORRECTION OF A.H. BELO CORPORATION FILED IN THIS OFFICE ON THE THIRTEENTH DAY OF MAY, A.D. 1987, AT 10 O'CLOCK A.M. [SEAL] /s/ MICHAEL HARKINS ----------------------------------- Michael Harkins, Secretary of State AUTHENTICATION: 1235306 DATE: 05/13/1987 2 CERTIFICATE OF CORRECTION FILED TO CORRECT A CERTAIN ERROR IN THE CERTIFICATE OF INCORPORATION OF A.H. BELO CORPORATION FILED IN THE OFFICE OF THE SECRETARY OF STATE OF DELAWARE ON MARCH 2, 1987 A.H. Belo Corporation, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: 1. That the name of the corporation as set forth in the Certificate of Incorporation referred to below is A.H. Belo Corporation. 2. That a Certificate of Incorporation was filed with the Secretary of State of Delaware on March 2, 1987, and that such certificate requires correction as permitted by subsection (f) of Section 103 of The General Corporation Law of the State of Delaware. 3. That the inaccuracy or defect of such certificate to be corrected is as follows: A space between "A." and "H." was inadvertently left out of the corporation name in Article 1. 4. That Section 1 of the certificate is corrected to read as follows: 1. The name of the corporation is A. H. Belo Corporation. 3 IN WITNESS WHEREOF, A.H. Belo Corporation has caused this certificate to be signed by its officers as set forth below this 7th day of May, 1987. A.H. Belo Corporation By: /s/ JAMES P. SHEEHAN -------------------------------- Title: President -------------------------------- Attest: /s/ MICHAEL J. MCCARTHY - ------------------------------- By: Michael J. McCarthy - ------------------------------- Title: Secretary - ------------------------------- EX-3.3 4 CERTIFICATE OF DESIGNATION OF SERIES A STOCK 1 EXHIBIT 3.3 PAGE 1 [STATE OF DELAWARE OFFICE OF SECRETARY OF STATE LETTERHEAD] I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF DELAWARE DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF STOCK DESIGNATION OF A.H. BELO CORPORATION FILED IN THIS OFFICE ON THE TWENTY-SECOND DAY OF APRIL, A.D. 1987, AT 10 O'CLOCK A.M. /s/ MICHAEL HARKINS ----------------------------------- [SEAL] Michael Harkins, Secretary of State AUTHENTICATION: 1211596 DATE: 04/23/1987 2 CERTIFICATE OF DESIGNATION OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK OF A.H. BELO CORPORATION A.H. Belo Corporation (the "Corporation"), pursuant to Sections 103 and 151(g) of the General Corporation Law of the State of Delaware, hereby certifies that the following resolution was adopted by the Board of Directors of the Corporation pursuant to authority expressly vested in it by the provisions of the Certificate of Incorporation of the Corporation: RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of this Corporation in accordance with the provisions of the Certificate of Incorporation, the Board of Directors hereby creates a series of Preferred Stock, par value $1.00 per share, of the Corporation and hereby states the designation and number of shares, and fixes the relative rights and preferences thereof, as follows: Preferred Stock-Series A: I. Designation and Amount. The shares of such series shall be designated as "Series A Junior Participating Preferred Stock" (the "Series A Preferred Stock") and the number of shares constituting such series shall be 150,000. Such number of shares may be increased or decreased by resolution of the Board of Directors provided, that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than that of the shares then outstanding. II. Dividends and Distributions. (A) Subject to the prior and superior rights of the holders of any shares of any series of Preferred Stock ranking prior and superior to the shares of Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock, in preference to the holders of Common Stock and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or 1 3 fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $10 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock, par value $1.67 per share, of the Corporation (the "Common Stock") or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $10 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the 2 4 record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued buy unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. III. Voting Rights. The holders of shares of Series A Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time on or after the Distribution Date declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (C) Except as set forth herein, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent 3 5 they are entitled to vote with holders of Common stock as set forth herein) for taking any corporate action. IV. Certain Restrictions. (A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section II are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or (iv) purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good 4 6 faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section IV, purchase or otherwise acquire such shares at such time and in such manner. V. Reacquired Shares. Shares of Series A Preferred Stock which have been redeemed, or which have been issued and reacquired in any manner and retired, shall have the status of authorized and unissued Preferred Stock and may be reissued by the Board of Directors as shares of the same or any other series. VI. Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of Common Stock, or (2) to the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 5 7 VII. Consolidation, Merger, etc. In case the corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series A Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. VIII. Redemption. (A) The shares of Series A Preferred Stock shall be redeemable, at the option of the Board of Directors of the Corporation, in whole but not in part, out of funds legally available therefor, upon at least 30 days' Notice of Redemption pursuant to paragraph (B) of this Section VIII, at the following times: (i) at any time as there shall be outstanding less than 150,000 shares of Series A Preferred Stock. For purposes of this clause (i), shares of Series A Preferred Stock (x) owned by the Corporation or any of its direct or indirect subsidiaries, or (y) as to which Notice of Redemption pursuant to paragraph (B) of this Section VIII has previously been duly mailed, shall not be considered to be outstanding; (ii) at any time after the Board of Directors shall have adopted a resolution recommending the liquidation, dissolution or winding up of the Corporation and directing that the question of such liquidation, dissolution or winding up be submitted to a vote at a meeting of stockholders. (B) Whenever shares of Series A Preferred Stock are to be redeemed, the Corporation shall mail a notice ("Notice of 6 8 Redemption") by first-class mail, postage prepaid, to each holder of record of shares of Series A Preferred Stock to be redeemed and to the transfer agent for the Series A Preferred Stock. The Notice of Redemption shall be addressed to the holder at the address of the holder appearing on the stock transfer books of the Corporation maintained by the transfer agent for the Series A Preferred Stock. The Notice of Redemption shall include a statement of (i) the redemption date, (ii) the redemption price, (iii) the number of shares of Series A Preferred Stock to be redeemed, (iv) the place or places where shares of the Series A Preferred Stock are to be surrendered for payment of the redemption price, (v) that the dividends on the shares to be redeemed will cease to accrue on such redemption date, and (vi) the provision under which redemption is made. No defect in the Notice of Redemption or in the mailing thereof shall affect the validity of the redemption proceedings, except as required by law. From the date on which a Notice of Redemption shall have been given as aforesaid and the Corporation shall have deposited with the transfer agent for the Series A Preferred Stock a sum sufficient to redeem the shares of Series A Preferred Stock as to which Notice of Redemption has been given, with irrevocable instructions and authority to pay the redemption price to the holders thereof, or if no such deposit is made, then upon such date fixed for redemption (unless the corporation shall default in making payment of the redemption price), all rights of the holders thereof as stockholders of the Corporation by reason of the ownership of such shares (except their right to receive the redemption price thereof, but without interest), shall terminate, and such shares shall no longer be deemed outstanding. The Corporation shall be entitled to receive, from time to time, from the transfer agent for Series A Preferred Stock the interest, if any, on such monies deposited with it and the holders of any shares so redeemed shall have no claim to any such interest. In case the holder of any shares so called for redemption shall not claim the redemption price for his shares within one year after the date of redemption, the transfer agent for the Series A Preferred Stock shall; upon demand, pay over the Corporation such amount remaining on deposit and the transfer agent for the Series A Preferred Stock shall thereupon be relieved of all responsibility to the holder of such shares and such holder of the shares of the Series A Preferred Stock so called for redemption shall look only to the Corporation for the payment thereof. (C) Each share of the Series A Preferred Stock to be redeemed pursuant to paragraph (A) of this Section VIII shall be redeemed at a redemption price equal to, subject to the provision for adjustment hereinafter set forth, 100 times the "current per share market price" of the Common 7 9 Stock on the date of the mailing of the Notice of Redemption plus an amount equal to accrued and unpaid dividends on such shares (whether or not earned or declared) to the redemption date. In the event the Corporation shall at any time on or after the Distribution Date declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. The "current per share market price" on any date shall be deemed to be the average of the closing price per share of such Common Stock for the 10 consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Common Stock is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if the Common Stock is not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then in use or, if on any such date the Common Stock is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors of the Corporation. If on such date no such market maker is making a market in the Common Stock, the fair value of the Common Stock on such date as determined in good faith by the Board of Directors of the Corporation shall be used. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the Common Stock is listed or admitted to trading is open 8 10 for the transaction of business or, if the Common Stock is not listed or admitted to trading an any national securities exchange, a Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions in the State of New York are not authorized or obligated by law or executive order to close. (D) Except as set forth under Section IV hereof and except as set forth above with respect to redemptions, nothing contained herein shall limit any legal right of the Corporation to purchase or otherwise acquire any shares of series A Preferred Stock in privately negotiated transactions or in the over-the-counter market or otherwise. IX. Amendment. The Certificate of Incorporation of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights Of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting together as a single series. IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf of the Corporation as of the 16th day April of 1987. A.H. BELO CORPORATION By:/s/ MICHAEL J. McCARTHY ------------------------------- Title: Senior Vice President ---------------------------- ATTEST : BY:/s/ ROBERT S. NORVELL ------------------------------ Title: Vice President, Treasurer ------------------------- and Assistant Secretary 9 EX-3.4 5 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INC 1 EXHIBIT 3.4 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION A. H. Belo Corporation, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That at a meeting of the Board of Directors of the corporation held on February 24, 1988, resolutions were duly adopted setting forth proposed amendments of the Certificate of Incorporation of the corporation, declaring said amendments to be advisable and calling a meeting of the stockholders of the corporation for consideration thereof. The proposed amendments, in the form adopted by the Board of Directors of the corporation, are as set forth in items 1 through 8 of Appendix A to this Certificate. SECOND: That at the next annual meeting of the stockholders of the corporation thereafter duly convened and held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, the necessary number of shares as required by statute and by the corporation's Certificate of Incorporation were voted in favor of the amendments. THIRD: That said amendments were duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. FOURTH: That the capital of the corporation shall not be reduced under or by reason of said amendments. IN WITNESS WHEREOF, the corporation has caused this Certificate to be duly executed by its Chairman of the Board and attested to by its Secretary, and caused its corporate seal to be affixed hereto as of the 4th day of May, 1988. A. H. BELO CORPORATION By: /s/ ROBERT W. DECHERD ------------------------------- Chairman of the Board [Corporate Seal] ATTEST: /s/ MICHAEL J. McCARTHY ---------------------------- Secretary 2 THE STATE OF TEXAS ) ) COUNTY OF DALLAS ) On the 29th day of April, 1988, before me personally appeared Robert W. Decherd, the Chairman of A. H. Belo Corporation, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same in the capacity indicated, that it is the act and deed of such corporation, and that the facts stated therein are true. /s/ DEAN H. BLYTHE ------------------------------ Notary Public My Commission Expires: /s/ DEAN H. BLYTHE 3-12-90 ------------------------------ - ---------------------- Print Name 2 3 APPENDIX A AMENDMENTS TO THE CERTIFICATE OF INCORPORATION OF A. H. BELO CORPORATION 1. The first paragraph of Article Four shall be deleted and the following information shall be added: SECTION 1. Authorized Shares. The aggregate number of shares of stock that the corporation shall have the authority to issue is one hundred fifty-five million (155,000,000) shares, of which five million (5,000,000) shares shall be Preferred Stock (the "Preferred Stock"), par value $1.00 per share, and one hundred fifty million (150,000,000) shares shall be Common Stock (the "Common Stock"), par value $1.67 per share. The Common Stock may be issued as a single class, without series, or if so determined from time to time by the Board of Directors, either in whole or in part in two or more series. Unless and until a Certificate of Designation is filed an is effective with respect to two or more series, all shares of Common Stock shall be of one class without series and shall be denominated Common Stock. Upon the filing with the Secretary of State of a Certificate of Designation providing for the issuance of either Series B Stock or Series C Stock, each share of Common Stock outstanding or held in the treasury immediately prior to such filing shall be converted without any action by the holder thereof into one share of Series A Stock and each certificate representing outstanding shares of Common Stock shall thereafter be deemed to represent a like number of shares of Series A Stock. If shares of Common Stock are issued in two or more series, (a) fifty million (50,000,000) shares shall be denominated Series A Common Stock (herein called "Series A Stock"). The remaining shares of Common Stock may be issued as shares of Series B Common Stock (herein called "Series B Stock"), and/or Series C Common Stock (herein called "Series C Stock"). After completion of the initial distribution of Series B Stock, the corporation shall not issue any additional shares of Series B Stock except for shares issued in connection with (i) stock splits, stock dividends, and other similar distributions, (ii) the exercise of stock options outstanding as of January 1, 1988, (iii) the grant of restricted shares and the exercise of stock options granted under the corporation's 1986 Long Term Incentive Plan, (iv) the corporation's Employee Stock Purchase Plan, and (v) any employee benefit plan created pursuant to section 401(k) of the Internal Revenue Code of 1986, as amended, or any successor provision. Subject to the foregoing, the Board of Directors shall have the authority to fix the number of shares constituting any such series, and to increase or decrease the number of shares of any series prior to or after the issuance of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any 4 series shall be so decreased, the shares constituting such decrease shall resume the status of authorized but unissued shares of Common Stock. 2. The second paragraph of Article Four shall be inserted as follows below: The following is a statement of the designations and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof, in respect of the shares of Preferred Stock and Common Stock or any series of any class of stock of the corporation, and of the authority expressly granted hereby to the Board of Directors of the corporation to fix by resolution or resolutions any of such designations and powers, preferences and rights, and qualifications, limitations and restrictions thereof that may be desired but which shall not be fixed by this Certificate of Incorporation. 3. Paragraph (A) of Article Four shall be deleted and the following Section 2 shall be inserted: SECTION 2. Common Stock - Series A, Series B, and Series C. A. Powers, Preferences, and Rights The Board of Directors shall have the authority to fix or to alter the powers, designations, preferences, and relative, participation, optional, or other special rights, if any, and the qualifications, limitations, or restrictions thereof, if any, of the Series D Stock or Series C Stock; provided that in no such case shall the powers, preferences, and rights of the Series B Stock or Series C Stock be greater than those provided for herein; and provided further that in no such case shall the voting rights of the Series B Stock or the Series C Stock be other than as provided for herein or in the resolution or resolutions of the Board of Directors providing for the issuance of the Series B Stock or the Series C Stock. The Board of Directors may make changes in the rights, powers, and preferences of the Series B Stock and the Series C Stock, provided that in no such case may the rights, powers, and preferences of any such series be greater than those described herein. Except as otherwise required by law or expressly provided for in or pursuant to the authority provided in this Certificate of Incorporation or any resolution or resolutions providing for the issuance of Series B Stock or Series C Stock, the rights, powers, and preferences of the Series A Stock, the Series B Stock, and the Series C Stock and the qualifications, limitations, or restrictions thereof, shall be in all respects identical. B. Voting Rights 1. If there shall be only one series of Common Stock outstanding, each share of Common Stock shall entitle the holder thereof to one (1) vote. 2. If two or more series of Common Stock are issued and outstanding, each share of Series A Stock shall entitle the holder thereof to one (1) vote, each share of Series B Stock shall entitle the holder thereof to not less than one (1) vote nor more than ten (10) votes, and each share of Series C Stock shall entitle the holder thereof to not less than one-tenth (1/10) of a vote nor more than one (1) vote, on all matters -2- 5 submitted to a vote of stockholders. Such voting rights shall be set forth in a Certificate of Designation to be filed with respect to such series. Except as set forth herein or in any resolution or resolutions of the Board of Directors providing for the issuance of any series of Preferred Stock, all actions submitted to a vote of stockholders shall be voted on by the holders of Series A Stock, Series B Stock, and Series C Stock (as well as the holders of any series of Preferred Stock, if any, entitled to vote thereon) voting together as a single class. 3. If two or more series of Common Stock are issued and outstanding, the holders of shares of Series A Stock, Series B Stock, and Series C Stock shall each be entitled to vote separately as a class with respect to (i) amendments to this Certificate of Incorporation that alter or change the powers, preferences, or special rights of their respective series so as to affect them adversely, and (ii) such other matters as require class votes under the Delaware General Corporation Law. 4. Except as otherwise provided by law or pursuant to this Article Four or by resolution or resolutions of the Board of Directors providing for the issuance of any series of Preferred Stock, the holders of the Series A Stock, Series B Stock, and Series C Stock shall have sole voting power for all purposes, each holder of the Series A Stock, Series B Stock, and Series C Stock being entitled to vote as provided in this paragraph B of Section 2 and in the resolution or resolutions of the Board of Directors providing for the issuance of the Series B Stock or the Series C Stock. C. Dividends 1. If no shares of a particular series of Common Stock are outstanding, the Board of Directors may declare and distribute a stock dividend payable in shares of that series to the holders of any other class or series of stock then outstanding. 2. If and when dividends on the Series A Stock, Series B Stock, or Series C Stock are declared payable from time to time by the Board of Directors as provided in this subparagraph C.2, whether payable in cash, in property, or in shares of stock of the corporation, the holders of Series A Stock, the holders of Series B Stock, and the holders of Series C Stock shall be entitled to share equally, on a per share basis, in such dividends, subject to the limitations described below. Notwithstanding the above, dividends declared and payable in cash on shares of (i) Series A Stock may be greater than dividends declared and payable in cash on shares of Series B Stock or on shares of Series C Stock, (ii) Series C Stock may be greater than dividends declared and payable in cash on shares of Series A Stock or on shares of Series B Stock, and (iii) Series B Stock may be greater than dividends declared and payable in cash on shares of Series C Stock. Except for dividends permitted by subparagraph C.1, if dividends are declared that are payable in shares of Series A Stock, Series B Stock, or Series C Stock, such dividends shall be payable at the same rate on all series of stock and the dividends payable in shares of Series A Stock shall be payable only to holders of Series A Stock, the dividends payable in shares of Series B Stock shall be payable only to holders of Series B Stock, and the dividends payable in shares of Series C -3- 6 Stock shall be payable only to holders of Series C Stock. If the corporation shall in any manner split, divide, or combine the outstanding shares of Series A Stock, Series B Stock, or Series C Stock, the outstanding shares of the other such series of Common Stock shall be proportionally split, divided, or combined in the same manner and on the same basis as the outstanding shares of Series A Stock, Series B Stock, or Series C Stock, as the case may be, that have been split, divided, or combined. 3. Subject to provisions of law and the preferences of the Preferred Stock and of any other stock ranking prior to the Series A Stock, the Series B Stock, or the Series C Stock as to dividends, the holders of the Series A Stock, the Series B Stock, and the Series C Stock shall be entitled to receive dividends at such times and in such amounts as may be determined by the Board of Directors and declared out of any funds lawfully available therefor, and shares of Preferred Stock of any series shall not be entitled to share therein except as otherwise expressly provided in the resolution or resolutions of the Board of Directors providing for the issuance of such series. D. Conversion of Series B Stock by Holder 1. The holder of each share of Series B Stock shall have the right at any time, or from time to time, at such holder's option, to convert such share into one fully paid and nonassessable share of Series A Stock on and subject to the terms and conditions hereinafter set forth. 2. In order to exercise the conversion privilege, the holder of any shares of Series B Stock to be converted shall present and surrender the certificate or certificates representing such shares during usual business hours at any office or agency of the corporation maintained for the transfer of Series B Stock and shall deliver a written notice of the election of the holder to convert the shares represented by such certificate or any portion thereof specified in such notice. Such notice shall also state the name or names (with address) in which the certificate or certificates for shares of Series A Stock issuable on such conversion shall be registered. If required by the corporation, any certificate for shares surrendered for conversion shall be accompanied by instruments of transfer, in form satisfactory to the corporation, duly executed by the holder of such shares or his duly authorized representative. Each conversion of shares of Series B Stock shall be deemed to have been effected on the date (the "conversion date") on which the certificate or certificates representing such shares shall have been surrendered and such notice and any required instruments of transfer shall have been received as aforesaid, and the person or persons in whose name or names any certificate or certificates for shares of Series A Stock shall be issuable on such conversion shall be, for the purpose of receiving dividends and for all other corporate purposes whatsoever, deemed to have become the holder or holders of record of the shares of Series A Stock represented thereby on the conversion date. 3. As promptly as practicable after the presentation and surrender for conversion, as herein provided, of any certificate for shares of Series B Stock, the corporation shall issue and deliver at such office or -4- 7 agency, to or upon the written order of the holder thereof, certificates for the number of shares of Series A Stock issuable upon such conversion. Subject to the provisions of paragraph F of this Section 2, in case any certificate for shares of Series B Stock shall be surrendered for conversion of only a part of the shares represented thereby, the corporation shall deliver at such office or agency, to or upon the written order of the holder thereof, a certificate or certificates for the number of shares of Series B Stock represented by such surrendered certificate that are not being converted. The issuance of certificates for shares of Series A Stock issuable upon the conversion of shares of Series B Stock by the registered holder thereof shall be made without charge to the converting holder for any tax imposed on the corporation in respect of the issue thereof. The corporation shall not, however, be required to pay any tax that may be payable with respect to any transfer involved in the issue and delivery of any certificate in a name other than that of the registered holder of the shares being converted, and the corporation shall not be required to issue or deliver any such certificate unless and until the person requesting the issue thereof shall have paid to the corporation the amount of such tax or has established to the satisfaction of the corporation that such tax has been paid. 4. Upon any conversion of shares of Series B Stock into shares of Series A Stock pursuant hereto, no adjustment with respect to dividends shall be made; only those dividends shall be payable on the shares so converted as have been declared and are payable to holders of record of shares of Series B Stock on a date prior to the conversion date with respect to the shares so converted; and only those dividends shall be payable on shares of Series A Stock issued upon such conversion as have been declared and are payable to holders of record of shares of Series A Stock on or after such conversion date. 5. In case of any consolidation or merger of the corporation as a result of which the holders of Series A Stock shall be entitled to receive cash, stock, other securities, or other property with respect to or in exchange for Series A Stock or in case of any sale or conveyance of all or substantially all of the property or business of the corporation as an entirety, a holder of a share of Series B Stock shall have the right thereafter to convert such share into the kind and amount of cash, shares of stock, and other securities and properties receivable upon such consolidation, merger, sale, or conveyance by a holder of one share of Series A Stock and shall have no other conversion rights with regard to such share. The provisions of this subparagraph D.5 shall similarly apply to successive consolidations, mergers, sales, or conveyances. 6. Shares of the Series B Stock converted into Series A Stock shall be retired and shall resume the status of authorized but unissued shares of Series B Stock. 7. Such number of shares of Series A Stock as may from time to time be required for such purpose shall be reserved for issuance upon conversion of outstanding shares of Series B Stock and of shares of Series B Stock issuable upon exercise of options. -5- 8 E. Termination of Series B or Series C Stock 1. All outstanding shares of Series B Stock shall automatically, without any further act or deed on the part of the corporation or any other person, be converted into shares of Series A Stock on a share-for-share basis a. if, as a result of the existence of the Series B Stock, the Series A Stock is excluded from trading on the New York Stock Exchange, the American Stock Exchange, and other national securities exchanges and is also excluded from quotation on the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or any other national quotation system then in use; or b. at the option of the corporation: (i) at any time when the Board of Directors and the holders of a majority of the outstanding shares of the Series B Stock approve the conversion of all of the Series B Stock into Series A Stock; or (ii) if the Board of Directors, in its sole discretion, elects to effect a conversion (X) in order to avoid the exclusion of the Series A Stock from trading on a national securities exchange or the exclusion of the Series A Stock from quotation on NASDAQ or such other national quotation system then in use, or (Y) due to requirements of federal or state law, in any such case, as a result of the existence of the Series B Stock. 2. All outstanding shares of Series C Stock shall automatically, without any further act or deed on the part of the corporation or any other person, be converted into shares of Series A Stock on a share-for-share basis a. if, as a result of the existence of the Series C Stock, the Series A Stock is excluded from trading on the New York Stock Exchange, the American Stock Exchange, and all other national securities exchanges and is also excluded from quotation on the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or any other national quotation system then in use; or b. at the option of the corporation: (i) at any time when the Board of Directors and the holders of a majority of the outstanding shares of the Series C Stock approve the conversion of all of the Series C Stock into Series A Stock; or (ii) if the Board of Directors, in its sole discretion, elects to effect a conversion (X) in order to avoid the exclusion of the Series A Stock from trading on a national securities exchange or the exclusion of the Series A Stock -6- 9 from quotation on NASDAQ or such other national quotation system then in use, or (Y) due to requirements of federal or state law, in any such case, as a result of the existence of the Series C Stock. 3. Upon any automatic conversion of Series B Stock of Series C Stock pursuant to this paragraph E, each certificate representing outstanding shares of Series B Stock or Series C Stock, as the case may be, shall thereafter be deemed to represent a like number of shares of Series A Stock or Common Stock, as the case may be. F. Limitations on Transfer of Series B Stock 1. No record or beneficial owner of shares of Series B Stock may transfer, and the corporation shall not register the transfer of, such shares of Series B Stock, whether by sale, assignment, gift, bequest, appointment, or otherwise, except to a "Permitted Transferee" as provided herein. a. In the case of a holder of record of the Series B Stock (the "Series B Holder") who is a natural person and the beneficial owner of the shares of Series B Stock to be transferred, Permitted Transferees shall include only the following: (i) The spouse of such Series B Holder, any lineal descendant of a great- grandparent of such Series B Holder, or any spouse of such lineal descendent (herein collectively referred to as "such Series B Holder's Family Members"); (ii) The trustee or trustees of a trust (including a voting trust) for the sole benefit of such Series B Holder and/or one or more of such Series B Holder's Family Members, except that such trust may also grant a general or special power of appointment to one or more of such Series B Holder's Family Members and may permit trust assets to be used to pay taxes, legacies, and other obligations of the Trust or the estates of one or more of such Series B Holder's Family Members payable by reason of the death of any of such Family Members; provided, however, if at any time such trust ceases to meet the requirements of this subparagraph (ii), all shares of Series B Stock then held by such trustee or trustees shall immediately and automatically, without further act or deed on the part of the corporation or any person, be converted into Series A Stock on a share-for-share basis, and stock certificates formerly representing such shares of Series B Stock shall thereupon and thereafter be deemed to represent a like number of shares of Series A Stock; (iii) A corporation wholly owned by such Series B Holder and/or such Series B Holder's Family Members or a partnership in which all of the partners are, and all of the partnership interests are owned by, such Series B -7- 10 Holder and/or such Series B Holder's Family Members provided that if by reason of any change in the ownership of such stock or partners or partnership interests, such corporation or partnership would no longer qualify as a Permitted Transferee of such Series B Holder, all shares of Series B Stock then held by such corporation or partnership shall immediately and automatically, without further act or deed on the part of the corporation or any other person, be converted into shares of Series A Stock on a share-for-share basis, and stock certificates formerly representing such shares of Series B Stock shall thereupon and thereafter be deemed to represent a like number of shares of Series A Stock; (iv) An organization established by the Series B Holder of such Series B Holder's Family Members, contributions to which are deductible for federal income, estate, or gift tax purposes (a "Charitable Organization") and a majority of whose governing board at all times consists of the Series B Holder and/or one or more of the Permitted Transferees of such Series B Holder, or any successor to such Charitable Organization meeting such definition; provided that if by reason of any change in the composition of the governing board of such Charitable Organization, such Charitable Organization shall no longer qualify as a Permitted Transferee of such Series B Holder, all shares of Series B Stock then held by such Charitable Organization shall immediately and automatically, without further act or deed on the part of the corporation or any other person, be converted into shares of Series A Stock on a share-for-share basis, and stock certificates formerly representing such shares of Series B Stock shall thereupon and thereafter be deemed to represent the like number of shares of Series A Stock; and (v) The executor, administrator, or personal representative of the estate of a deceased Series B Holder or guardian or conservator of a Series B Holder adjudged disabled or incompetent by a court of competent jurisdiction, acting in his capacity as such. b. In the case of a Series B Holder holding the shares of Series B Stock as trustee pursuant to a trust other than a trust described in subparagraph F.1.c below, Permitted Transferees shall include only the following: (i) any successor trustee of such trust who is described in subparagraph F.1.b.(ii) below, or who is not and will not thereby become, an Interested Stockholder of the corporation (as defined in Article Twelve, Section C.(2) hereof); and -8- 11 (ii) the person who established such trust and any Permitted Transferee of such person, determined in accordance with paragraph (a) above. c. In the case of a Series B Holder holding the shares of Series B Stock as trustee pursuant to a trust that was irrevocable on the Record Date (a "Transferor Trust"), Permitted Transferees shall include only the following: (i) any successor trustee of such Transferor Trust who is described in subparagraph F.1.c.(ii) or (iii) below, or who is not, and will not thereby become, an Interested Stockholder of the corporation (as defined in Article Twelve, Section C.(2) hereof); (ii) any person to whom or for whose benefit the principal or income may be distributed either during or at the end of the term of such Transferor Trust whether by power of appointment or otherwise, and any Permitted Transferee of such person, determined pursuant to paragraph (a) above; and (iii) any Family Member of the person who established such Transferor Trust. d. In the case of a record (but not beneficial) owner of the Series B Stock as a nominee for the person who was the Beneficial owner thereof on the Record Date (as defined below), Permitted Transferees shall include only such beneficial owner and a Permitted Transferee of such beneficial owner. e. In the case of a Series B Holder that is a partnership and the beneficial owner of the shares of Series B Stock proposed to be transferred, Permitted Transferees shall include only: (i) any partner of such partnership who was also a partner of such partnership on the Record Date; (ii) any person transferring shares of Series B Stock to such partnership after the Record Date (provided, however, that such transferor may not receive shares of Series B Stock in excess of the shares transferred by the transferor to such partnership); and (iii) any Permitted Transferee of such person referred to in subparagraph F.1.e(i) or F.1.e(ii) above (not in excess of the number of shares that such person is entitled to receive pursuant to this subparagraph F.1.e). f. In the case of a Series B Holder that is a corporation and the beneficial owner of the shares proposed to be transferred, Permitted Transferees shall include only: -9- 12 (i) any stockholder of such corporation on the Record Date who receives shares of Series B Stock pro rata to his stock ownership in such corporation through a dividend or through a distribution made upon liquidation of such corporation; (ii) any person transferring shares of Series B Stock to such corporation after the Record date (provided, however, that such transferor may not receive shares of Series B Stock in excess of the shares transferred by the transferor to such corporation); (iii) Any Permitted Transferee of such stockholder or person referred to in subparagraph F.1.f(i) or (ii) above (not in excess of the number of shares that such stockholder or person is entitled to receive pursuant to this subparagraph F.1.f); and (iv) the survivor of a merger or consolidation of such corporation if those persons who owned beneficially sufficient shares entitled to elect at least a majority of the entire board of directors of such constituent corporation immediately prior to the merger or consolidation own beneficially sufficient shares entitled to elect at least a majority of the board of directors of the surviving corporation, provided that if by reason of any change in the ownership of such stock such surviving corporation would no longer qualify as a Permitted Transferee, all shares of Series B Stock then held by such surviving corporation shall immediately and automatically, without further act or deed on the part of the corporation or any other person, be converted into shares of Series A Stock on a share-for-share- basis, and stock certificates formerly representing such shares of Series B Stock shall thereupon and thereafter be deemed to represent a like number of shares of Series A Stock. For purposes of subparagraph F.1.f, a mutual company shall be treated as a corporation, and the persons holding voting interests therein shall be treated as stockholders. g. In the case of a Series B Holder who is the executor or administrator of the estate of a deceased Series B Holder or guardian or conservator of the estate of a disabled or incompetent Series B Holder, Permitted Transferees shall include only a Permitted Transferee of such deceased, disabled, or incompetent Series B Holder. 2. Notwithstanding anything to the contrary set forth herein, any Series B Holder may pledge such holder's shares of Series B Stock to a pledgee pursuant to a bona fide pledge of such shares as collateral security for indebtedness due to the pledgee, provided that such shares shall not be transferred to or registered in the name of the pledgee and shall remain subject to the provisions of this paragraph F. In the event -10- 13 of foreclosure or other similar action by the pledgee, such pledged shares of Series B Stock may only be transferred to a Permitted Transferee of the pledgor or converted into shares of Series A Stock, as the pledgee may elect. 3. For purposes of this paragraph F: a. The relationship of any person that is derived by or through legal adoption shall be considered a natural one; b. Each joint owner of shares of Series B Stock shall be considered a Series B Holder of such shares; c. A minor for whom shares of Series B stock are held pursuant to a Uniform Gifts to Minors Act or similar law shall be considered a Series B Holder of such shares; d. Unless otherwise specified, the term "person" means both natural person and legal entities; and e. The "Record Date" is the date for determining the persons to whom the Series B Stock is initially distributed by the corporation as a dividend on the Common Stock. 4. Any purported transfer of shares of Series B Stock not permitted hereunder shall result in the conversion of the transferee's shares of Series B Stock into shares of Series A Stock, effective on the date on which certificates representing such shares are presented for transfer on the stock transfer record books of the corporation; provided, however, that if the corporation should determine that such shares were not so presented for transfer within 20 days after the date of such sale, transfer, assignment, or other disposition, the transfer date shall be the actual date of such sale, transfer, assignment, or other disposition as determined in good faith by the Board of Directors or its appointed agent. The corporation may, as a condition to the transfer or the registration of transfer of shares of Series B Stock to a purported Permitted Transferee, require the furnishing of such affidavits or other proof as it deems necessary to establish that such transferee is a Permitted Transferee. If no indication to the contrary is supplied at the time shares of Series B Stock are presented for transfer, the transfer shall be presumed by the corporation to be a transfer to a person other than the Permitted Transferee. G. Registration of Series B Stock 1. Shares of Series B Stock shall be registered in the name(s) of the beneficial owner(s) thereof (as hereafter defined) and not in "street" or "nominee" names; provided, however, certificates representing shares of Series B Stock issued as a stock dividend on the corporation's then outstanding Common Stock may be registered in the same name and manner as the certificates representing the shares of Common Stock with respect to which the shares of Series B Stock were issued. For the purposes of paragraphs F and G of this Section 2, the term "beneficial owner(s)" of any shares of Series B Stock shall mean the person or -11- 14 persons who possess the power to vote or dispose, or to direct the voting or disposition of such shares and "beneficially owned" shares shall refer to shares owned by such a beneficial owner. 2. The corporation shall note on the certificates representing the shares of Series B Stock that there are restrictions on transfer and registration of transfer imposed by paragraphs F and G of this Section 2. H. Priority of Preferred Stock The Series A Stock, Series B Stock, and Series C Stock are subject to all the powers, rights, privileges, preferences, and priorities of the Preferred Stock as may be stated herein and as shall be stated and expressed in any resolution or resolutions adopted by the Board of Directors providing for the issuance of any series of Preferred Stock, pursuant to authority expressly granted to and vested in it by the provisions of this Article Four. I. Liquidation, Dissolution, or Winding Up In the event of any liquidation, dissolution or winding up of the corporation, whether voluntary or involuntary (sometimes referred to as liquidation), after payment or provision for payment of the debts and other liabilities of the corporation and the preferential amounts to which the holders of any stock ranking prior to the Series A Stock, the Series B Stock, and the Series C Stock in the distribution of assets shall be entitled upon liquidation, the holders of the Series A Stock, the Series B Stock, and the Series C Stock and holders of any other stock ranking on a parity with the Series A Stock, the Series B Stock, and the Series C Stock in the distribution of assets upon liquidation shall be entitled to share pro rata in the remaining assets of the corporation according to their respective interests. 4. Paragraph (B) of Article Four is hereby redesignated as SECTION 3. Preferred Stock. 5. Paragraph (C) of Article Four is hereby redesignated as SECTION 4. General. The first sentence of the second paragraph of Paragraph (C) shall be deleted. 6. Article Nine shall be amended to read as shown below. ARTICLE NINE "The initial Bylaws of the corporation shall be adopted by the Board of Directors. The power to alter, amend, or repeal the corporation's Bylaws, and to adopt new Bylaws, is hereby vested in the Board of Directors, subject, however, to repeal or change by the affirmative vote of the holders of at least two-thirds of the voting power of all of the outstanding shares entitled to vote thereon. Notwithstanding any other provisions of this Certificate of Incorporation, or any provision of law which might otherwise permit a lesser vote or no vote, the affirmative vote of the holders of at least two-thirds of the voting power of all of -12- 15 the then outstanding shares of the voting stock, voting together as a single class, shall be required to alter, amend, or repeal this Article Nine." 7. Article Eleven shall be amended to read as show below. ARTICLE ELEVEN "Except as otherwise provided in this Certificate of Incorporation, for purposes of Sections 251, 253, 271, 275, and 311 of the Delaware General Corporation Law (or any successor provisions of Delaware law), where applicable the affirmative vote of the holders of at least two-thirds, rather than a majority, of the voting power of all of the outstanding shares of stock entitled to vote in accordance therewith shall be required. Notwithstanding any other provisions of this Certificate of Incorporation, or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of voting stock required by law, this Certificate of Incorporation or any Certificate of Designation, the affirmative vote of the holders of at least two-thirds of the voting power of all of the then outstanding shares of the voting stock, voting together as a single class, shall be required to alter, amend, or repeal this Article Eleven." 8. The paragraph from Article Twelve immediately following Section A(1)(i)-(v) shall be amended to read as shown below. "shall require the affirmative vote of the holders of at least eighty percent (80%) of the voting power of all the then outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors (hereinafter in this Article Twelve referred to as the "Voting Stock"), voting together as a single class (it being understood that, for purposes of this Article Twelve, each share of stock shall have the number of votes granted to it pursuant to Article Four of this Certificate of Incorporation or any designation of the rights, powers and preferences of any class or series of stock made pursuant to Article Four (a "Certificate of Designation"). Such affirmative vote shall be required notwithstanding any other provisions of this Certificate of Incorporation or any provision of law or of any agreement with any national securities exchange which might otherwise permit a lesser vote or no vote, but such affirmative vote shall be required in addition to any affirmative vote of the holders of any particular class or series of the Voting Stock required by law, this Certificate of Incorporation or any Certificate of Designation." -13- EX-3.5 6 CERTIFICATE OF AMENDMENT TO CERTIFICATE OF INC 1 EXHIBIT 3.5 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION A. H. Belo Corporation, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That at a meeting of the Board of Directors of the corporation held on February 22, 1995, resolutions were duly adopted setting forth a proposed amendment of the Certificate of Incorporation of the corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of the corporation for consideration thereof. The proposed amendment, in the form adopted by the Board of Directors of the corporation, is as set forth in Appendix A to this Certificate. SECOND: That at the next annual meeting of the stockholders of the corporation thereafter duly convened and held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, the necessary number of shares as required by statute and by the corporation's Certificate of Incorporation were voted in favor of the amendment. THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. FOURTH: That the capital of the corporation shall not be reduced under or by reason of said amendment. IN WITNESS WHEREOF, the corporation has caused this Certificate to be duly executed by its Chairman of the Board and attested to by its Secretary, and caused its corporate seal to be affixed hereto as of the 3rd day of May, 1995. A. H. BELO CORPORATION By: /s/ ROBERT W. DECHERD --------------------------------- Chairman of the Board [Corporate Seal] ATTEST: /s/ MICHAEL J. MECARTHY ----------------------------- Secretary 2 THE STATE OF TEXAS Section Section COUNTY OF DALLAS Section On the ______ day of __________________, 1995, before me personally appeared Robert W. Decherd, the Chairman of the Board of A. H. Belo Corporation, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same in the capacity indicated, that it is the act and deed of such corporation, and that the facts stated therein are true. ---------------------------------- Notary Public My Commission Expires: - ------------------------- ---------------------------------- Print Name 3 APPENDIX A AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF A. H. BELO CORPORATION The third paragraph of Article Four, Section 1, shall be deleted and replaced with the following: If the shares are issued in two or more series, the remaining shares of Common Stock may be issued by the Board of Directors as shares of Series A Common Stock (herein called "Series A Stock"), and/or designated and issued as shares of Series B Common Stock (herein called "Series B Stock"), and/or as shares of Series C Common Stock (herein called "Series C Stock"). After completion of the initial distribution of Series B Stock, the corporation shall not issue any additional shares of Series B Stock if such issuance would result in the Series A Stock being excluded from trading on the New York Stock Exchange, the American Stock Exchange, and other national stock exchanges and also being excluded from quotation on the NASDAQ (as defined herein) or any other national quotation system then in use. Subject to the foregoing, the Board of Directors shall have the authority to fix the number of shares constituting any such series, and to increase or decrease the number of shares of any series prior to or after the issuance of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status of authorized but unissued shares of Common Stock. EX-3.7 7 AMENDED CERTIFICATE OF DESIGNATION OF SERIES A 1 EXHIBIT 3.7 AMENDED CERTIFICATE OF DESIGNATION OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK OF A. H. BELO CORPORATION A. H. Belo Corporation (the "Corporation"), pursuant to Sections 103 and 151 of the General Corporation Law of the State of Delaware, hereby certifies the following: (1) No shares of the series A Junior Participating Preferred Stock of A. H. Belo Corporation have been issued. (2) Pursuant to the authority vested in the Board of Directors by the Corporation's Certificate of Incorporation, the Board of Directors, at a meeting duly convened and held on the 4th day of May, 1988, adopted the following resolution: RESOLVED, that the Certificate of Designation of Series A Junior Participating Preferred Stock of A. H. Belo Corporation is hereby amended pursuant to the amendments attached hereto as Appendix A. (3) The Series A Junior Participating Preferred Stock designated pursuant to a Certificate of Designation dated April 16, 1987, and filed with the Secretary of State of the State of Delaware on April 22, 1987, shall continue to be designated "Series A Junior Participating Preferred Stock." IN WITNESS WHEREOF, the Certificate of Amendment to Certificate of Designation is executed on behalf of the Corporation as of May 4, 1988. A. H. Belo Corporation Attest: By: /s/ MICHAEL J. McCARTHY By: /s/ ROBERT W. DECHERD ----------------------------- ---------------------------------- Title: Secretary Title: Chairman of the Board and CEO ------------------- ------------------------------ 2 THE STATE OF TEXAS ) ) COUNTY OF DALLAS ) On the 29th day of April, 1988, before me personally appeared Robert W. Decherd, the Chairman of A. H. Belo Corporation, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same in the capacity indicated, that it is the act and deed of such corporation, and that the facts stated therein are true. /s/DEAN H. BLYTHE --------------------- Notary Public My commission expires: Dean H. Blythe 3-12-90 --------------------- - ---------------------- Print Name 3 APPENDIX A Amendments to Certificate of Designation of Series A Junior Participating Preferred Stock of A. H. Belo Corporation The Certificate of Designation of the Series A Junior Participating Preferred Stock of A. H. Belo Corporation dated April 16, 1987, and filed with the Secretary of State of the State of Delaware on April 22, 1987, is amended as follows: 1. Section I is amended by adding a new sentence at the end of this Section to read as follows: "For purposes of this Certificate of Designation, 'Common Stock' shall mean the common stock, par value $1.67 per share, of the Corporation, or if such Common Stock shall be issued and outstanding in series, the Series A Common Stock, Series B Common Stock, and/or Series C Common Stock." 2. The first sentence of Section VIII (C) is amended in its entirety to read as follows: "(C) Each share of Series A Preferred Stock to be redeemed pursuant to Paragraph A of this Section VIII shall be redeemed at a redemption price equal to, subject to the provision for adjustment hereinafter set forth, one hundred times the 'current per share market price' of Series A Common Stock, or if no Series A Common Stock is outstanding, the Common Stock, on the date of the mailing of the Notice of Redemption plus an amount equal to accrued and unpaid dividends on such shares (whether or not earned or declared) to the redemption date." 3. The second paragraph of Section VIII (C) is amended in its entirety to read as follows: "The 'current per share market price' of the Common Shares on any date shall be deemed to be the average of the daily closing prices per share of such Common Shares (or, in the event issued and outstanding, Series A Common Shares) for the 10 consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case reported in the principal consolidated transaction reporting system with respect to securities listed or 4 admitted to trading on the New York Stock Exchange or, if the Common Shares (or, in the event issued and outstanding, Series A Common Shares) are not listed or admitted on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Common Shares (or, in the event issued and outstanding, Series A Common Shares) are listed or admitted to trading, or, if the Common Shares (or, in the event issued and outstanding, Series A Common Shares) are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then is use, or, if on any such date the Common Shares (or, in the event issued and outstanding, Series A Common Shares) are not quoted by any organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Shares (or, in the event issued and outstanding, Series A Common Shares) selected by the Board of Directors of the Corporation. If on such date no such market maker is making a market in the Common Shares (or, in the event issued and outstanding, Series A Common Shares) the fair value of the Common Shares (or, in the event issued and outstanding, Series A Common Shares) on such date as determined in good faith by the Board of Directors of the Corporation shall be used. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the Common Shares (or, in the event issued and outstanding, Series A Common Shares) are listed or admitted to trading is open to the transaction of business or, if the Common Shares (or, in the event issued and outstanding, Series A Common Shares) are not listed or admitted to trading on any national securities exchange, a Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions in the State of Texas are not authorized or obligated by law or executive order to close. 2 EX-3.8 8 CERTIFICATE OF DESIGNATION OF SERIES B STOCK 1 EXHIBIT 3.8 CERTIFICATE OF DESIGNATION OF SERIES B COMMON STOCK OF A.H. BELO CORPORATION Pursuant to Section 151 of the General Corporation Law of the State of Delaware A. H. Belo Corporation, a corporation organized and existing under the laws of the State of Delaware, does hereby certify that, pursuant to the authority vested in its Board of Directors by Article Four of the corporation's Certificate of Incorporation, the Board of Directors, at a meeting duly convened and held on the 4th day of May, 1988, adopted the following resolution creating a series of its Common Stock, par value $1.67 per share, designated as Series B Common Stock: RESOLVED, that a series of the class of the corporation's authorized Common Stock, par value $1.67 per share, be and hereby is created, and that the designation and amount thereof and the voting power, preferences and relative, participating, optional and other special rights of such series, and the qualifications, limitations and restrictions thereof are as set forth on Appendix A attached hereto. IN WITNESS WHEREOF, A. H. Belo Corporation has caused this Certificate of Designation to be duly executed by its Chairman of the Board and attested to by its Secretary, and caused its corporate seal to be affixed hereto as of the 4th day of May, 1988. A. H. BELOW CORPORATION By: /s/ ROBERT W. DECHERD --------------------------------- Chairman of the Board [Corporate Seal] ATTEST: /s/ MICHAEL J. McCARTHY ----------------------------- Secretary 2 THE STATE OF TEXAS ) ) COUNTY OF DALLAS ) On the 29th day of April, 1988, before me personally appeared Robert W. Decherd, the Chairman of A. H. Belo Corporation, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same in the capacity indicated, that it is the act and deed of such corporation, and that the facts stated therein are true. /s/ DEAN H. BLYTHE ---------------------------------- Notary Public My Commission Expires: Dean H. Blythe 3-12-90 ---------------------------------- - ----------------------- Print Name 2 3 APPENDIX A DESIGNATION OF SERIES B COMMON STOCK Section 1. Designation and Amount. The shares of such series shall be designated as the "Series B Common Stock" (the Series B Stock") and the number os shares constituting such series shall be fifteen million (15,000,000), which number may be increased or decreased by the Board of Directors without a vote of stockholders; provided, however, that such number may not be increased above the number of shares of Series B Stock permitted pursuant to the provisions of Article Four, Section 1 of the Certificate of Incorporation, or decreased below the number of shares of Series B Stock then outstanding. Section 2. Voting Rights. Each share of Series B Stock shall entitle the holder thereof to ten (10) votes on all matters submitted to a vote of stockholders. Except as set forth herein and in the Certificate of Incorporation, all actions submitted to a vote of stockholders shall be voted on by the holders of Series A Common Stock (the "Series A Stock"), and Series B Stock (as well as the holders of any other series of Common Stock and any series of Preferred Stock, if any, entitled to vote thereon), voting together as a single class. The holders of shares of Series B Stock shall be entitled to vote separately as a class with respect to (i) amendments to the Certificates of Incorporation that alter or change the powers, preferences, or special rights of the Series B Stock so as to affect them adversely, and (ii) such other matters as require class votes under the General Corporation Law of the State of Delaware. Section 3. Dividends. If and when dividends on the Series A Stock, Series B Stock or Series C Common Stock (if any) are declared payable from time to time by the Board of Directors as provided in Article Four, Section 2, subparagraph C.2 of the Certificate of Incorporation, whether payable in cash, in property, or in shares of stock of the corporation, the holders of Series A Stock, the holders of Series B Stock, and the holders of Series C Common Stock (if any) shall be entitled to share equally, on a per share basis, in such dividends, subject to the limitations described below. Notwithstanding the above, dividends declared and payable in cash on shares of (i) Series A Stock may be greater than dividends declared and payable in cash on shares of Series B Stock or on shares of Series C Common Stock (if any), (ii) Series C Common Stock (if any) may be greater than dividends declared and payable in cash on shares of Series A Stock or on shares of Series B Stock, and (iii) Series B Stock may be greater than dividends declared and payable in cash on shares of Series C Common Stock (if any). Except for dividends permitted by Article Four, Section 2, subparagraph C.1 of the Certificate of Incorporation, if dividends are declared that are payable in shares of Series A Stock, Series B Stock, or Series C Common Stock, such dividends shall be payable at the same rate on all series of stock and the dividends payable in shares of Series A Stock shall be payable only to holders of Series A Stock, the 4 dividends payable in shares of Series B Stock be payable only to holders of Series B Stock, and the dividends payable in shares of Series C Common Stock (if any) shall be payable only to holders of Series C Common Stock (if any). If the corporation shall in any manner split, divide, or combine the outstanding shares of Series A Stock, Series B Stock, or Series C Common Stock (if any), the outstanding shares of the other such series of Common Stock shall be proportionally split, divided, or combined in the same manner and on the same basis as the outstanding shares of Series A Stock, Series B Stock, or Series C Common Stock (if any), as the case may be, that have been split, divided, or combined. Subject to provisions of law and the preferences of the Preferred Stock and of any other stock ranking prior to the Series A Stock, the Series B Stock, or the Series C Common Stock (if any) as to dividends, the holders of the Series A Stock, the Series B Stock and the Series C Common Stock (if any) shall be entitled to received dividends at such times and in such amounts as may be determined by the Board of Directors and declared out of any funds lawfully available therefor, and shares of Preferred Stock of any series shall not be entitled to share therein except as otherwise expressly provided in the resolution or resolutions of the Board of Directors providing for the issuance of such series. Section 4. Conversion of Series B Stock by Holder. A. The holder of each share of Series B Stock shall have the right at any time, or from time to time, at such holder's option, to convert such shares into one fully paid and nonassessable share of Series A Stock on and subject to the terms and conditions hereinafter set forth. B. In order to exercise the conversion privilege, the holder of any shares of Series B Stock to be converted shall present and surrender the certificate or certificates representing such shares during usual business hours at any office or agency of the corporation maintained for the transfer of Series B Stock and shall deliver a written notice of the election of the holder to convert the shares represented by such certificate or any portion thereof specified in such notice. Such notice shall also state name or names (with address) in which the certificate or certificates for shares of Series A Stock issuable on such conversion shall be registered. If required by the corporation, any certificate for shares surrendered for conversion shall be accompanied by instruments of transfer, in form satisfactory to the corporation, duly executed by the holder of such shares or his duly authorized representative. Each conversion of shares of Series B Stock shall be deemed to have been effected on the date (the "conversion date") on which to certificate or certificates representing such shares shall have been surrendered and such notice and any required instruments of transfer shall have been received as -2- 5 aforesaid, and the person or persons in whose name or names any certificate or certificates for shares of Series A Stock shall be issuable on such conversion shall be, for the purpose of receiving dividends and for all other corporate purposes whatsoever, deemed to have become the holder or holders of record of the shares of Series A Stock represented thereby on the conversion date. C. As promptly as practicable after the presentation and surrender for conversion, as herein provided, of any certificate for shares of Series B Stock, the corporation shall issue and deliver at such office or agency, to or upon the written order of the holder thereof, certificates for the number of shares of Series A Stock issuable upon such conversion. Subject to the provisions of Section 6 below, in case any certificate for shares of Series B Stock shall be surrendered for conversion of only a part of the shares represented thereby, the corporation shall deliver at such office or agency, to or upon the written order of the holder thereof, a certificate or certificates for the number of shares of Series B Stock represented by such surrendered certificate that are not being converted. The issuance of certificates for shares of Series A Stock issuable upon the conversion of shares of Series B Stock by the registered holder thereof shall be made without charge to the converting holder of any tax imposed on the corporation in respect of the issue thereof. The corporation shall not, however, be required to pay any tax that may be payable with respect to any transfer involved in the issue and delivery of any certificate in a name other than that of the registered holder of the shares being converted, and the corporation shall not be required to issue or deliver any such certificate unless and until the person requesting the issue thereof shall have paid to the corporation the amount of such tax or has established to the satisfaction of the corporation that such tax has been paid. D. Upon any conversion of shares of Series B Stock into shares of Series B Stock into shares of Series A Stock pursuant hereto, no adjustment with respect to dividends shall be made; only those dividends shall be payable on shares of Series A Stock issued upon such conversion as have been declared and are payable to holders of record of shares of Series A Stock on or after such conversion date. E. In case of any consolidation or merger of the corporation as a result of which the holders of Series A Stock shall be entitled to receive cash, stock, other securities, or other property with respect to or in exchange for Series A Stock or in case of any sale or conveyance of -3- 6 all or substantially all of the property or business of the corporation as an entirety, a holder of a share of Series B Stock shall have the right thereafter to convert such share into the kind and amount of cash, shares of stock, and other securities and properties receivable upon such consolidation, merger, sale, or conveyance by a holder of one share of Series A Stock and shall have no other conversion rights with regard to such share. The provisions of this paragraph 4.E shall similarly apply to successive consolidations, mergers, sales or conveyances. F. Shares of the Series B Stock converted into Series A Stock shall be retired and shall resume the status of authorized but unissued shares of Series B Stock. G. Such number of shares of Series A Stock as may from time to time be required for such purpose shall be reserved for issuance upon conversion of outstanding shares of Series B Stock and of shares of Series B Stock issuable upon exercise of options. Section 5. Termination of Series B Stock. A. All outstanding shares of Series B Stock shall automatically, without any further act or deed on the part of the corporation or any other person, be converted into shares of Series A Stock on a share-for-share basis. (a) if, as a result of the existence of the Series B Stock, the Series A Stock is excluded from trading on the New York Stock Exchange, the American Stock Exchange, and other national securities exchanges and is also excluded from quotation on the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or any other national quotation system then in use; or (b) at the option of the corporation: (i) at any time when the Board of Directors and the holders of a majority of the outstanding shares of the Series B Stock approve the conversion of all of the Series B Stock into Series A Stock; or (ii) if the Board of Directors, in its sole discretion, elects to effect a conversion (X) in order to avoid the exclusion of the Series A Stock from trading on a national securities exchange or the exclusion of the Series A Stock from quotation on NASDAQ or such other national quotation system then in use, or (Y) due to requirements of federal or -4- 7 state law, in any such case, as a result of the existence of the Series B Stock. B. Upon any automatic conversion of Series B Stock pursuant to this Section 5, each certificate representing outstanding shares of Series B Stock shall thereafter be deemed to represent a like number of shares of Series A Stock. Section 6. Limitations on Transfer of Series B Stock. A. No record or beneficial owner of shares of Series B Stock may transfer, and the corporation shall not register the transfer of, such shares of Series B Stock , whether by sale, assignment, gift, bequest, appointment, or otherwise, except to a "Permitted Transferee" as provided herein. (a) in the case of a holder of record of the Series B Stock (the "Series B Holder") who is a natural person and the beneficial owner of the shares of Series B Stock to be transferred, Permitted Transferees shall include only the following: (i) The spouse of such Series B Holder, any lineal descendant of a great- grandparent of such Series B Holder, or any spouse of such lineal descendant (herein collectively referred to as "such Series B Holder's Family Members"); (ii) The trustee or trustees of a trust (including a voting trust) for the sole benefit of such Series B Holder and/or one or more of such Series B Holder's Family Members, except that such trust may also grant a general or special power of appointment to one or more of such Series B Holder's Family Members and may permit trust assets to be used to pay taxes, legacies, and other obligations of the Trust or the estates of one or more of such Series B Holder's Family Members payable by reason of the death of any of such Family Members; provided, however, if at any time such trust ceases to meet the requirements of this subparagraph (ii), all shares of Series B Stock then held by such trustee or trustees shall immediately and automatically, without further act or deed on the part of the corporation or any other person, be converted into Series A Stock on a share-for-share basis, and stock certificates formerly representing such shares of Series B Stock shall thereupon and thereafter be deemed to represent a like number of shares of Series A Stock; -5- 8 (iii) A corporation wholly owned by such Series B Holder and/or such Series B Holder's Family Members or a partnership in which all of the partners are, and all of the partnership interests are owned by, such Series B Holder and/or such Series B Holder's Family Members, provided that if by reason of any change in the ownership of such stock or partners or partnership interests, such corporation or partnership would no longer qualify as a Permitted Transferee of such Series B Holder, all shares of Series B Stock then held by such corporation or partnership shall immediately and automatically, without further act or deed on the part of the corporation or any other person, be converted into shares of Series A Stock on a share-for-share basis, and stock certificates formerly representing such shares of Series B Stock shall thereupon and thereafter be deemed to represent a like number of shares of Series A Stock; (iv) An organization established by the Series B Holder or such Series B Holder's Family Members, contributions to which are deductible for federal income, estate, or gift tax purposes (a "Charitable Organization") and a majority of whose governing board at all times consists of the Series B Holder and/or one or more of the Permitted Transferees of such Series B Holder, or any successor to such Charitable Organization meeting such definition; provided that if by reason of any change in the composition of the governing board of such Charitable Organization, such Charitable Organization shall no longer qualify as a Permitted Transferee of such Series B Holder, all shares of Series B Stock then held by such Charitable Organization shall immediately and automatically, without further act or deed on the part of the corporation or any other person, be converted into shares of Series A Stock on a share-for-share basis, and stock certificates formerly representing such shares of Series B Stock shall thereupon and thereafter be deemed to represent the like number of shares of Series A Stock; and (v) The executor, administrator, or personal representative of the estate of a deceased Series B Holder or the guardian or conservator of a Series B Holder adjudged disabled or -6- 9 incompetent by a court of competent jurisdiction, acting in his capacity as such. (b) In the case of a Series B Holder holding the shares of Series B Stock as trustee pursuant to a trust other than a trust described in subparagraph (c) below, permitted Transferees shall include only the following: (i) any successor trustee of such trust who is described in subparagraph (b)(ii) below, or who is not and will not thereby become, an Interested Stockholder of the corporation (as defined in Article Twelve, Section C.(2) of the Certificate of Incorporation); and (ii) the person who established such trust and any Permitted Transferee of such person, determined in accordance with paragraph (a) above. (c) In the case of a Series B Holder holding the shares of Series B Stock as trustee pursuant to a trust that was irrevocable on the Record Date (a "Transferor Trust"), Permitted Transferees shall include only the following: (i) any successor trustee of such Transferor Trust who is described in subparagraph (c)(ii) or (iii) below, or who is not, and will not thereby become, an Interested Stockholder of the corporation (as defined in Article Twelve, Section C.(2) of the Certificate of Incorporation); (ii) any person to whom or for whose benefit the principal or income may be distributed either during or at the end of the term of such Transferor Trust whether by power of appointment or otherwise, and any Permitted Transferee of such person, determined pursuant to paragraph (a) above; and (iii) any Family Member of the person who established such Transferor Trust. (d) In the case of a record (but not beneficial) owner of the Series B Stock as nominee for the person who was the beneficial owner thereof on the Record Date (as defined below), Permitted Transferees shall include only such beneficial owner and a Permitted Transferee of such beneficial owner. (e) In the case of a Series B Holder that is a partnership and the beneficial owner of the shares of Series B Stock proposed to be transferred, Permitted Transferees shall include only: -7- 10 (i) any partner of such partnership who was also a partner of such partnership on the Record Date; (ii) any person transferring shares of Series B Stock to such partnership after the Record Date (provided, however, that such transferor may not receive shares of Series B Stock in excess of the shares transferred by the transferor to such partnership); and (iii) any Permitted Transferee of such person referred to in subparagraph (e)(i) or (e)(ii) above (not in excess of the number of shares that such person is entitled to receive pursuant to this subparagraph (e)). (f) In the case of a Series B Holder that is a corporation and the beneficial owner of the shares proposed to be transferred, Permitted Transferees shall include only: (i) any stockholder of such corporation on the Record Date who receives shares of Series B Stock pro rata to his stock ownerships in such corporation through a dividend or through a distribution made upon liquidation of such corporation; (ii) any person transferring shares of Series B Stock to such corporation after the Record Date (provided, however, that such transferor may not receive shares of Series B Stock in excess of the shares transferred by the transferor to such corporation); (iii) any Permitted Transferee of such stockholder or person referred to in subparagraph (f)(i) or (ii) above (not in excess of the number of shares that such stockholder of person is entitled to receive pursuant to this subparagraph (f)); and (iv) the survivor of a merger or consolidation of such corporation if those persons who owned beneficially sufficient shares entitled to elect at least a majority of the entire board of directors of such constituent corporation immediately prior to the merger or consolidation own beneficially sufficient shares entitled to elect at least a majority of the entire board of directors of the surviving corporation, provided that if by reason of any change in the ownership of such stock such surviving corporation would no longer qualify as a Permitted Transferee, all shares of Series B Stock -8- 11 then held by such surviving corporation shall immediately and automatically, without further act or deed on the part of the corporation or any other person, be converted into shares of Series A Stock on a share-for-share basis, and stock certificates formerly representing such shares of Series B Stock shall thereupon and thereafter be deemed to represent a like number of shares of Series A Stock. For purposes of this subparagraph (f), a mutual company shall be treated as a corporation, and the persons holding voting interest therein shall be treated as stockholders. (g) In the case of a Series B Holder who is the executor or administrator of the estate of a deceased Series B Holder or guardian or conservator of the estate of a disabled or incompetent Series B Holder, Permitted Transferees shall include only a Permitted Transferee of such deceased, disabled or incompetent Series B Holder. B. Notwithstanding anything to the contrary set forth herein, any Series B Holder may pledge such holder's shares of Series B Stock to a pledgee pursuant to a bona fide pledge of such shares as collateral security for indebtedness due to the pledgee, provided that such shares shall not be transferred to or registered in the name of the pledgee and shall remain subject to the provisions of this Section 6. In the event of foreclosure or other similar action by the pledgee, such pledged shares of Series B Stock may only be transferred to a Permitted Transferee of the pledgor or converted into shares of Series A Stock, as the pledgee may elect. C. For purposes of this Section 6: (a) The relationship of any person that is derived by or through legal adoption shall be considered a natural one; (b) Each joint owner of shares of Series B Stock shall be considered a Series B Holder of such shares; (c) A minor for whom shares of Series B Stock are held pursuant to a Uniform Gifts to Minors Act or similar law shall be considered a Series B Holder of such shares; (d) Unless otherwise specified, the term "person" means both natural persons and legal entities, and -9- 12 (e) The "Record Date" is the date for determining the persons to whom the Series B Stock is initially distributed by the corporation as a dividend on the Common Stock. D. Any purported transfer of shares of Series B Stock not permitted hereunder shall result in the conversion of the transferee's shares of Series B Stock into shares of Series A Stock, effective on the date on which certificates representing such shares are presented for transfer on the stock transfer record books of the corporation; provided, however, that if the corporation should determine that such shares were not so presented for transfer within 20 days after the date of such sale, transfer, assignment, or other disposition, the transfer date shall be the actual date of such sale, transfer, assignment, or other dispositions determined in good faith by the Board of Directors or its appointed agent. The corporation may, as a condition to the transfer or the registration of transfer of shares of Series B Stock to a purported Permitted Transferee, require the furnishing of such affidavits or other proof as it deems necessary to establish that such transferee is a Permitted Transferee. If no indication to the contrary is supplied at the time shares of Series B Stock are presented for transfer, the transfer shall be presumed by the corporation to be a transfer to a person other than a Permitted transferee. Section 7. Registration of Series B Stock. A. Shares of Series B Stock shall be registered in the name(s) of the beneficial owner(s) thereof (as hereafter defined) and not in-street" or "nominee" names; provided, however, certificates representing shares of Series B Stock issued as a stock dividend on the corporation's then outstanding Common Stock may be registered in the same name and manner as the certificates representing the shares of Common Stock with respect to which the shares of Series B Stock were issued. For the purposes of Sections 6 and 7 hereof, the term "beneficial owner(s)" of any shares of Series B Stock shall mean the person or persons who possess the power to vote or dispose, or to direct the voting or disposition, of such shares and "beneficially owned" shares shall refer to shares owned by such a beneficial owner. B. The corporation shall note on the certificates representing the shares of Series B Stock that there are restrictions on transfer and registration of transfer imposed by Sections 6 and 7 hereof. Section 8. Priority of Preferred Stock. The Series B Stock is subject to all the powers, rights, privileges, preferences, and priorities of the Preferred Stock as may be stated in the Certificate of Incorporation and as shall be stated and expressed in any resolution or resolutions adopted by the -10- 13 Board of Directors providing for the issuance of any series of Preferred Stock, pursuant to authority expressly granted to and vested in it by the provisions of Article Four of the Certificate of Incorporation. Section 9. Liquidation, Dissolution, or Winding Up. In the event of any liquidation, dissolution, or winding up of the corporation, whether voluntary or involuntary (sometimes referred to as liquidation), after payment or provision for payment of the debts and other liabilities of the corporation and the preferential amounts to which the holders of any stock ranking prior to the Series A Stock, the Series B Stock, and the Series C Common Stock (if any) in the distribution of assets shall be entitled upon liquidation, the holders of the Series A Stock, the Series B Stock, and the Series C Common Stock (if any) and the holders of any other stock ranking on the parity with the Series A Stock, the Series B Stock, and the Series C Common Stock (if any) in the distribution of assets upon liquidation shall be entitled to share pro rata in the remaining assets of the corporation according to their respective interests. -11- EX-3.9 9 AMENDED/RESTATED BYLAWS 1 EXHIBIT 3.9 AMENDED AND RESTATED BYLAWS OF A. H. BELO CORPORATION (A Delaware Corporation) Effective February 10, 2000 2 INDEX TO BYLAWS OF A. H. BELO CORPORATION
Page ---- ARTICLE I - OFFICES ......................................................1 Section 1. Registered Office.....................................1 Section 2. Other Offices.........................................1 ARTICLE II - MEETINGS OF THE STOCKHOLDERS.....................................1 Section 1. Place of Meetings.....................................1 Section 2. Annual Meeting........................................1 Section 3. Special Meeting.......................................2 Section 4. Notice of Annual or Special Meeting.............................................2 Section 5. Business at Special Meeting...........................2 Section 6. Quorum of Stockholders................................3 Section 7. Act of Stockholders' Meeting..........................3 Section 8. Voting of Shares......................................3 Section 9. Proxies...............................................4 Section 10. Voting List...........................................4 Section 11. Order of Business.....................................5 Section 12. Notice of Stockholder Business........................5 Section 13. Notice of Stockholder Nominees........................7 ARTICLE III - BOARD OF DIRECTORS..............................................8 Section 1. Powers................................................8 Section 2. Number of Directors...................................9 Section 3. Election and Term.....................................9 Section 4. Vacancies............................................10 Section 5. Resignation and Removal..............................10 Section 6. Compensation of Directors............................11
-ii- 3 ARTICLE IV - MEETINGS OF THE BOARD ..........................................11 Section 1. Regular Meetings.....................................11 Section 2. Special Meetings.....................................11 Section 3. Business at Regular or Special Meeting............................................12 Section 4. Quorum of Directors..................................12 Section 5. Act of Directors' Meeting............................12 Section 6. Action by Written Consent Without a Meeting..........................................12 ARTICLE V - COMMITTEES ......................................................13 ARTICLE VI - NOTICES.........................................................14 Section 1. Methods of Giving Notice.............................14 Section 2. Waiver of Notice.....................................15 Section 3. Attendance as Waiver.................................15 ARTICLE VII - ACTION WITHOUT A MEETING BY USE OF A CONFERENCE TELEPHONE OR SIMILAR COMMUNICATIONS EQUIPMENT .....................................................15 ARTICLE VIII - OFFICERS......................................................16 Section 1. Executive Officers...................................16 Section 2. Election and Qualification...........................16 Section 3. Division Officers....................................17 Section 4. Other Officers and Agents............................17 Section 5. Salaries.............................................18 Section 6. Term, Removal and Vacancies..........................18 Section 7. Chairman of the Board................................18 Section 8. Chief Executive Officer..............................19 Section 9. President............................................19 Section 10. Vice Presidents......................................19 Section 11. Secretary............................................20 Section 12. Assistant Secretaries................................20 Section 13. Treasurer............................................20 Section 14. Assistant Treasurers.................................21 Section 15. Officers' Bond.......................................21
-iii- 4 ARTICLE IX - CERTIFICATES FOR SHARES.........................................21 Section 1. Certificates Representing Shares.....................21 Section 2. Transfer of Shares...................................22 Section 3. Lost, Stolen or Destroyed Certificate................23 Section 4. Closing of Stock Ledger and Fixing Record Date........................................23 Section 5. Foreign Share Ownership..............................24 Section 6. Registered Stockholders..............................26 ARTICLE X - GENERAL PROVISIONS ..............................................27 Section 1. Dividends............................................27 Section 2. Reserves.............................................27 Section 3. Checks...............................................27 Section 4. Fiscal Year..........................................27 Section 5. Seal.................................................27 ARTICLE XI - INDEMNIFICATION OF OFFICERS AND DIRECTORS.......................27 Section 1. Actions, Suits, or Proceedings Other Than by or in the Right of the Corporation....................................27 Section 2. Actions or Suits by or in the Right of the Corporation...........................28 Section 3. Indemnification for Costs, Charges, and Expenses of Successful Party...................29 Section 4. Determination of Right to Indemnification....................................29 Section 5. Advance of Costs, Charges and Expenses...........................................30 Section 6. Procedure for Indemnification........................31 Section 7. Other Rights; Continuation of Right to Indemnification...........................32 Section 8. Extent of Indemnification............................32 Section 9. Insurance............................................33 Section 10. Savings Clause.......................................33 ARTICLE XII - AMENDMENTS ....................................................34
-iv- 5 AMENDED AND RESTATED BYLAWS OF A. H. BELO CORPORATION (A Delaware Corporation) ARTICLE I OFFICES Section 1. Registered Office. The registered office shall be located in the City of Wilmington, County of New Castle, State of Delaware. Section 2. Other Offices. The corporation also may have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or as the business of the corporation may require. ARTICLE II MEETINGS OF THE STOCKHOLDERS Section 1. Place of Meetings. All meetings of the stockholders for the election of directors or for any other proper purpose, including any special meeting of stockholders regardless of by whom called, shall be held at such time and place, within or without the State of Delaware, as the Board of Directors may from time to time designate, as stated in the notice of such meeting or a duly executed waiver of notice thereof. Section 2. Annual Meeting. An annual meeting of the stockholders shall be held on such date and at such time as shall be designated from time to time by the Board of Directors or, in the -1- 6 absence of a resolution of the Board of Directors providing otherwise, at 10:00 a.m. on the second Wednesday in May in each year, unless such day is a legal holiday, in which case such meeting shall be held at the specified time on the first full business day thereafter which is not a legal holiday. At such meeting the stockholders entitled to vote thereat shall elect, by a plurality vote of the voting power of all of the shares entitled to vote thereon, the successors to the directors whose terms shall expire that year, and may transact such other business as properly may be brought before the meeting. Section 3. Special Meeting. Special meetings of the stockholders may be called by the Chief Executive Officer, the Board of Directors or the holders of not less than one-fifth of the voting power of all shares entitled to vote at the meeting. Section 4. Notice of Annual or Special Meeting. Written or printed notice stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, by or at the direction of the Chairman of the Board or the Secretary, to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the stockholder at his or her address as it appears on the records of the corporation, with postage thereon prepaid. Section 5. Business at Special Meeting. The business transacted at any special meeting of the stockholders shall be limited to the purposes stated in the notice thereof. -2- 7 Section 6. Quorum of Stockholders. Unless otherwise provided in the Certificate of Incorporation, the holders of a majority of the voting power of all of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of the stockholders, but in no event shall a quorum consist of the holders of less than one-third (1/3) of the shares entitled to vote and thus represented at such meeting. If, however, a quorum shall not be present or represented at any meeting of the stockholders, the stockholders present in person or represented by proxy shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. Section 7. Act of Stockholders' Meeting. The vote of the holders of a majority of the voting power of all of the shares entitled to vote and represented in person or by proxy at a meeting at which a quorum is present shall be the act of the stockholders' meeting, unless the vote of a greater number is required by law or the Certificate of Incorporation. Section 8. Voting of Shares. Each outstanding share shall be entitled to the number of votes per share as provided in the Certificate of Incorporation and the Certificate of Designation, if any, which relates to such share, on each matter submitted to a vote at a meeting of the stockholders. At each election of directors, every stockholder entitled to vote at such election shall have the right to vote, in person or by proxy, the number of votes allotted to the shares owned by him or her for as many persons as there are directors to be elected and for whose election he or she has the right -3- 8 to vote. Cumulative voting in the election of directors or otherwise is expressly prohibited by the Certificate of Incorporation. Section 9. Proxies. At any meeting of the stockholders, each stockholder having the right to vote shall be entitled to vote either in person or by proxy. Any such proxy or evidence thereof shall be delivered to the secretary of such meeting at or prior to the time designated by the chairman of the meeting or in the order of business for so delivering such proxies. No proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. Each proxy shall be revocable unless expressly provided therein to be irrevocable and unless otherwise made irrevocable by law. Unless required by statute or determined by the chairman of the meeting to be advisable, the vote on any question need not be by ballot. On a vote by ballot, each ballot shall be signed by the stockholder voting or by such stockholder's proxy, if there be such proxy. Section 10. Voting List. The officer or agent having charge of the stock ledger for shares of the corporation shall make, at least ten (10) days before each meeting of the stockholders, a complete list of the stockholders entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order, with the address of and number of shares of each class or series of the corporation's stock registered in the name of each stockholder, which list, for a period of ten (10) days prior to such meeting, shall be open to the examination of any stockholder, for any purpose germane to the meeting, at any time during the usual business hours, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any stockholder -4- 9 during the whole time of the meeting. The corporation shall be entitled to rely upon the stock ledger as the only evidence as to who are the stockholders entitled to examine the stock ledger, the aforementioned list of stockholders or the books of the corporation, or to vote in person or by proxy at any such meeting of stockholders. Section 11. Order of Business. Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in his or her absence, by the Vice Chairman of the Board, if any, or in his or her absence, by the Chief Executive Officer, or in his or her absence, by the President or an Executive Vice President or a Senior Vice President, or in the absence of the foregoing persons, by a chairman designated by the Board of Directors. The Secretary shall act as secretary of the meeting, but in the Secretary's absence the chairman of the meeting may appoint any person to act as secretary of the meeting. The order of business of each meeting of the stockholders of the corporation shall be determined by the chairman of the meeting. The chairman of the meeting shall have the right and authority to prescribe such rules, regulations, and procedures and to do all such acts and things as are necessary or desirable for the conduct of the meeting, including, without limitation, the establishment of procedures for the dismissal of business not properly presented, the maintenance of order and safety, limitations on the time allotted to questions or comments on the affairs of the corporation, restrictions on entry to such meetings after the time prescribed for commencement thereof, opening and closing of the voting polls, and adjournment of such meetings. Section 12. Notice of Stockholder Business. At an annual meeting of the stockholders or, subject to Article II, Section 5 of these Bylaws, at a special meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting (a) by or at the -5- 10 direction of the Chief Executive Officer or the Board of Directors or (b) by any stockholder of the corporation entitled to vote at such annual or special meeting who complies with the notice procedures set forth in this Section 12. For business to be properly brought before an annual or special meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the corporation, not less than sixty (60) days nor more than ninety (90) days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than thirty (30) days or delayed by more than thirty (30) days from such anniversary date, then notice by the stockholder to be timely must be delivered not later than the close of business on the later of the 60th day prior to the annual meeting or the 10th day following the day on which the date of the meeting is publicly announced. Such stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual or special meeting (a) a brief description of the business desired to be brought before the annual or special meeting and the reasons for conducting such business at the annual or special meeting; (b) the name and address, as they appear on the corporation's books, of such stockholder; (c) the class, series and number of shares of the corporation which are beneficially owned by such stockholder; and (d) any material interest of such stockholder in such business. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at an annual meeting of the stockholders or, subject to Article II, Section 5 of these Bylaws, at a special meeting except in accordance with the procedures set forth in this Section 12. The chairman of an annual or special meeting shall, if the facts warrant, determine that -6- 11 business was not properly brought before the meeting and in accordance with the provisions of this Section 12, and if he or she should so determine, he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Notwithstanding the foregoing provisions of this Section 12, a stockholder seeking to have a proposal included in the corporation's proxy statement in addition shall comply with the requirements of Regulation 14A under the Securities Exchange Act of 1934, as amended (including, but not limited to, Rule 14a-8 or its successor provision). Section 13. Notice of Stockholder Nominees. Only persons who are nominated in accordance with the procedures set forth in these Bylaws shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the corporation may be made at a meeting of stockholders (a) by or at the direction of the Chief Executive Officer or the Board of Directors or (b) by any stockholder of the corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 13. Nominations by stockholders shall be made pursuant to timely notice in writing to the Secretary of the corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the corporation not less than sixty (60) days nor more than ninety (90) days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than thirty (30) days or delayed by more than thirty (30) days from such anniversary date, then notice by the stockholder to be timely must be delivered not later than the close of business on the later of the 60th day prior to the annual meeting or the 10th day following the day on which the date of the meeting is publicly announced. -7- 12 Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including such person's written consent to being named in a proxy statement as a nominee and to serving as a director if elected); and (b) as to the stockholder giving the notice (i) the name and address, as they appear on the corporation's books, of such stockholder and (ii) the class, series and number of shares of the corporation which are beneficially owned by such stockholder. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the corporation that information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. No person shall be eligible for election as a director of the corporation unless nominated in accordance with the procedures set forth in these Bylaws. The chairman of the meeting shall, if the facts warrant, determine that a nomination was not made in accordance with the procedures prescribed by these Bylaws, and if he or she should so determine, he or she shall so declare to the meeting and the defective nomination shall not be admitted. ARTICLE III BOARD OF DIRECTORS Section 1. Powers. The business and affairs of the corporation shall be managed by its Board of Directors which may exercise all such powers of the corporation and do all such lawful acts -8- 13 and things as are not by statute, the Certificate of Incorporation or by these Bylaws directed or required to be exercised and done by the stockholders. Section 2. Number of Directors. The number of directors of the corporation constituting the Board of Directors shall be not less than nine (9) nor more than eighteen (18), determined from time to time in accordance with these Bylaws by resolution of the Board of Directors or of the stockholders. Section 3. Election and Term. The directors shall be classified with respect to the time for which they shall severally hold office by dividing them into three (3) classes, each consisting of approximately one-third (1/3) of the whole number of the Board of Directors, and each director of the corporation shall hold office until his or her successor is elected and qualified or until his or her death, resignation, or removal. Each class of directors shall be as nearly equal in number of directors as possible and shall be denominated in such manner as the Board of Directors may determine. The term of office of those of the first class will expire at the first annual meeting of stockholders after adoption of this Bylaw provision; of the second class one year thereafter; of the third class two years thereafter; and at each annual election held after such classification and election, the successors to the class of directors whose terms shall expire that year shall be elected to hold office for a term of three (3) years, so that the term of office for one class of directors shall expire in each year. Directors need not be residents of the State of Delaware or stockholders of the corporation. Notwithstanding the foregoing, no person shall be eligible to stand for election as director if he or she has attained the age of 70 years. Furthermore, the term of any director elected, reelected or named to the Board of Directors after the 1998 Annual Meeting of Stockholders shall terminate -9- 14 at the first annual meeting of stockholders following the date on which such director attains the age of 70 years. Notwithstanding anything else in these Bylaws, the term of any director elected, reelected or named to the Board of Directors after the 1998 Annual Meeting of Stockholders who was an officer or other employee of the corporation (or of a subsidiary of or other entity controlled by the corporation) at the time he or she was last elected, reelected or named to serve as a director, other than any person who at such time was serving as Chief Executive Officer of the corporation, shall automatically terminate at the first annual meeting of stockholders following the date on which such director ceases to serve as an officer or other employee of the corporation (or of a subsidiary of or other entity controlled by the corporation). Section 4. Vacancies. Any vacancies occurring in the Board of Directors and any newly created directorships resulting from any increase in the authorized number of directors may be filled by the affirmative vote of a majority of the remaining directors although less than a quorum of the Board of Directors. A director elected to fill a vacancy shall be elected for the unexpired term of his or her predecessor in office. Any directorship to be filled by reason of an increase in the number of directors may be filled by the affirmative vote of a majority of the directors, subject to the applicable provisions then in effect of the Delaware General Corporation Law pertaining thereto. A director elected to fill a newly created directorship shall hold office until his or her successor is elected and qualified or until his or her death, resignation, or removal. Section 5. Resignation and Removal. Any director may resign at any time upon giving written notice to the corporation. At any meeting of stockholders called expressly for the purpose of removing a director or directors, any director or the entire Board of Directors may be removed, -10- 15 but for cause only (removal of directors without cause being expressly prohibited), by a vote of the holders of a majority of the voting power of all of the shares then entitled to vote at an election of directors. Section 6. Compensation of Directors. As specifically prescribed from time to time by resolution of the Board of Directors, the directors of the corporation may be paid their expenses of attendance at each meeting of the Board and may be paid reasonable compensation for their services as directors. This provision shall not preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for their services in such capacities. ARTICLE IV MEETINGS OF THE BOARD Section 1. Regular Meetings. Regular meetings of the Board of Directors may be held with or without notice at such time and at such place either within or without the State of Delaware as from time to time shall be prescribed by resolution of the Board of Directors. Section 2. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board, the Chief Executive Officer or the Secretary on the written request of two directors. Written notice of special meetings of the Board of Directors shall be given to each director at least three (3) days before the date of the meeting. -11- 16 Section 3. Business at Regular or Special Meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. Section 4. Quorum of Directors. A majority of the Board of Directors shall constitute a quorum for the transaction of business, unless a greater number is required by law or the Certificate of Incorporation. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement of the meeting, until a quorum shall be present. Section 5. Act of Directors' Meeting. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless the vote of a greater number is required by law or the Certificate of Incorporation. Section 6. Action by Written Consent Without a Meeting. Any action required or permitted to be taken at a meeting of the Board of Directors or of any committee thereof under the applicable provisions of any statute, the Certificate of Incorporation or these Bylaws may be taken without a meeting if a consent in writing setting forth the action so taken is signed by all members of the Board of Directors or of the committee, as the case may be. Such consent shall have the same force and effect as a unanimous vote of the Board of Directors or of the committee, as the case may be. -12- 17 ARTICLE V COMMITTEES The Board of Directors, by resolution adopted by a majority of the full Board of Directors, may designate from among its members an executive committee and one or more other committees, each of which, to the extent provided in such resolution, the Certificate of Incorporation or these Bylaws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it, except that no such committee shall have the power or authority of the Board of Directors in reference to amending the Certificate of Incorporation (except as permitted by the Delaware General Corporation Law), adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease, or exchange of all or substantially all of the property and assets of the corporation otherwise than in the usual and regular course of its business, recommending to the stockholders a voluntary dissolution of the corporation or a revocation thereof, amending, altering, or repealing the Bylaws of the corporation or adopting new Bylaws for the corporation, filling vacancies in or removing members of the Board of Directors or any such committee, fixing the compensation of any member of such committee, or altering or repealing any resolution of the Board of Directors which by its terms provides that it shall not be so amendable or repealable. Unless such resolution, the Certificate of Incorporation or these Bylaws so provides, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of shares of the corporation, or to adopt a certificate of ownership and merger pursuant to Section 253 of the Delaware General Corporation Law. Vacancies in the membership of any such committee shall be filled by resolution adopted by the majority of the full Board of Directors at a regular or special meeting of the Board. The designation of any such committee and -13- 18 the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed upon it or him or her by law. Any executive committee designated by the Board of Directors shall consist of the Chief Executive Officer and such number (not less than two (2)) of other directors as the Board may from time to time determine by resolution adopted by the majority of the full Board of Directors, one of the members of which committee shall be designated the chairman thereof by the Board of Directors. The executive committee may make rules for the conduct of its business, not inconsistent with this Article V, as it shall from time to time deem necessary and shall keep regular minutes of its proceedings and report the same to the Board when required. A majority of the members of the executive committee shall constitute a quorum for the transaction of business. If a quorum is not present at a meeting, the members present may adjourn the meeting until a quorum is present. The act of a majority of the members present at any meeting at which a quorum is present shall be the act of the executive committee, except as otherwise specifically provided by statute, the Certificate of Incorporation or the Bylaws of the corporation. Any member of the executive committee may be removed by the Board of Directors by the affirmative vote of a majority of the full Board, whenever in its judgment the best interests of the corporation will be served thereby. ARTICLE VI NOTICES Section 1. Methods of Giving Notice. Whenever any notice is required to be given to any stockholder or director under the provisions of any statute, the Certificate of Incorporation or these -14- 19 Bylaws, it shall be given in writing and delivered personally or mailed to such stockholder or director at such address as appears on the books of the corporation, and such notice shall be deemed to be given at the time the same shall be deposited in the United States mail with sufficient postage thereon prepaid. Notice to directors may also be given by telegram, telex, telecopy or similar means of visual data transmission, and notice given by any of such means shall be deemed to be delivered when transmitted for delivery to the recipient. Section 2. Waiver of Notice. Whenever any notice is required to be given to any stockholder or director under the provisions of any statute, the Certificate of Incorporation or these Bylaws, a waiver thereof in writing signed (either in advance or after the fact) by the person or persons entitled to said notice shall be deemed equivalent to the giving of such notice. Section 3. Attendance as Waiver. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting is not lawfully called or convened. ARTICLE VII ACTION WITHOUT A MEETING BY USE OF A CONFERENCE TELEPHONE OR SIMILAR COMMUNICATIONS EQUIPMENT Subject to the provisions required or permitted for notice of meetings, unless otherwise restricted by the Certificate of Incorporation or these Bylaws, stockholders, members of the Board of Directors or members of any committee designated by such Board may participate in and hold a -15- 20 meeting of such stockholders, Board or committee by conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in such a meeting shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. ARTICLE VIII OFFICERS Section 1. Executive Officers. The officers of the corporation shall consist of a Chairman of the Board, a Chief Executive Officer, a President, one or more Vice Presidents (with such supplemental designation to indicate seniority or scope of duties as the Board of Directors may determine from time to time), a Secretary, and a Treasurer, each of whom shall be elected by the Board of Directors as provided in Section 2 of this Article; provided that any of such offices except President, Secretary and Treasurer may be allowed to become vacant by failure of the Board of Directors to fill the office. Any two or more offices may be held by the same person, except that the Chairman of the Board or the President and the Secretary shall not be the same person. Section 2. Election and Qualification. The Board of Directors shall annually choose (subject to the provisions of Section 1 of this Article) a Chairman of the Board, a Chief Executive Officer, a President, such Executive Vice Presidents and Senior Vice Presidents as the Board shall deem necessary, a Secretary, and a Treasurer, none of whom, except the Chairman of the Board, the Chief Executive Officer and the President need to be a member of the Board. -16- 21 Section 3. Division Officers. The Board of Directors may from time to time establish one or more divisions of the corporation and assign to such divisions responsibilities for such of the corporation's business, operations and affairs as the Board may designate. The Board of Directors may appoint or authorize an officer of the corporation to appoint in writing officers of a division. Unless elected or appointed an officer of the corporation by the Board of Directors or pursuant to authority granted by the Board, an officer of a division shall not as such be an officer of the corporation, except that he or she shall be an officer of the corporation for the purposes of executing and delivering documents on behalf of the corporation or for other specific purposes, if and to the extent that he or she may be authorized to do so by the Board of Directors. Unless otherwise provided in the writing appointing an officer of a division, such officer shall hold office until his or her successor is appointed and qualified. Any officer of a division may be removed with or without cause by the Board of Directors or by the officer, if any, of the corporation then authorized by the Board of Directors to appoint such officer of a division. The Board of Directors may prescribe or authorize an officer of the corporation or an officer of a division to prescribe in writing the duties and powers and authority of officers of divisions and may authorize an officer of the corporation or an officer of a division to determine the compensation for officers of divisions. Section 4. Other Officers and Agents. The Board of Directors may elect or appoint such Vice Presidents, other officers, assistant officers and agents as the Board may deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board. -17- 22 Section 5. Salaries. Subject to the provisions of Section 3 of this Article, the compensation of all officers and agents of the corporation shall be determined by the Board of Directors. Section 6. Term, Removal and Vacancies. Each officer of the corporation shall hold office until his or her successor is elected and qualified, or until his or her earlier death, resignation or removal. Any officer may resign at any time upon giving written notice to the corporation. Any officer or agent or member of the executive committee elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interests of the corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. Any vacancy occurring in any office of the corporation by death, resignation, removal or otherwise shall be filled (subject to the provisions of Sections 1 and 3 of this Article) by the Board of Directors. Section 7. Chairman of the Board. The Chairman of the Board shall preside at all meetings of the stockholders and of the Board of Directors and shall have such other powers and duties as usually pertain to such office or as may be prescribed by the Board of Directors. -18- 23 Section 8. Chief Executive Officer. The Board of Directors may designate whether the Chairman of the Board or the President shall be the Chief Executive Officer of the corporation. The officer so designated as the Chief Executive Officer shall have general powers of oversight, supervision and management of the business and affairs of the corporation, and shall see that all orders and resolutions of the Board of Directors are carried into effect. He or she shall execute bonds, mortgages and other contracts requiring a seal under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed, and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the corporation. The Chief Executive Officer shall have such other powers and duties as usually pertain to such office or as may be prescribed by the Board of Directors. If a Chief Executive Officer is not otherwise designated by the Board of Directors, the Chairman of the Board shall be the Chief Executive Officer of the corporation. Section 9. President. The President, in the absence or disability of the Chairman of the Board, shall perform the duties and exercise the powers of the Chairman of the Board. The President shall perform such other duties and exercise such other powers as usually pertain to such office or as may be delegated from time to time by the Board of Directors. Section 10. Vice Presidents. Unless otherwise determined by the Board of Directors, the Vice Presidents, in the order of their seniority as such seniority may from time to time be designated by the Board of Directors, shall perform the duties and exercise the powers of the President in the absence or disability of the President. They shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. -19- 24 Section 11. Secretary. The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders, and shall record all the proceedings of the meetings of the corporation and of the Board of Directors in a book to be kept for that purpose, and shall perform like duties for the standing committees when required. He or she shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors. He or she shall keep in safe custody the seal of the corporation, and, when authorized by the Board of Directors, affix the same to any instrument requiring it. When so affixed, such seal shall be attested by his or her signature or by the signature of the Treasurer or an Assistant Secretary. Section 12. Assistant Secretaries. Unless otherwise determined by the Board of Directors, the Assistant Secretaries, in the order of their seniority as such seniority may from time to time be designated by the Board of Directors, shall perform the duties and exercise the powers of the Secretary in the absence or disability of the Secretary. They shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. Section 13. Treasurer. The Treasurer shall have the custody of the corporate funds and securities, and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation, and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors. He or she shall disburse the funds of the corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. -20- 25 Section 14. Assistant Treasurers. Unless otherwise determined by the Board of Directors, the Assistant Treasurers, in the order of their seniority as such seniority may from time to time be designated by the Board of Directors, shall perform the duties and exercise the powers of the Treasurer in the absence or disability of the Treasurer. They shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. Section 15. Officers' Bond. If required by the Board of Directors, any officer so required shall give the corporation a bond (which shall be renewed as the Board may require) in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his or her office and for the restoration to the corporation, in case of his or her death, resignation, retirement or removal from office, of any and all books, papers, vouchers, money and other property of whatever kind in his or her possession or under his or her control belonging to the corporation. ARTICLE IX CERTIFICATES FOR SHARES Section 1. Certificates Representing Shares. The corporation shall deliver certificates representing all shares to which stockholders are entitled. Such certificates shall be numbered and shall be entered in the books of the corporation as they are issued, and shall be signed by the Chairman of the Board, the President or a Vice President, and the Secretary or an Assistant Secretary of the corporation, and may be sealed with the seal of the corporation or a facsimile thereof. The signatures of the Chairman of the Board, the President or Vice President, Secretary or Assistant -21- 26 Secretary, upon a certificate may be facsimiles, if the certificate is countersigned by a transfer agent or registered by a registrar, either of which is other than the corporation itself or an employee of the corporation. In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he or she were such officer at the date of its issuance. If the corporation is authorized to issue shares of more than one class of stock or more than one series of any class, there shall be set forth upon the face or back of the certificate, or the certificate shall have a statement that the corporation will furnish to any stockholder upon request and without charge, a full statement of all of the powers, designations, preferences, and rights of the shares of each class authorized to be issued and the qualifications, limitations or restrictions thereof, and, if the corporation is authorized to issue any preferred or special class in series, the variations in the relative rights and preferences between the shares of each such series so far as the same have been fixed and determined, and the authority of the Board of Directors to fix and determine the relative rights and preferences of subsequent series. Each certificate representing shares shall state upon the face thereof that the corporation is organized under the laws of the State of Delaware, the name of the person to whom issued, the number and the class and the designation of the series, if any, which such certificate represents and the par value of each share represented by such certificate or a statement that the shares are without par value. No certificate shall be issued for any share until the consideration therefor has been fully paid. Section 2. Transfer of Shares. Subject to the provisions of Section 5 of this Article IX and the provisions of Section 2 of Article Four of the Certificate of Incorporation, upon surrender -22- 27 to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction upon its books. Section 3. Lost, Stolen or Destroyed Certificate. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors, in its discretion and as a condition precedent to the issuance thereof, may require the owner of such lost, stolen or destroyed certificate or certificates, or his or her legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed. Section 4. Closing of Stock Ledger and Fixing Record Date. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of stockholders for any other proper purpose, the Board of Directors may provide that the stock ledger shall be closed for a stated period but not to exceed, in any case, sixty (60) days. If the stock ledger shall be closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such ledger shall be closed for at least ten (10) days -23- 28 immediately preceding such meeting. In lieu of closing the stock ledger, the Board of Directors may fix in advance a date as the record date for any such determination of stockholders, such date in any case to be not more than sixty (60) days, and, in case of a meeting of stockholders, not less than ten (10) days, prior to the date on which the particular action requiring such determination of stockholders is to be taken. If the stock ledger is not closed and no record date is fixed for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders, or stockholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of stockholders. When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this Section 4, such determination shall apply to any adjournment thereof, except where the determination has been made through the closing of the stock ledger and the stated period of closing has expired. Section 5. Foreign Share Ownership. As used in these Bylaws, the word "Alien" shall include any individual not a citizen of the United States of America and any representative of any such individual; any corporation or other entity organized under the laws of any foreign government; any foreign government, its agencies or representatives; any partnership of which any partner is an alien, except for limited partners insulated in accordance with the rules and regulations of the Federal Communications Commission; any corporation or other entity controlled directly or indirectly by other than United States citizens; and any other entity or individual determined to be an alien under -24- 29 Section 310 of the Communications Act of 1934, as amended, or the rules and regulations of the Federal Communications Commission. At no time shall Aliens (i) own, directly or indirectly, more than one-fourth of the equity in the corporation, or in any other corporation directly or indirectly controlling the corporation, that is represented by the issued and outstanding capital stock of such corporation; or (ii) vote, directly or indirectly, more than one-fourth of the total voting rights in the corporation, or in any other corporation directly or indirectly controlling the corporation, that are represented by the issued and outstanding capital stock of such corporation. The percentage of voting rights and equity ownership of Aliens in the corporation's issued and outstanding capital stock shall be determined in accordance with the Communications Act of 1934, as amended, and the rules and regulations of the Federal Communications Commission, taking into account direct and indirect equity interests and direct and indirect voting rights in the corporation as may be required. As used in these Bylaws, a "Noncompliance Status" means the existence of circumstances in which, but for the following provisions of this Section 5, Aliens would own or hold voting rights or interests in the corporation in excess of the thresholds set forth in this paragraph. In the event a Noncompliance Status shall arise, then, so long as the Noncompliance Status continues to exist, those stockholders causing or contributing to the Noncompliance Status shall have no voting, dividend, or other rights with respect to the shares of the corporation that they may hold, except the right to transfer such shares in such a manner that the Noncompliance Status will cease to exist. No transfers of shares of domestic record to Aliens shall be made if a Noncompliance Status exists or if such transfer would result in a Noncompliance Status. If the -25- 30 corporation shall determine that stock of domestic record in fact is held or voted, in whole or in part, by or for the account of an Alien, and that such interest, but for this Section 5, would give rise to a Noncompliance Status, the holder of such stock shall not be entitled to vote, to receive dividends, or to exercise any other normal stockholder rights, except the right to transfer such stock to a citizen of the United States of America. Alien voting and equity interests and rights in stock of the corporation and the citizenship of transferees of the corporation's stock shall be determined in conformity with regulations prescribed by or upon the approval of the Board of Directors, which shall not be less restrictive than the requirements imposed by the Communications Act of 1934, as amended, and the rules and regulations of the Federal Communications Commission. The Board of Directors shall be authorized, at any time and from time to time, to adopt such other provisions as the directors may deem necessary or desirable to avoid violation of the provisions of Section 310 of the Communications Act of 1934 as now in effect or as it may hereafter from time to time be amended, and to carry out the provisions of this Section 5. Section 6. Registered Stockholders. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware. -26- 31 ARTICLE X GENERAL PROVISIONS Section 1. Dividends. The Board of Directors from time to time may declare, and the corporation may pay, dividends on its outstanding shares in cash, property, or its own shares pursuant to law and subject to the provisions of the Certificate of Incorporation and these Bylaws. Section 2. Reserves. The Board of Directors may by resolution create a reserve or reserves out of earned surplus for any proper purpose or purposes, and may abolish any such reserve in the same manner. Section 3. Checks. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors from time to time may designate. Section 4. Fiscal Year. The fiscal year of the corporation shall be the calendar year. Section 5. Seal. The corporate seal shall have inscribed thereon the name of the corporation and may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. ARTICLE XI INDEMNIFICATION OF OFFICERS AND DIRECTORS Section 1. Actions, Suits, or Proceedings Other Than by or in the Right of the Corporation. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, -27- 32 criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he or she is or was or has agreed to become a director, officer, employee or agent of the corporation, or is or was serving or has agreed to serve at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges, expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her or on his or her behalf in connection with such action, suit or proceeding and any appeal therefrom, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. Section 2. Actions or Suits by or in the Right of the Corporation. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he or she is or was or has agreed to become a director, officer, employee or agent of the corporation, or is or was serving or has agreed to serve at the request of the -28- 33 corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges and expenses (including attorneys' fees) actually and reasonably incurred by him or her or on his or her behalf in connection with the defense or settlement of such action or suit and any appeal therefrom, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such costs, charges and expenses which the Court of Chancery or such other court shall deem proper. Section 3. Indemnification for Costs, Charges, and Expenses of Successful Party. Notwithstanding the other provisions of this Article XI, to the extent that a director, officer, employee or agent of the corporation has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any action, suit or proceeding referred to in Sections 1 and 2 of this Article, or in defense of any claim, issue or matter therein, he or she shall be indemnified against all costs, charges and expenses (including attorneys' fees) actually and reasonably incurred by him or her or on his or her behalf in connection therewith. Section 4. Determination of Right to Indemnification. Any indemnification under Sections 1 and 2 of this Article XI (unless ordered by a court) shall be paid by the corporation unless -29- 34 a determination is made (1) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the vote of the holders of a majority of the voting power of all of the shares entitled to vote thereon, that indemnification of the director, officer, employee or agent is not proper in the circumstances because he or she has not met the applicable standard of conduct set forth in Sections 1 and 2 of this Article. Section 5. Advance of Costs, Charges and Expenses. Costs, charges and expenses (including attorneys' fees) incurred by a person referred to in Sections 1 and 2 of this Article in defending a civil or criminal action, suit or proceeding shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding, unless such action, suit or proceeding was authorized against an officer or director of the corporation by a majority of the directors not named as defendants therein, in which case such costs, charges and expenses may be paid by the corporation in advance if authorized by a majority of the directors not named as defendants therein; provided further, however, that the payment of such costs, charges and expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer) in advance of the final disposition of such action, suit or proceeding shall be made only upon receipt of an undertaking by or on behalf of the director or officer to repay all amounts so advanced in the event that it shall ultimately be determined that such director or officer is not entitled to be indemnified by the corporation as authorized in this Article XI. Such costs, charges and expenses incurred by other employees and -30- 35 agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate. The Board of Directors may, in the manner set forth above, and upon approval of such director, officer, employee or agent of the corporation, authorize the corporation's counsel to represent such person, in any action, suit or proceeding, whether or not the corporation is a party to such action, suit or proceeding. Section 6. Procedure for Indemnification. Any indemnification under Sections 1, 2 and 3, or advance of costs, charges and expenses under Section 5 of this Article, shall be made promptly, and in any event within sixty (60) days, upon the written request of the director, officer, employee or agent. The right to indemnification or advances as granted by this Article XI shall be enforceable by the director, officer, employee or agent in any court of competent jurisdiction, if the corporation denies such request, in whole or in part, or if no disposition thereof is made within sixty (60) days. Such person's costs and expenses incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such action shall also be indemnified by the corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for the advance of costs, charges and expenses under Section 5 of this Article XI where the required undertaking, if any, has been received by the corporation) that the claimant has not met the standard of conduct set forth in Sections 1 or 2 of this Article, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation (including its Board of Directors, its independent legal counsel, and its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Sections 1 or 2 of this -31- 36 Article, nor the fact that there has been an actual determination by the corporation (including its Board of Directors, its independent legal counsel, and its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Section 7. Other Rights; Continuation of Right to Indemnification. The indemnification and advancement of costs, charges and expenses provided by this Article XI shall not be deemed exclusive of any other rights to which a person seeking indemnification or advancement of costs, charges and expenses may be entitled under any law (common or statutory), other Bylaw provision, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding office or while employed by or acting as agent for the corporation, and shall continue as to a person who has ceased to be a director, officer, employee or agent as to actions taken while he or she was such a director, officer, employee or agent, and shall inure to the benefit of the estate, heirs, executors and administrators of such person. All rights to indemnification under this Article shall be deemed to be a contract between the corporation and each director, officer, employee or agent of the corporation who serves or served in such capacity at any time while this Article is in effect. Any repeal or modification of this Article or any repeal or modification of relevant provisions of the Delaware General Corporation Law or any other applicable laws shall not in any way diminish any rights to indemnification of such director, officer, employee or agent or the obligations of the corporation arising hereunder. Section 8. Extent of Indemnification. In addition to the specific indemnification provided for herein, the corporation shall indemnify each person who is or was or has agreed to become a -32- 37 director, officer, employee or agent of the corporation, or is or was serving or has agreed to serve at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, to the fullest extent authorized or permitted (i) by the General Corporation Law of Delaware, or any other applicable law, or by any amendment thereof or other statutory provisions in effect on the date hereof, or (ii) by the corporation's Certificate of Incorporation as in effect on the date hereof. Subject to the exceptions and conditions set forth in Article XI, Section 2 of these Bylaws, the corporation shall also advance expenses to any of the foregoing individuals to the fullest extent authorized or permitted (i) by the General Corporation Law of Delaware, or any other applicable law, or by any amendment thereof or other statutory provision in effect on the date hereof, or (ii) by the corporation's Certificate of Incorporation as in effect on the date hereof. Section 9. Insurance. Notwithstanding the foregoing, the corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was or has agreed to become a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her or on his or her behalf in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against such liability under the provisions of this Article. Section 10. Savings Clause. If this Article XI or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless -33- 38 indemnify each director, officer, employee and agent of the corporation as to costs, charges and expenses (including attorneys' fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the corporation, to the full extent permitted by any applicable portion of this Article XI that shall not have been invalidated and to the full extent permitted by applicable law. ARTICLE XII AMENDMENTS The initial Bylaws of the corporation shall be adopted by the Board of Directors. The power to alter, amend, or repeal the Bylaws or adopt new Bylaws, subject to repeal or change by action of the stockholders, is vested in the Board of Directors. Thus, these Bylaws may be altered, amended, or repealed or new Bylaws may be adopted by the affirmative vote of a majority of the Board of Directors at any regular or special meeting of the Board, subject to repeal or change at any regular or special meeting of stockholders at which a quorum is present or represented by the affirmative vote of not less than two-thirds of the voting power of all of the shares entitled to vote at such meeting, voting together as a single class, and present or represented thereat, provided notice of the proposed repeal or change is contained in the notice of such meeting of stockholders. -34- EX-4.4 10 AMENDED/RESTATED FORM OF RIGHTS AGREEMENT 1 EXHIBIT 4.4 AMENDED AND RESTATED RIGHTS AGREEMENT Agreement, dated as of March 10, 1986, as amended and restated as of February 28, 1996, between A.H. Belo Corporation, a Delaware corporation (the "Company"), and Chemical Mellon Shareholder Services, L.L.C., a New York banking corporation (the "Rights Agent"). The Board of Directors of the Company has authorized and declared a dividend of one preferred share purchase right (a "Right") for each Common Share (as hereinafter defined) of the Company outstanding on March 20, 1986, each Right representing the right to purchase one one-hundredth of a share of Series A Junior Participating Preferred Stock of the Company having the rights and preferences set forth in the form of Certificate of Designations attached hereto as Exhibit A, upon the terms and subject to the conditions herein set forth, and has further authorized the issuance of one Right with respect to each Common Share that shall become outstanding between March 20, 1986 and the earlier of the Distribution Date, the Redemption Date and the Final Expiration Date (as such terms are defined in Sections 3 and 7 hereof). This Agreement has been amended from time to time in accordance with the terms hereof by Supplements Nos. 1, 2, 3, 4, 5, and 6. The Board of Directors of the Company has determined to further amend this Agreement to extend the term of the Rights authorized hereunder for a period of 10 years and to include certain features intended to increase the effectiveness hereof. In addition, the Board of Directors of the Company has determined to restate this Agreement such that all amendments hereto, including certain amendments effected as of the date hereof, are reflected herein. 2 Accordingly, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: Section 1. Certain Definitions. For purposes of this Agreement, the following terms have the meanings indicated: (a) "Acquiring Person" shall mean any Person (as such term is hereinafter defined) who or which, together with all Affiliates and Associates (as such terms are hereinafter defined) of such Person, shall be the Beneficial Owner (as such term is hereinafter defined) of 30% or more of the total number of Common Shares then outstanding, but shall not include the Company, any wholly-owned Subsidiary (as such term is hereinafter defined) of the Company or any employee benefit plan of the Company or any Subsidiary of the Company or any entity holding Common Shares for or pursuant to the terms of such plan. Notwithstanding the foregoing, no Person shall become an "Acquiring Person" as the result of an acquisition of Common Shares by the Company which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 30% or more of the Common Shares of the Company then outstanding; provided, however, that if a Person shall become the Beneficial Owner of 30% or more of the Common Shares of the Company then outstanding by reason of share purchases by the -2- 3 Company and shall, after such share purchases by the Company, become the Beneficial Owner of any additional Common Shares of the Company, then such Person shall be deemed to be an "Acquiring Person." Notwithstanding the foregoing, if the Board of Directors of the Company determines in good faith that a Person who would otherwise be an "Acquiring Person," as defined pursuant to the foregoing provisions of this paragraph (a), has become such inadvertently, and such Person divests as promptly as practicable a sufficient number of Common Shares so that such Person would no longer be an "Acquiring Person," as defined pursuant to the foregoing provisions of this paragraph (a), then such Person shall not be deemed to be an "Acquiring Person" for any purposes of this Agreement. (b) "Affiliate" shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on March 10, 1986. "Associate," used to indicate a relationship with any Person, shall mean (i) any corporation or organization (other than the Company or a direct or indirect subsidiary of the Company) of which such Person is an officer or partner or is, directly or indirectly, the beneficial owner of 10 percent or more of any class of equity securities, (ii) any trust or other estate in which such Person has a substantial beneficial interest or as to which such Person serves as a trustee or in a similar fiduciary capacity, and (iii) any relative or -3- 4 spouse of such Person, or any relative of such spouse, who has the same principal residence as such Person. (c) A Person shall be deemed the "Beneficial Owner" of and shall be deemed to "beneficially own" any securities: (i) which such Person or any of such Person's Affiliates or Associates beneficially owns, directly or indirectly; (ii) which such Person or any of such Person's Affiliates or Associates has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, rights (other than these Rights), warrants or options, or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange; or (B) the right to vote pursuant to any agreement, arrangement or understanding; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security if the agreement, arrangement or understanding to vote such security (1) arises -4- 5 solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations of the Exchange Act and (2) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person's Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except to the extent contemplated by the proviso to Section 1(c)(ii)(B)) or disposing of any securities of the Company. (d) "Business Day" shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in the State of Texas are authorized or obligated by law or executive order to close. (e) "Close of business" on any given date shall mean 5:00 P.M., Dallas, Texas time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 P.M., Dallas, Texas time, on the next succeeding Business Day. (f) "Common Shares" when used with reference to the Company shall mean shares of Series A Common Stock, Series B Common Stock, and/or Series C Common -5- 6 Stock. "Common Shares" when used with reference to any Person other than the Company shall mean the capital stock (or equity interest) with the greatest voting power of such other Person or, if such other Person is a Subsidiary of another Person, the Person or Persons which ultimately controls such first-mentioned Person. (g) "Person" shall mean any individual, firm, corporation or other entity, and shall include any successor (by merger or otherwise) of such entity. (h) "Preferred Shares" shall mean shares of Series A Junior Participating Preferred Stock of the Company. (i) "Shares Acquisition Date" shall mean the first date of public announcement by the Company or an Acquiring Person that an Acquiring Person has become such. (j) "Subsidiary" of any Person shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person. Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent to act as agent for the Company and the holders of the Rights (who, in accordance with Section 3 hereof, shall prior to the Distribution Date also be the holders of the Common Shares) in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts -6- 7 such appointment. The Company may from time to time appoint such co-Rights Agents as it may deem necessary or desirable. Section 3. Issue of Right Certificates. (a) Until the earlier of (i) the tenth day after the Shares Acquisition Date or (ii) the tenth day after the date of commencement of, or first public announcement of the intent of any Person (other than the Company, any wholly-owned Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company or any entity holding Common Shares for or pursuant to the terms of any such Plan) to commence, a tender or exchange offer the consummation of which would result in beneficial ownership by a Person of 30% or more of the total number of the outstanding Common Shares (including any such date which is after the date of this Agreement and prior to the issuance of the Rights; the earlier of such dates being herein referred to as the "Distribution Date"), (x) the Rights will be evidenced (subject to the provisions of paragraph (b) of this Section 3) by the certificates for Common Shares registered in the names of the holders thereof (which certificates shall also be deemed to be Right Certificates) and not by separate Right Certificates, and (y) the right to receive Right Certificates will be transferable only in connection with the transfer of Common Shares. As soon as practicable after the Distribution Date, the Rights Agent will send, by first-class, insured, postage-prepaid mail, to each record holder of Common Shares as of the close of business on the Distribution Date, at the address of such holder shown on the records of the Company, a Right Certificate, in substantially the form of Exhibit B hereto (a "Right Certificate"), -7- 8 evidencing one Right for each Common Share so held. As of the Distribution Date, the Rights will be evidenced solely by such Right Certificates. (b) On March 20, 1986 or as soon as practicable thereafter, the Company will send a copy of a Summary of Rights to Purchase Preferred Shares, in substantially the form attached hereto as Exhibit C (the "Summary of Rights"), by first-class, postage-prepaid mail, to each record holder of Common Shares as of the close of business on March 20, 1986, at the address of such holder shown on the records of the Company. With respect to certificates for Common Shares outstanding as of March 20, 1986, until the Distribution Date, the Rights will be evidenced by such certificates registered in the names of the holders thereof together with a copy of the Summary of Rights. Until the Distribution Date (or the earlier of the Redemption Date or Final Expiration Date (as such terms are defined in Section 7 hereof)), the surrender for transfer of any certificate for Common Shares outstanding on March 20, 1986, with or without a copy of the Summary of Rights attached thereto, shall also constitute the transfer of the Rights associated with the Common Shares represented thereby. (c) Certificates for Common Shares issued after March 20, 1986 but prior to the earlier of the Distribution Date or the Redemption Date or the Final Expiration Date (as such terms are defined in Section 7) shall have impressed on, printed on, written on or otherwise affixed to them a legend in substantially the following form: -8- 9 This certificate also evidences and entitles the holder hereof to certain Rights as set forth in a Rights Agreement between A.H. Belo Corporation and Chemical Bank, dated as of March 10, 1986, amended and restated as of February 28, 1996 (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of A.H. Belo Corporation. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. A.H. Belo Corporation will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. Under certain circumstances, Rights beneficially owned by Acquiring Persons (as defined in the Rights Agreement) may become null and void. With respect to such certificates containing a legend in substantially the foregoing form, until the Distribution Date, the Rights associated with the Common Shares represented by such certificates shall be evidenced by such certificates alone, and the surrender for transfer of any such certificate shall also constitute the transfer of the Rights associated with the Common Shares represented thereby. Section 4. Form of Right Certificates. The Right Certificates (and the forms of election to purchase Preferred Shares and of assignment to be printed on the reverse thereof) shall be substantially the same as Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on -9- 10 which the Rights may from time to time be listed, or to conform to usage. Subject to the provisions of Section 22 hereof, the Right Certificates, in each such case, on their face shall entitle the holders thereof to purchase such number of Preferred Shares as shall be set forth therein at the price per one-hundredth of a Preferred Share set forth therein (the "Purchase Price"), but the number of such Preferred Shares and the Purchase Price shall be subject to adjustment as provided herein. Section 5. Countersignature and Registration. The Right Certificates shall be executed on behalf of the Company by its Chairman of the Board, its President or any Executive Vice President, Senior vice President or Vice President, and by the Secretary, an Assistant Secretary, Treasurer or an Assistant Treasurer of the Company, either manually or by facsimile signature, and have affixed thereto the Company's seal or a facsimile thereof. The Right Certificates shall not be valid for any purpose unless countersigned. In case any officer of the Company who shall have signed any of the Right Certificates shall cease to be such officer of the Company before counter-signature by the Rights Agent and issuance and delivery by the Company, such Right Certificates, nevertheless, may be countersigned by the Rights Agent, and issued and delivered by the Company with the same force and effect as though the person who signed such Right Certificates had not ceased to be such officer of the Company; and any Right Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Right Certificate, shall be a proper officer -10- 11 of the Company to sign such Right Certificate, although at the date of the execution of this Agreement any such person was not such an officer. Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its principal offices, books for registration and transfer of the Right Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Right Certificates, the number of Rights evidenced on its face by each of the Right Certificates and the date of each of the Right Certificates. Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject to the provisions of Section 14 hereof, at any time after the close of business on the Distribution Date, and at or prior to the close of business on the earlier of the Redemption Date or the Final Expiration Date (as such terms are defined in Section 7 hereof), any Right Certificate or Right Certificates (other than Right Certificates representing Rights that have become void pursuant to Section 11(a)(ii) hereof or that have been exchanged pursuant to Section 24 hereof) may be transferred, split up, combined or exchanged for another Right Certificate or Right Certificates, entitling the registered holder to purchase a like number of Preferred Shares as the Right Certificate or Right Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Right Certificate shall make such request in writing delivered to the Rights Agent, and shall -11- 12 surrender the Right Certificate or Right Certificates to be transferred, split up, combined or exchanged at the principal office of the Rights Agent. Thereupon the Rights Agent shall countersign and deliver to the person entitled thereto a Right Certificate or Right Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Right Certificates. Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and, at the Company's request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if mutilated, the Company will make and deliver a new Right Certificate of like tenor to the Rights Agent for delivery to the registered owner in lieu of the Right Certificate so lost, stolen, destroyed or mutilated. Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights. (a) The registered holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein) in whole or in part at any time after the Distribution Date upon surrender of the Right Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at the principal office of the Rights -12- 13 Agent, together with payment of the Purchase Price for each one one-hundredth of a Preferred Share as to which the Rights are exercised, at or prior to the close of business on the earlier of (i) the close of business on March 20, 2006 (the "Final Expiration Date"), or (ii) the date on which the Rights are redeemed as provided in Section 23 hereof (the "Redemption Date"), or (iii) the time at which such Rights are exchanged as provided for in Section 24 hereof. (b) The Purchase Price for each one one-hundredth of a Preferred Share pursuant to the exercise of a Right shall be, as of February 28, 1996, $150, shall be subject to adjustment from time to time as provided in Sections 11 and 13 hereof and shall be payable in lawful money of the United States of America in accordance with paragraph (c) below, and as of February 28, 1996 each Right shall entitle the holder thereof to purchase one one- hundredth of a Preferred Share, subject to the terms and conditions herein set forth. (c) Upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase duly executed, accompanied by payment of the Purchase Price for the shares to be purchased and an amount equal to any applicable transfer tax required to be paid by the holder of such Right Certificate in accordance with Section 9 in cash, or by certified check or cashier's check payable to the order of the Company, the Rights Agent shall thereupon promptly (i) (A) requisition from any transfer agent of the Preferred Shares certificates for the number of Preferred Shares to be purchased and the Company -13- 14 hereby irrevocably authorizes its transfer agent to comply with all such requests, or (B) requisition from the depositary agent depositary receipts representing such number of one one-hundredths of a Preferred Share as are to be purchased (in which case certificates for the Preferred Shares represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company hereby directs the depositary agent to comply with such request, (ii) when appropriate, requisition from the Company the amount of cash to be paid in lieu of issuance of fractional shares in accordance with Section 14, (iii) promptly after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder and (iv) when appropriate, after receipt, promptly deliver such cash to or upon the order of the registered holder of such Right Certificate. (d) In case the registered holder of any Right Certificate shall exercise less than all the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Right Certificate or to his duly authorized assignee, subject to the provisions of Section 14 hereof. Section 8. Cancellation and Destruction of Right Certificates. All Right Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the -14- 15 Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Right Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all cancelled Right Certificates to the Company, or shall, at the written request of the Company, destroy such cancelled Right Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. Section 9. Reservation and Availability of Preferred Shares. The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued Preferred Shares or any Preferred Shares held in its treasury, the number of Preferred Shares that will be sufficient to permit the exercise in full of all outstanding Rights. So long as the Preferred Shares issuable upon the exercise of Rights may be listed on any national securities exchange, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable, all shares reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise. The Company covenants and agrees that it will take all such action as may be necessary to ensure that all Preferred Shares delivered upon exercise of Rights shall, at the -15- 16 time of delivery of the certificates for such Preferred Shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable shares. The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Right Certificates or of any Preferred Shares upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Right Certificates to a person other than, or the issuance or delivery of certificates for the Preferred Shares in a name other than that of, the registered holder of the Right Certificate evidencing Rights surrendered for exercise or to issue or deliver any certificates for Preferred Shares upon the exercise of any Rights until any such tax shall have been paid (any such tax being payable by the holder of such Right Certificate at the time of surrender) or until it has been established to the Company's satisfaction that no such tax is due. Section 10. Preferred Shares Record Date. Each person in whose name any certificate for Preferred Shares is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the Preferred Shares represented thereby on, and such certificate shall be dated, the date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable transfer -16- 17 taxes) was made; provided, however, that if the date of such surrender and payment is a date upon which the Preferred Shares transfer books of the Company are closed, such person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeeding business day on which the Preferred Shares transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Right Certificate shall not be entitled to any rights of a holder of Preferred Shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein. Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights. The Purchase Price, the number of Preferred Shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11. (a) (i) In the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Preferred Shares payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine the outstanding Preferred Shares into a smaller number of Preferred Shares or (D) issue any shares of its capital stock in a reclassification of the Preferred Shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), -17- 18 except as otherwise provided in this Section 11(a), the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of capital stock issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares of capital stock which, if such Right had been exercised immediately prior to such date and at a time when the Preferred Shares transfer books of the Company were open, he would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification. If an event occurs which would require an adjustment under both Section 11(a)(i) and Section 11(a)(ii), the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii). (ii) Subject to Section 24 of this Agreement, in the event any Person becomes an Acquiring Person, each holder of a Right shall thereafter have a right to receive, upon exercise thereof at a price equal to the then current Purchase Price multiplied by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable, in accordance with the terms of this Agreement and in lieu of Preferred Shares, such number of Common Shares of the Company as shall equal the result obtained by (x) multiplying the then current Purchase Price by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable and dividing that product by (y) 50% of the then current per -18- 19 share market price of the Company's Common Shares (determined pursuant to Section 11(d) hereof) on the date of the occurrence of such event. In the event that any Person shall become an Acquiring Person and the Rights shall then be outstanding, the Company shall not take any action which would eliminate or diminish the benefits intended to be afforded by the Rights. From and after the occurrence of such event, any Rights that are or were acquired or beneficially owned by any Acquiring Person (or any Associate or Affiliate of such Acquiring Person) shall be void and any holder of such Rights shall thereafter have no right to exercise such Rights under any provision of this Agreement. No Right Certificate shall be issued pursuant to Section 3 that represents Rights beneficially owned by an Acquiring Person whose Rights would be void pursuant to the preceding sentence or any Associate or Affiliate thereof; no Right Certificate shall be issued at any time upon the transfer of any Rights to an Acquiring Person whose Rights would be void pursuant to the preceding sentence or any Associate or Affiliate thereof or to any nominee of such Acquiring Person, Associate or Affiliate; and any Right Certificate delivered to the Rights Agent for transfer to an Acquiring Person whose Rights would be void pursuant to the preceding sentence shall be cancelled. (iii) In the event that there shall not be sufficient Common Shares issued but not outstanding or authorized but unissued to permit the exercise in full of the -19- 20 Rights in accordance with the foregoing subparagraph (ii), the Company shall take all such action as may be necessary to authorize additional Common Shares for issuance upon exercise of the Rights. (b) In case the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Shares entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Preferred Shares (or shares having the same rights, privileges and preferences as the Preferred Shares ("equivalent preferred shares")) or securities convertible into Preferred Shares or equivalent preferred shares at a price per Preferred Share or equivalent preferred share (or having a conversion price per share, if a security convertible into Preferred Shares or equivalent preferred shares) less than the current per share market price of the Preferred Shares (as defined in Section 11(d)) on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of Preferred Shares outstanding on such record date plus the number of Preferred Shares which the aggregate offering price of the total number of Preferred Shares and/or equivalent preferred shares so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current market price and the denominator of which shall be the number of Preferred Shares outstanding on such record date plus the -20- 21 number of additional Preferred Shares and/or equivalent preferred shares to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible). In case such subscription price may be paid in consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent. Preferred Shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such rights or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. (c) In case the Company shall fix a record date for the making of a distribution to all holders of the Preferred Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness or assets (other than a regular quarterly cash dividend or a dividend payable in Preferred Shares) or subscription rights or warrants (excluding those referred to in Section 11(b)), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the current per share market price of the Preferred Shares (as defined in Section 11(d)) on such record date, less -21- 22 the fair market value (as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent) of the portion of the assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to one Preferred Share and the denominator of which shall be such current per share market price of the Preferred Shares. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. (d) (i) For the purpose of any computation hereunder, the "current per share market price" of the Common Shares on any date shall be deemed to be the average of the daily closing prices per share of such Common Shares for the 30 consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date; provided, however, that in the event that the current per share market price of the Common Shares is determined during a period following the announcement by the issuer of such Shares of a dividend or distribution on such Common Shares payable in such Common Shares or securities convertible into such Common Shares, and prior to the expiration of 30 Trading Days after the ex-dividend date for such dividend or distribution, then, and in each such case, the current market price shall be appropriately adjusted to reflect the current market price per Common Share equivalent. The closing price for each day shall be the last sale price, regular way, or, -22- 23 in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Common Shares are not listed or admitted on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Common Shares are listed or admitted to trading, or, if the Common Shares are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the Nasdaq National Market ("NASDAQ") or such other system then in use, or, if on any such date the Common Shares are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Shares selected by the Board of Directors of the Company. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the Common Shares are listed or admitted to trading is open to the transaction of business or, if the Common Shares are not listed or admitted to trading on any national securities exchange, a Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions in the State of Texas are not authorized or obligated by law or executive order to close. For purposes of this Section 11(d)(i), the term "Common Shares", when used with reference to the Company, shall mean shares of Series A Common Stock. -23- 24 (ii) For the purpose of any computation hereunder, the "current per share market price" of the Preferred Shares shall be determined in the same manner as set forth above for Common Shares in clause (i) of this Section 11(d). If the current per share market price of the Preferred Shares cannot be determined in the manner provided above, the "current per share market price" of the Preferred Shares shall be conclusively deemed to be the current per share market price of the Common Shares (approximately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof), multiplied by one hundred. If neither the Common Shares nor the Preferred Shares are publicly held or so listed or traded, "current per share market price" shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent. (e) No adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest ten-thousandth of a common share or other share or one-millionth of a Preferred Shares as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years -24- 25 from the date of the transaction which requires such adjustment or (ii) the date of the expiration of the right to exercise any Rights. (f) If as a result of an adjustment made pursuant to Section 11(a), the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock of the company other than Preferred Shares, thereafter the number of such other shares so receivable upon exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares contained in Section 11(a) through (c), inclusive, and the provisions of Section 7, 9, 10 and 13 with respect to the Preferred Shares shall apply on like terms to any such other shares. (g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of Preferred Shares purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein. (h) Unless the Company shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Section 11(b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price per -25- 26 one one-hundredth of a Preferred Share, that number of one one-hundredths of a Preferred Share (calculated to the nearest one one-millionth of a Preferred Share) obtained by (i) multiplying (x) the number of one one-hundredths of a share covered by a Right immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price. (i) The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in substitution for any adjustment in the number of Preferred Shares purchasable upon the exercise of a Right. Each of the rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one one-hundredths of a Preferred Share for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of rights shall become that number of Rights (calculated to the nearest one ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Right Certificates have been issued, shall be at -26- 27 least 10 days later than the date of the public announcement. If Right Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Right Certificates on such record date Right Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders or record in substitution and replacement for the Right Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Right Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Right Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein and shall be registered in the manner provided for herein and shall be registered in the names of the holders of record of Right Certificates on the record date specified in the public announcement. (j) Irrespective of any adjustment or change in the Purchase Price or the number of Preferred Shares issuable upon the exercise of the rights, the Right Certificates theretofore and thereafter issued may continue to express the Purchase Price per one one-hundredth of a share and the number of shares which were expressed in the initial Right Certificates issued hereunder. -27- 28 (k) Before taking any action that would cause an adjustment reducing the Purchase Price below one one-hundredth of the then par value, if any, of the Preferred Shares issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable Preferred Shares at such adjusted Purchase Price. (l) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuing to the holder of any Right exercised after such record date of the Preferred Shares and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the Preferred Shares and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment. (m) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it in it sole discretion shall determine to be advisable in order that any consolidation or subdivision of the -28- 29 Preferred Shares, issuance wholly for cash if any of Preferred Shares at less than the current market price, issuance wholly for cash of Preferred Shares or securities which by their terms are convertible into or exchangeable for Preferred Shares, dividends on Preferred Shares payable in Preferred Shares or issuance of rights, options or warrants referred to hereinabove in subsection (b) of this Section 11, hereafter made by the Company to holders of its Preferred Shares shall not be taxable to such shareholders. (n) In the event that at any time after the February 28, 1996 and prior to the Distribution Date, the Company shall (i) declare or pay any dividend on the Common Shares payable in Common Shares or (ii) effect a subdivision combination or consolidation of the Common Shares (by reclassification or otherwise than by payment of dividends in Common Shares) into a greater or lesser number of Common Shares, then in any such case (i) the number of one one-hundredths of a Preferred Share purchasable upon proper exercise of each Right shall be determined by multiplying the number of shares so purchasable immediately prior to such event by a fraction, the numerator of which is the number of Common Shares outstanding immediately before such event and the denominator of which is the number of Common Shares outstanding immediately after such event, and (ii) each Common Share outstanding immediately after such event shall have issued with respect to it that number of Rights which each Common Share outstanding immediately prior to such event had issued with respect to it. The adjustments provided for in this Section 11(n) shall be made -29- 30 successively whenever such a dividend is declared or paid or such a subdivision, combination or consolidation is effected. If an event occurs which would require an adjustment under Section 11(a)(ii) and this Section 11(n), the adjustments provided for in this Section 11(n) shall be in addition and prior to any adjustment required pursuant to Section 11(a)(ii). Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the Company shall (a) promptly prepare a certificate setting forth such adjustment, and a brief statement of the facts accounting for such adjustment, (b) promptly file with the Rights Agent and with each transfer agent for the Common Shares and the Preferred Shares a copy of such certificate and (c) mail a brief summary thereof to each holder of a Right Certificate in accordance with Section 26 hereof; provided, however, that no failure to prepare or file such certificate, or to mail such summary thereof, shall void or impair the effectiveness of any adjustment referred to herein. Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power. In the event, directly or indirectly, (a) the Company shall consolidate with, or merge with and into, any other Person (other than (x) any employee benefit plan of the Company, or any entity holding Common Shares for or pursuant to the terms of any such plan or (y) a wholly-owned Subsidiary of the Company, and pursuant to such consolidation or merger all of the Common Shares of the Company are converted into the right to receive Common -30- 31 Shares of such Subsidiary on a share-for-share basis), (b) any Person (other than any employee benefit plan of the Company, or any entity holding Common Shares for or pursuant to the terms of any such plan) shall consolidate with the Company, or merge with and into the Company and the Company shall be the continuing or surviving corporation of such merger and, in connection with such merger, all or part of the Common Shares shall be changed into or exchanged for stock or other securities of any other Person (or the Company) or cash or any other property, or (c) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one or more transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person other than the Company or one or more of its wholly-owned Subsidiaries, then, and in each such case, proper provisions shall be made so that (i) each holder of a Right (except as otherwise provided therein) shall thereafter have the right to receive, upon the exercise thereof in accordance with the terms of this Agreement, such number of Common Shares of such other Person (including the Company as successor thereto or as the surviving corporation) as shall be equal to the result obtained by (X) multiplying the then current Purchase Price by the number of one one-hundredths of a Preferred Share for which a Right is then exercisable (without taking into account any adjustment previously made pursuant to Section 11(a)(ii)) and dividing that product by (Y) 50% of the current per share market price of the Common Shares of such other Person (determined pursuant to Section 11(d)) on the date of consummation of such -31- 32 consolidation, merger, sale or transfer; (ii) the issuer of such Common Shares shall thereafter be liable for, and shall assume, by virtue of such consolidation, merger, sale or transfer, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to such issuer; and (iv) such issuer shall take such steps (including, but not limited to, the reservation of a sufficient number of shares of its Common Shares in accordance with Section 9) in connection with such consummation as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be practicable, in relation to the shares of its Common Shares thereafter deliverable upon the exercise of the Rights. The Company shall not enter into any transaction of the kind referred to in this Section 13 if at the time of such transaction there are any rights, warrants, instruments or securities outstanding or any agreement or arrangements which, as a result of the consummation of such transaction, would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights. The Company shall not consummate any such consolidation, merger, sale or transfer unless prior thereto the Company and such issuer shall have executed and delivered to the Rights Agent a supplemental agreement so providing. The provisions of this Section 13 shall similarly apply to successive mergers or consolidation or sales or other transfers. In the event the Company shall consolidate with, or merge with and into, a wholly-owned Subsidiary of the Company and pursuant to such consolidation or merger all -32- 33 of the Common Shares of the Company are converted into the right to receive Common Shares of such Subsidiary on a share-for-share basis, then proper provision shall be made so that (i) each holder of a Right (except as otherwise provided herein) shall thereafter have the right to receive, upon the exercise thereof in accordance with the terms of this Agreement, the same number of one one-hundredths of a Preferred Share of such Subsidiary (which Preferred Shares shall be as nearly identical as practicable to the Preferred Shares as defined herein) as the number of one one-hundredths of a Preferred Share of the Company for which a Right is then exercisable; (ii) such Subsidiary shall thereafter be liable for, and shall assume, by virtue of such consolidation or merger, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to such Subsidiary; and (iv) such Subsidiary shall take such steps (including, but not limited to, the reservation of a sufficient number of its Preferred Shares in accordance with Section 9) in connection with such consummation as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be practicable, in relation to its Preferred Shares thereafter deliverable upon exercise of the Rights. The Company shall not consummate any such consolidation or merger unless prior thereto the Company and such Subsidiary shall have executed and delivered to the Rights Agent a supplemental agreement so providing. -33- 34 Section 14. Fractional Rights and Fractional Shares. (a) The Company shall not be required to issue fractions of Rights or to distribute Right Certificates which evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For the purposes of this Section 14(a) the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price for any day shall be the last sale price, regular way, or, in case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors of the Company. If on any such date no such market maker is -34- 35 making a market in the Rights the fair value of the Rights on such date as determined in good faith by the Board of Directors of the Company shall be used. (b) The Company shall not be required to issue fractions of Preferred Shares (other than fractions which are integral multiples of one one-hundredth of a Preferred Share) upon exercise of the Rights or to distribute certificates which evidence fractional Preferred Shares (other than fractions which are integral multiples of one one-hundredth of a Preferred Share). Fractions of Preferred Shares in integral multiples of one one-hundredth of a Preferred Share may, at the election of the company, be evidenced by depositary receipts, pursuant to an appropriate agreement between the Company and a depositary selected by it, provided that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial owners of the Preferred shares. In lieu of fractional Preferred Shares that are not integral multiples of the one-hundredth of a Preferred Share, the Company shall pay to the registered holders of Right Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of the Preferred Share. For purposes of this Section 14(b), the current market value of a Preferred Share shall be the closing price of a Preferred Share (as determined pursuant to the second sentence of Section 11(d)) for the Trading Day immediately prior to the date of such exercise. -35- 36 (c) The holder of a Right by the acceptance of the Rights expressly waives his right to receive any fractional Rights or any fractional shares upon exercise of a Right. Section 15. Rights of Action. All rights of action in respect of this Agreement, excepting the rights of actions given to the Right Agent under Section 18 hereof, are vested in the respective registered holders of the Right Certificates (and, prior to the Distribution Date, the registered holders of the Common Shares); and any registered holder of any Right Certificate (or, prior to the Distribution Date, of the Common Shares), without the consent of the Right Agent or of the holder of any other Right Certificate (or, prior to the Distribution Date, of the Common Shares), may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Right Certificate in the manner provided in such Right Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of, the obligations of any Person subject to this Agreement. -36- 37 Section 16. Agreement of Right Holders. Every holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that: (a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the Common Shares; (b) after the Distribution Date, the Right Certificates are transferable only on the registry books of the Rights Agent if surrendered at the principal office of the Rights Agent duly endorsed or accompanied by a proper instrument of transfer; and (c) the Company and the Rights Agent may deem and treat the person in whose name the Right Certificate (or, prior to the Distribution Date, the associated Common Shares certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificates or the associated Common Shares certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary. Section 17. Right Certificate Holder Not Deemed a Shareholder. No holder, as such, of any Right Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the Preferred Shares or any other securities of the Company which -37- 38 may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any right Certificate, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in Section 25), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Right Certificate shall have been exercised in accordance with the provisions hereof. Section 18. Concerning the Rights Agent. The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against any loss, liability, or expense, incurred without negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability in the premises. -38- 39 The Rights Agent shall be protected and shall incur no liability for, or in respect of any action taken, suffered or omitted by it in connection with, its administration of this Agreement in reliance upon any Right Certificate or certificate for the Preferred Shares or Common Shares or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper person or persons, or otherwise upon the advice of its counsel as set forth in Section 20 hereof. Section 19. Merger or Consolidation or Change of Name of Rights Agent. Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the corporate trust business or stock transfer business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt -39- 40 the countersignature of the predecessor Rights Agent and deliver such Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. In case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Right Certificates by their acceptance thereof, shall be bound: -40- 41 (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion. (b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chairman of the Board, the President, any Vice President, the Treasurer or the Secretary of the Company and delivered to the Rights Agent, and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. (c) The Rights Agent shall be liable hereunder to the Company and any other Person only for its own negligence bad faith or willful misconduct. (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Right Certificates (except -41- 42 its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including the Rights becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment in the terms of the Rights (including the manner, method or amount thereof) provided for in Section 3, 11, 13, 23 or 24, or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after actual notice that such change or adjustment is required); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Preferred Shares to be issued pursuant to this Agreement or any Right Certificate or as to be issued pursuant to this Agreement or any Right Certificate or as to whether any Preferred Shares will, when issued, be validly authorized and issued, fully paid and nonassessable. -42- 43 (f) The Company agrees that it will perform, execute acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement. (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the Chairman of the Board, the President, any Vice President, the Secretary or the Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer. (h) The Rights Agent and any shareholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not the Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. -43- 44 (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof. Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days' notice in writing mailed to the Company and to each transfer agent of the Common Shares and Preferred Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Shares and Preferred Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated -44- 45 Rights Agent or by the holder of a Right Certificate (who shall, with such notice, submit his Right Certificate for inspection by the Company), then the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be, or shall be affiliated with, a corporation organized and doing business under the laws of the United States or of the State of Texas or of the State of New York or of the State of Delaware (or of any other state of the United States so long as such corporation is authorized to do business as a banking institution in the State of Texas or the State of New York or the State of Delaware), in good standing, having a principal office in the State of Texas or in the State of New York or in the State of Delaware, which is authorized under such laws to exercise corporate trust or stock transfer powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50 million. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Shares and Preferred Shares, and mail a notice thereof in writing to the registered holders of the -45- 46 Right Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. Section 22. Issuance of New Right Certificates. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Purchase Price per share and the number of kind or class of shares or other securities or property purchasable under the Right Certificates made in accordance with the provisions of this Agreement. Section 23. Redemption. (a) The Board of Directors of the Company may, at its option, at any time prior to such time as any Person becomes an Acquiring Person redeem all but not less than all the then outstanding Rights at a Redemption price of $.01 per right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the February 28, 1996 (such redemption price being hereinafter referred to as the "Redemption Price"). (b) Immediately upon the action of the Board of Directors of the Company ordering the redemption of the Rights, and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the -46- 47 holders of Rights shall be to receive the Redemption Price. Within 10 days after the action of the Board of Directors ordering the redemption of the Rights, the Company shall give notice of such redemption to the holders of the then outstanding Rights by mailing such notice to all such holders at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the Transfer Agent for the Common Shares. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. Neither the Company nor any of its Affiliates or Associates may redeem, acquire or purchase for value any Rights at any time in any manner other than that specifically set forth in this Section 23 or in Section 24 hereof, and other than in connection with the purchase of Common Shares prior to the Distribution Date. Section 24. Exchange. (a) The Board of Directors of the Company may, at its option, at any time after any Person becomes an Acquiring Person, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 11(a)(ii) hereof) for shares of Series A Common Stock or Series B Common Stock at an exchange ratio of one share of Series A Common Stock or Series B Common Stock, as determined by the Board of Directors, per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction -47- 48 occurring after the date hereof (such exchange ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors shall not be empowered to effect such exchange at any time after any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any such Subsidiary, or any entity holding Common Shares for or pursuant to the terms of any such plan), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of the voting power of the Common Shares then outstanding. Section 25. Notice of Certain Events. In case the Company shall propose (a) to pay any dividend payable in stock of any class to the holders of its Preferred Shares or to make any other distribution to the holder of its Preferred Shares (other than a regular quarterly cash dividend) or (b) to offer to the holder of its Preferred Shares rights or warrants to subscribe for or to purchase any additional Preferred Shares or shares of stock of any class or any other securities, rights or options, or (c) to effect any reclassification of its Preferred Shares (other than a reclassification involving only the subdivision of outstanding Preferred Shares), or (d) to effect any consolidation or merger into or with, or to effect any sale or other transfer (or to permit one or more of its subsidiaries to effect any sale or other transfer), in one or more transactions, of more than 50% of the assets or earning power of the Company and its subsidiaries (taken as a whole) to, any other Person, or (e) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company -48- 49 shall give to each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, or distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the Common Shares and/or Preferred Shares, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (a) or (b) above at least 20 days prior to the record date for determining holders of the Preferred Shares for purposes of such action, and in the case of any such other action, at least 20 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the Common Shares and/or Preferred shares, whichever shall be the earlier. In case any of the events set forth in Section 11(a)(ii) of this Agreement shall occur, then, in any such case, the Company shall as soon as practicable thereafter give to each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of rights under Section 11(a)(ii) hereof. Section 26. Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right Certificate to or on the -49- 50 company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows: A.H. Belo Corporation Communications Center Dallas, Texas Attention: Secretary Subject to the provisions of Section 21 hereof, any notice of demand authorized by this Agreement to be given or made by the Company or by the holder of any Right Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows: Chemical Mellon Shareholder Services, L.L.C. 85 Challenger Road, Overpeck Centre, 4th Floor Ridgefield, New Jersey 07660 Attention: Vice President/Administration Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any right Certificate shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company. Section 27. Supplements and Amendments. The Company and the Rights Agent may from time to time supplement or amend this Agreement without the approval of any holders of Right Certificates in order to cure any ambiguity, to correct or supplement any -50- 51 provision contained herein which may be defective or inconsistent with any other provisions herein, or to make any other provisions in regard to matters or questions arising hereunder, which the Company and the Rights Agent may deem necessary or desirable, including but not limited to extending the Final Expiration Date and, provided that at the time of such amendment there is no Acquiring Person, the period of time during which the Rights may be redeemed, and which shall not adversely affect the interests of the holders of Right Certificates. Without limiting the foregoing, the Company may at any time prior to such time as any Person becomes an Acquiring Person amend this Agreement to lower the thresholds set forth in Sections 1(a) and 3(a) to not less than the greater of (i) the sum of .001% and the largest percentage of the outstanding Common Shares then known by the Company to be beneficially owned by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any Subsidiary of the Company, or any entity holding Common Shares for or pursuant to the terms of any such plan) and (ii) 10%. Section 28. Successors. All the covenants and provisions of this Agreement by or for the Benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. Section 29. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the -51- 52 Common Shares) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Shares). Section 30. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Section 31. Governing Law. This Agreement and each Right Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State, except that the rights, duties and obligations of Chemical Mellon Shareholder Services, L.L.C. under this Agreement shall be governed by the laws of the State of New York without reference to the choice of law doctrine of such state. Section 32. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. -52- 53 Section 33. Descriptive Headings. Descriptive headings of the several sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. -53- 54 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. A.H. BELO CORPORATION Attest: By By ------------------------------ ------------------------------ Title: [Name and Title] CHEMICAL MELLON SHAREHOLDER SERVICES, L.L.C. Attest: By By ------------------------------ ------------------------------ Title: [Name and Title] -54- EX-10.2(1)(E) 11 4TH AMENDMENT TO EMPLOYEE SAVINGS PLAN 1 EXHIBIT 10.2(1)(e) FOURTH AMENDMENT TO A. H. BELO CORPORATION EMPLOYEE SAVINGS AND INVESTMENT PLAN (AS RESTATED EFFECTIVE JANUARY 1, 1998) A. H. Belo Corporation, a Delaware corporation (the "Company"), pursuant to authority of the Compensation Committee of the Board of Directors, adopts the following amendments to the A. H. Belo Corporation Employee Savings and Investment Plan (the "Plan"): 1. Section 1.31 of the Plan ("Year of Service") is amended by the addition of the following paragraphs: An Employee who became an employee of KTVK, Inc., a Delaware corporation, on November 1, 1999, and who immediately prior to that date was an employee of MAC America Communications, Inc., an Arizona corporation, will receive credit for an Hour of Service for each hour for which such Employee was paid or entitled to be paid by MAC America Communications, Inc., an Arizona corporation, or any of its affiliates determined in accordance with Section 1.17 and will receive credit for his period of employment with MAC America Communications, Inc., an Arizona corporation, or any of its affiliates, calculated in the same manner as if it had been employment with a Controlled Group Member. An Employee who was an employee of Denton Publishing Company, a Texas corporation, on July 1, 1999, will receive credit for an Hour of Service for each hour for which such Employee was paid or entitled to be paid by Denton Publishing Company, a Texas corporation, or any of its affiliates determined in accordance with Section 1.17 and will receive credit for his period of employment with Denton Publishing Company, a Texas corporation, or any of its affiliates calculated in the same manner as if it had been employment with a Controlled Group Member. 2. Section 2.1 of the Plan ("Eligibility to Participate") is amended by the addition of the following paragraphs: (xi) Each Employee of KTVK, Inc., a Delaware corporation, who on October 31, 1999, was an employee of MAC America Communications, Inc. an Arizona corporation, and who was eligible to participate in the section 401(k) plan sponsored by MAC America Communications, Inc., an Arizona corporation, will be eligible to participate in the Plan as of the first payroll period beginning after October 31, 1999. 2 (xii) Each Employee who was eligible to participate in the Denton Publishing Company Retirement Plan on December 31, 1999, will be eligible to participate in the Plan as of the first payroll period that includes January 1, 2000. 3. The second paragraph of Section 4.1 of the Plan, relating to amounts transferred from other plans, is amended in its entirety to read as follows: Notwithstanding any provision of the Plan to the contrary, any amounts transferred to the Plan on behalf of an Employee from the Journal Qualified Compensation Deferral Plan, the Journal Broadcasting 401(k) Plan, the Press-Enterprise Tax Deferred Savings Plan, the Gleaner and Journal Publishing Co. 401(k) Retirement Plan or the Denton Publishing Company Retirement Plan (each a "Transferror Plan") will be allocated as follows: (i) amounts held in the Employee's compensation deferral account under a Transferror Plan will be allocated to the Employee's Deferral Contribution Account; (ii) amounts held in the Employee's employer matching contribution account under a Transferror Plan will be allocated to the Employee's Matching Contribution Account; (iii) amounts held in the Employee's profit sharing account under a Transferror Plan will be allocated to the Employee's Profit Sharing Account; and (iv) amounts held in the Employee's after-tax account or rollover account under a Transferror Plan will be allocated to the Employee's Transfer Account. 4. Appendix A to the Plan ("Participating Employers") is amended to remove the following employer as a Participating Employer in the Plan as of the date indicated: KASA-TV, Inc. (After October 29, 1999) 5. Appendix A to the Plan is further amended to add the following employers as Participating Employers as of the dates indicated: KTVK, Inc. (As of November 1, 1999) Denton Publishing Company (As of January 1, 2000) 3 Executed at Dallas, Texas, this 16th day of December, 1999. A. H. BELO CORPORATION By: Name: Marian Spitzberg --------------------------------- Title: Secretary --------------------------------- EX-10.2(2)(C) 12 AMENDMENT NO. 7 TO 1986 LONG-TERM INCENTIVE PLAN 1 Exhibit 10.2(2)(c) AMENDMENT NO. 7 TO THE A. H. BELO CORPORATION 1986 LONG TERM INCENTIVE PLAN WHEREAS, A. H. Belo Corporation (the "Company") has heretofore adopted THE A. H. BELO CORPORATION 1986 LONG TERM INCENTIVE PLAN (the "1986 Plan"); and WHEREAS, pursuant to the provisions of paragraph 18 of the 1986 Plan, the Board of Directors of the Company desires herein to amend the 1986 Plan. NOW, THEREFORE, the 1986 Plan is hereby amended as follows: 1. Paragraph 7(c) of the 1986 Plan is amended by adding the following sentence at the end of such paragraph: "Payment of the exercise price may also be made, in the discretion of the Committee, by delivery (including by telecopy) to the Corporation or its designated agent of an executed irrevocable option exercise form together with irrevocable instructions to a broker-dealer to sell (or margin) a sufficient portion of the shares of Common Stock and to deliver the sale (or margin loan) proceeds directly to the Corporation to pay the exercise price." IN WITNESS WHEREOF, the Company has caused this instrument to be executed in its name and on its behalf by the officer thereunto duly authorized as of the 25th day of October, 1995. A. H. BELO CORPORATION By: /s/Robert W. Decherd ------------------------------------ Chairman of the Board, President and Chief Executive Officer ATTEST: /s/Michael J. McCarthy - ------------------------------- Secretary EX-10.2(3)(B) 13 AMENDMENT TO 1995 EXECUTIVE COMPENSATION PLAN 1 EXHIBIT 10.2(3)(b) AMENDMENT TO A. H. BELO CORPORATION 1995 EXECUTIVE COMPENSATION PLAN A. H. Belo Corporation, a Delaware corporation, pursuant to action of its Board of Directors adopts the following amendments to the A. H. Belo Corporation 1995 Executive Compensation Plan (the "Plan"): 1. Paragraph 5(h) of the Plan is amended in its entirety to read as follows: (h) If a Participant terminates employment by reason of retirement at or after attaining the earliest age that qualifies as the Participant's Early Retirement Age under The G. B. Dealey Retirement Pension Plan, as amended from time to time, death or disability, each outstanding Stock Option granted to the Participant to the extent not vested will vest and be fully exercisable and will remain exercisable until the term of the Stock Option expires (determined without regard to the Participant's termination of employment). If a Participant terminates employment for any other reason, the Participant's right, if any, to exercise Stock Options after termination of employment will be determined in accordance with the termination guidelines set forth on Appendix A to the Plan. Such Stock Options will be exercisable after termination of employment only to the extent the Stock Options were vested and exercisable immediately prior to termination of employment. 2. Paragraph 7(f) of the Plan is amended in its entirety to read as follows: (f) If a Participant terminates employment by reason of retirement at or after attaining the earliest age that qualifies as the Participant's Early Retirement Age under The G. B. Dealey Retirement Pension Plan, as amended from time to time, death or disability, each outstanding Appreciation Right granted to the Participant to the extent not vested will vest and be fully exercisable and will remain exercisable until the Appreciation Right expires by its terms (determined without regard to the Participant's termination of employment). If a Participant terminates employment for any other reason, the Participant's right, if any, to exercise Appreciation Rights after termination of employment will be determined in accordance with the termination guidelines set forth on Appendix A to the Plan. Such Appreciation Rights will be exercisable after termination of employment only to the extent the Appreciation Rights were vested and exercisable immediately prior to termination of employment. 3. Paragraph 14 of the Plan is amended in its entirety to read as follows: 14. Withholding Taxes. To the extent that the Company is required to withhold federal, state, local or foreign taxes in connection with any payment made or benefit realized by a Participant or other person under the Plan, and the amounts available to the Company for such withholding are insufficient, it will be a condition to the receipt of 2 such payment or the realization of such benefit that the Participant or such other person make arrangements satisfactory to the Company for payment of the balance of such taxes required to be withheld. In addition, if permitted by the Committee, the Participant or such other person may elect to have any withholding obligation of the Company satisfied with shares of Common Stock that would otherwise be transferred to the Participant or such other person in payment of the Participant's Award. In no event, however, will shares of Common Stock be withheld in excess of the minimum number of shares required to satisfy Belo's withholding obligation. 4. The Plan is amended by the addition of Appendix A, in the form attached to this Amendment. 5. The foregoing amendments will be effective as of December 7, 1999, with respect to all Stock Options and Appreciation Rights outstanding on that date and with respect to all Stock Options and Appreciation Rights granted after that date. Executed at Dallas, Texas, this 16th day of December, 1999. A. H. BELO CORPORATION By /s/ MARIAN SPITZBERG ----------------------------------- Name: Marian Spitzberg ---------------------------- Title: Secretary ---------------------------- 3 APPENDIX A TERMINATION GUIDELINES The following guidelines will determine the period of time, if any, during which a Participant may continue to exercise Stock Options and Appreciation Rights after termination of employment for reasons other than retirement at or after attaining the earliest age that qualifies as the Participant's Early Retirement Age under The G. B. Dealey Retirement Pension Plan, as amended from time to time (the "Retirement Plan"), death or disability.
REASON FOR TERMINATION EXERCISE PERIOD ---------------------- --------------- Voluntary Resignation None; Stock Options and Appreciation Rights expire immediately, and all unexercised Stock Options and Appreciation Rights are forfeited, on the date of termination of employment. Discharge for Cause None; Stock Options and Appreciation Rights expire immediately, and all unexercised Stock Options and Appreciation Rights are forfeited, on the date of termination of employment. Termination for Other Reasons: Executive officers and general managers of operating units One year after termination of employment. Other Participants with 10 or more years of service One year after termination of employment. Other Participants with more than 5 but less than 10 years of service Six months after termination of employment. Other Participants with 5 or fewer years of service Three months after termination of employment.
For purposes of these guidelines, a year of service will be determined in the same manner as a year of vesting service under the Retirement Plan. EX-10.2(4)(A) 14 AMENDMENT TO MANAGEMENT SECURITY PLAN 1 EXHIBIT 10.2(4)(a) AMENDMENT TO MANAGEMENT SECURITY PLAN OF A. H. BELO CORPORATION AND AFFILIATED COMPANIES (AS RESTATED EFFECTIVE JANUARY 1, 1982) A. H. Belo Corporation, a Delaware corporation ("Belo"), pursuant to authorization of its Board of Directors, adopts the following amendments to the Management Security Plan of A. H. Belo Corporation and Affiliated Companies, as restated effective January 1, 1982 (the "Plan"), with respect to the following facts: A. The Board of Directors of Belo has approved the termination of the Plan effective as of December 31, 1999. B. The Plan is being amended in connection with its termination to provide for the transfer of the present value of each Plan participant's accrued retirement benefit to an account established for the participant under the Belo Supplemental Executive Retirement Plan. NOW, THEREFORE, the Plan is amended as follows: 1. Article 3 of the Plan, relating to the payment of benefits upon retirement or other separation from service of Belo and its affiliates, is amended by the addition of the following new section: 3.7 Notwithstanding the foregoing provisions of this Article or of any other Article of the Plan, no benefits will be paid under the Plan to a Participant who retires or otherwise terminates employment with the Company and its affiliates after December 31, 1999. With respect to each Participant who remains an Employee after December 31, 1999, and who is eligible as of January 1, 2000, to participate in the Belo Supplemental Executive Retirement Plan (the "SERP"), there will be credited to the Participant's SERP account an amount equal to the Participant's lump sum benefit under the Plan. The Participant's lump sum benefit under the Plan will be the actuarial present value of the Participant's accrued retirement benefit determined under Article 3 of the Plan as if the Participant terminated employment with the Company and its affiliates on 2 December 31, 1999. The actuarial present value of a Participant's accrued benefit will be determined using actuarial assumptions approved by the Compensation Committee of the Board of Directors with the advice of such actuaries as it may select. 2. Article 4 of the Plan, relating to the payment of death benefits to Beneficiaries, is amended by the addition of the following new section: 4.8 Notwithstanding the foregoing provisions of this Article or of any other Article of the Plan, any death benefit payable under the Plan with respect to a Participant who dies after December 31, 1999 will be a lump sum equal to the after-tax value of the difference between the death benefit provided in the Plan and the portion of the payment received from the Belo Supplemental Executive Retirement Plan (as amended and restated effective January 1, 2000) attributable to the benefit described in that plan's section 8(e) inclusive of earnings. Such death benefit will be paid pursuant to such Supplemental Executive Retirement Plan. Executed at Dallas, Texas, this 16th day of December, 1999. A. H. BELO CORPORATION By /s/ Marian Spitzberg -------------------------------------- Name: Marian Spitzberg ------------------------------ Title: Secretary ----------------------------- EX-10.2(5) 15 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN 1 EXHIBIT 10.2(5) BELO SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2000 1. PURPOSE. The purpose of the Supplemental Executive Retirement Plan is to provide certain employees of Belo and its subsidiaries with a targeted level of retirement income upon retirement or other termination of employment. The provisions of the Plan as amended and restated effective January 1, 2000 will apply to each employee who is a participant in the Plan on and after such date. Benefits under the Plan for participants who retired or otherwise terminated employment prior to such date will be determined under the terms of the Plan as in effect on December 31, 1999. 2. DEFINITIONS. The following definitions are used throughout the Plan. (a) "Belo" means A. H. Belo Corporation, a Delaware corporation. The term "Belo subsidiary" means (i) any corporation of which at least 80% of the total combined voting power of all outstanding shares of stock is owned directly or indirectly by Belo, (ii) any partnership of which at least 80% of the profits interest or capital interest is owned directly or indirectly by Belo and (iii) any other entity of which at least 80% of the total equity interest is owned directly or indirectly by Belo. (b) "Board of Directors" means the Board of Directors of Belo. (c) "Cause" means any intentional act of fraud, embezzlement, or theft committed by a Participant in the course of the Participant's employment by Belo or any Belo subsidiary or any intentional misconduct engaged in by the Participant which is materially injurious to the business, reputation or property of Belo or any Belo subsidiary. (d) "Code" means the Internal Revenue Code of 1986, as amended and in effect from time to time. (e) "Committee" means the Compensation Committee of the Board of Directors or any successor committee appointed by the Board of Directors to administer the Plan. (f) "Effective Date" means January 1, 2000. (g) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. (h) "Final Monthly Compensation" means the final monthly compensation of a Participant as determined under the provisions of the Pension Plan except that (i) the limitation on compensation under Section 401(a)(17) of the Code will not be taken into account and (ii) with respect to a Participant who participates in a Belo incentive compensation plan, compensation paid after 1999 will include the amount of the Participant's target incentive cash compensation under such incentive compensation plan rather than the amount of the actual incentive cash compensation payment. 2 (i) "Participant" means an employee who is eligible to receive benefits under the Plan. The term "Participant" will include the beneficiary of a deceased Participant, unless the context clearly requires a different interpretation. (j) "Pension Plan" means The G. B. Dealey Retirement Pension Plan, as amended from time to time, which is a defined benefit pension plan that is sponsored by Belo and is intended to qualify under Section 401(a) of the Code. (k) "Plan" means the Belo Supplemental Executive Retirement Plan as set forth herein and as amended from time to time. (l) "Plan Year" means the calendar year. (m) "Restoration Benefit" means the Target Benefit described in Section 5 or Section 6 and the benefit described in Section 7. (n) "Supplemental Retirement Benefit" means the Target Benefit described in Section 4. (o) "SRP" means The Providence Journal Company Supplemental Retirement Plan. (p) "Target Benefit" means the retirement benefit that is projected for a Participant under Section 4, Section 5 and Section 6, whichever apply, solely for purposes of determining the contributions to be credited to the Participant's account under Section 8(a). 3. ELIGIBILITY. The Committee will designate from time to time those employees of Belo or any Belo subsidiary who are eligible to participate in the Plan with respect to the Supplemental Retirement Benefit or one or more Restoration Benefits. If the Committee designates an employee who has an accrued benefit under the SRP, such employee will be eligible to participate in the Plan only if he agrees in writing to transfer to the Plan his entire benefit under the SRP and to relinquish any benefit that would otherwise be payable from the SRP. An employee who has been designated as eligible to participate in the Plan will cease to be eligible for future benefits as of any date specified by the Committee, subject to the provisions of Section 8(d). 4. SUPPLEMENTAL RETIREMENT BENEFIT. (a) As soon as practicable after an employee becomes a Participant with respect to the Supplemental Retirement Benefit, the Committee will determine the Participant's projected annual Final Monthly Compensation on the assumption that the Participant will remain employed by Belo or a Belo subsidiary through the last day of the month in which the Participant attains age 65. (b) The Committee will also determine the projected annual retirement benefit that will be paid to the Participant under the terms of the Pension Plan as a straight-life annuity on the assumption that the Participant will remain employed by Belo or a Belo subsidiary through the last day of the month in which the Participant attains age 65 and will begin to receive retirement 3 benefits immediately thereafter. If a Participant is not an active participant in the Pension Plan, the Committee will determine the projected annual retirement benefit that would be paid to the Participant as if the Participant were an active participant in the Pension Plan, on the basis of the assumptions set forth in the preceding sentence and such years of benefit accrual service as the Committee determines should be credited to the Participant for this purpose. (c) The Target Benefit for each Participant under this Section will be an annual benefit payable as a straight-life annuity, beginning on the first day of the month immediately following the month in which the Participant attains age 65, in an amount equal to the greater of: (i) 60% of the Participant's annual Final Monthly Compensation determined under Section 4(a) reduced (but not below zero) by 100% of the Participant's projected annual retirement benefit determined under Section 4(b), multiplied by a fraction (not to exceed one) the numerator of which is the number of years of Plan participation that the Participant will have completed if the Participant participates continuously in the Plan until reaching age 65 and the denominator of which is 10; and (ii) a projected annual benefit calculated in the same manner as the Restoration Benefit under Section 5. 5. RESTORATION BENEFIT - ACTIVE PENSION PLAN PARTICIPANTS. (a) As soon as practicable after an employee becomes a Participant with respect to the Restoration Benefit under this Section, the Committee will determine (i) the amount of the Participant's projected annual Final Monthly Compensation on the assumption that the Participant will remain employed by Belo or a Belo subsidiary through the last day of the month in which the Participant attains age 65 and (ii) the annual retirement benefit that would be paid to the Participant from the Pension Plan based on such projected annual Final Monthly Compensation, and without regard to any limitation on benefits under Section 415 of the Code, in the form of a straight-life annuity beginning on the first day of the month immediately following the month in which the Participant attains age 65. (b) The Committee will also determine the projected annual retirement benefit that will be paid to the Participant under the terms of the Pension Plan as a straight-life annuity on the assumption that the Participant will remain employed by Belo or a Belo subsidiary through the last day of the month in which the Participant attains age 65 and will begin to receive retirement benefits immediately thereafter. (c) The Target Benefit for each Participant under this Section will be an annual benefit payable as a straight-life annuity beginning on the first day of the month immediately following the month in which the Participant attains age 65 in an amount equal to the difference between the annual benefit determined under Section 5(a) and the annual benefit determined under Section 5(b), multiplied by a fraction (not to exceed one) the numerator of which is the number of years of Plan participation that the Participant will have completed if the Participant participates continuously in the Plan until reaching age 65 and the denominator of which is 10. 4 6. RESTORATION BENEFIT - INACTIVE PENSION PLAN PARTICIPANTS. The Target Benefit for a Participant who has ceased to participate in the Pension Plan will be an annual benefit payable as a straight-life annuity beginning on the first day of the month immediately following the month in which the Participant attains age 65 in an amount equal to the difference between (i) the Participant's accrued annual benefit under the Pension Plan payable as a straight-life annuity beginning on the first day of the month immediately following the month in which the Participant attains age 65 and determined without regard to any limitation under Section 401(a)(17) or Section 415 of the Code and (ii) the accrued annual benefit that will actually be paid to the Participant under the Pension Plan as a straight-life annuity beginning on the first day of the month immediately following the month in which the Participant attains age 65. 7. RESTORATION BENEFIT - DEFINED CONTRIBUTION PLAN PARTICIPANTS. The Restoration Benefit for a Participant who is participating in a defined contribution plan sponsored by Belo or any Belo subsidiary and who is entitled to receive an allocation of an employer contribution under such plan other than an employer matching contribution will be an amount equal to the difference between (i) the amount of the employer contribution other than an employer matching contribution that would be allocable to the Participant for any calendar year determined without regard to any limitation under Section 401(a)(17) or Section 415 of the Code and (ii) the amount of such employer contribution that is actually allocated to the Participant for the calendar year. 8. PARTICIPANT ACCOUNTS; CONTRIBUTION AND EARNINGS CREDITS. (a) The Committee will determine the amount Belo would be required to contribute each Plan Year on behalf of a Participant in order to fully fund the Participant's Target Benefit under the Plan as of the last day of the month in which the Participant attains age 65 (or, if earlier with respect to the Target Benefit described in Section 6, the last day of the Participant's tenth year of participation in the Plan) and will also determine the amount required to fund the Participant's Restoration Benefit, if any, under Section 7. Belo will establish on its books an account for each Participant and will credit annually to each Participant's account the amount of the contribution determined by the Committee as necessary to fund the Participant's Target Benefit and the Restoration Benefit described in Section 7, if any, plus earnings on such contributions determined by applying the earnings factor specified by the Committee. Beginning in 2000, the Committee will review no less frequently than once every three years the assumptions used in determining each Participant's Target Benefit and the balance credited to each Participant's account and in its discretion may make any changes to the contribution and earnings credits to a Participant's account that it determines are appropriate as a result of such review. (b) With respect to a Participant who has agreed to the transfer of his SRP benefit to the Plan, the value of the Participant's SRP benefit will be credited to the Participant's account as the opening balance of the account and will be taken into account in determining the amount Belo would be required to contribute to fund the Participant's Target Benefit. The value of the Participant's SRP benefit for this purpose will be equal to the cash contribution made by Belo in February 1997 to Fleet National Bank, as trustee of the Belo Holdings, Inc. Benefits Trust, to fully fund the Participant's SRP benefit, as adjusted for investment gains and losses through December 31, 1999. 5 (c) Notwithstanding the provisions of Section 8(a), if Belo with the concurrence of the Committee either invests corporate funds in investments that are designated for the purpose of providing a Participant's Plan benefit or establishes a trust described in Section 13(c) for the purpose of providing Plan benefits, the actual earnings of such corporate or trust fund investments will be credited to the Participant's account instead of the earnings produced by the Committee's earnings factor, even though such actual earnings may be more or less than the earnings that would be credited using the earnings factor specified by the Committee. For purposes of this provision, the Belo Holdings, Inc. Benefits Trust established on February 28, 1997, with Fleet National Bank, as trustee, will be a trust described in Section 13(c) with respect to a Participant described in Section 8(b). (d) Annual contributions will be credited to the Participant's account as of a date selected by Belo, but not later than 90 days after the end of the Plan Year for which the contribution is to be credited. Except as otherwise provided in this Section 8(d), contributions will be credited for each full Plan Year in which the Participant participates in the Plan. If a Participant first becomes eligible to participate on a date other than the first day of the Plan Year or attains age 65, retires or otherwise terminates employment or ceases to be eligible for future benefits on a date other than the last day of the Plan Year, the Committee will determine whether any contributions are to be credited for such Plan Year and the amount of any such contributions. For purposes of the Plan, a Participant who becomes eligible for benefits under any long term disability plan maintained by Belo or any Belo subsidiary will be regarded as having terminated employment on the date as of which disability benefits begin. Earnings will continue to be credited to a Participant's account until the Participant's Plan benefit is paid, even though contributions cease to be credited as of an earlier date. (e) In addition to the contribution credits described in Section 8(a), there will be credited to the account of each employee who is a Participant on the Effective Date, and who was a participant in the Management Security Plan of A. H. Belo Corporation and Affiliated Companies ("MSP") on December 31, 1999, an additional amount equal to the Participant's lump sum benefit under the MSP (as determined under the provisions of the MSP as amended in December 1999), plus such additional amounts, if any, as are set forth on Exhibit A to the Plan. The Participant's lump sum benefit under the MSP will be credited to the Participant's account as of the Effective Date, and the additional amounts will be credited as of the dates set forth on Exhibit A. Earnings will be credited to these additional amounts in the same manner as all other amounts credited to the Participant's account. All amounts credited to a Participant's account under this Section 8(e) will be used to fund the Participant's Target Benefit and will not be used to provide a benefit in addition to the Target Benefit. (f) Notwithstanding the Target Benefit set forth in Section 4, Section 5 or Section 6, whichever applies, each Participant's actual Plan benefit as of any time will be the balance of the Participant's account described in this Section. 9. VESTING. Subject to the rights of general creditors as set forth in Section 13 and the right of Belo to discontinue the Plan as provided in Section 16, a Participant will be vested in his Target Benefit to the same extent that he has a vested interest in his employer-provided benefit under the Pension Plan (or would have a vested interest in such benefit, as determined by the Committee, if he were a participant in the Pension Plan) and will be vested in his Restoration 6 Benefit described in Section 7, to the same extent that he has a vested interest in his employer-provided benefit under the Belo defined contribution plan, unless the Participant's employment with Belo or any Belo subsidiary is terminated for Cause. If a Participant is terminated for Cause, the Participant's Plan benefit will be forfeited and the Participant will not be entitled to any benefit under the Plan. In addition, a Participant will be fully vested in his Plan benefit if he dies or becomes eligible for benefits under any long term disability plan maintained by Belo or any Belo subsidiary. 10. COMMENCEMENT OF BENEFITS. Payment of a Participant's vested interest in his Plan benefit will be made or will begin as soon as practicable following the Participant's termination of employment unless the Participant elects in writing at least six months prior to termination of employment, in accordance with procedures established by the Committee, to defer payment of his benefit to a later date (but not later than the first day of the month following attainment of age 65). A Participant's election to defer payment of his benefit to a later date will be irrevocable and may not be changed after it has been received by the Committee. 11. FORM OF BENEFITS. (a) A Participant's Plan benefit will be paid in a single lump sum payment, unless the Participant elects in writing at least six months prior to his termination of employment, in accordance with procedures established by the Committee, to receive his Plan benefit in one of the following optional forms, each of which will be actuarially equivalent to the Participant's account balance as of the date of benefit commencement: (i) a joint and survivor annuity that pays monthly benefits for the life of the Participant and on the death of the Participant pays 50% of such monthly benefit to the spouse to whom the Participant was married when annuity payments began, if such spouse survives the Participant, for the life of such spouse; (ii) a straight-life annuity that pays monthly benefits for the life of the Participant and pays no further benefits following the Participant's death; or (iii) an annuity that pays monthly benefits for the life of the Participant and in the event that the Participant dies before 120 monthly benefit payments have been made, continues to pay monthly payments in the same amount to the beneficiary designated by the Participant before benefit payments began, until a total of 120 monthly payments have been made to the Participant and the Participant's beneficiary. (b) Any annuity elected by a Participant or by a beneficiary pursuant to Section 12 will be paid from the Participant's account established under Section 8, and Belo will not purchase any form of annuity contract from an insurance company or other third party. In the event the balance of the Participant's account is insufficient to continue the monthly payments being made under the form of annuity elected by the Participant or beneficiary (because the individual receiving the payments outlives the life expectancy used in determining the amount of the monthly payments or because of any other reason), Belo will credit such additional amounts to the Participant's account as may be necessary to provide to the Participant or beneficiary the remaining payments due under the annuity. Upon the death of both the Participant and beneficiary, any balance remaining in the Participant's account will revert to Belo and may be used by Belo for any purpose. (c) A Participant or beneficiary who is receiving monthly annuity payments may elect at any time to receive in a single lump sum payment an amount equal to 90% of the actuarially equivalent value of the unpaid portion of the annuity. 7 (d) In determining the actuarial equivalence of forms of benefit under this Section, the Committee will adopt from time to time such actuarial assumptions and other factors as it determines to be appropriate. 12. DEATH BENEFITS. (a) Upon the death of a Participant who is receiving a Plan benefit, the Plan benefit will continue to be paid (if at all) in accordance with the form of payment elected by the Participant under Section 11. (b) If a Participant who is entitled to receive a Plan benefit dies before payment of such benefit begins, the Plan benefit will be paid as a death benefit to the beneficiary designated by the Participant (who may or may not be the Participant's spouse) in accordance with procedures established by the Committee or, in the event the Participant has not designated any beneficiary, to the Participant's surviving spouse, if any, and if none, to the Participant's estate. The death benefit payable pursuant to this Section will be paid in a lump sum payment as soon as practicable after the Participant's death. In addition, if a Participant listed on Exhibit B to the Plan dies before terminating employment, the Participant's beneficiary will also be paid an insured death benefit in the amount set forth on Exhibit B for the year in which the Participant's death occurs. 13. FUNDING OF BENEFITS. (a) The Plan will be unfunded. All benefits payable to a Participant under the Plan will be paid from the general assets of Belo or any Belo subsidiary that employed the Participant, and nothing contained in the Plan will require Belo or any Belo subsidiary to set aside or hold in trust any funds for the benefit of a Participant, who will have the status of a general unsecured creditor with respect to the obligation of Belo to make payments under the Plan. Any funds of Belo or any Belo subsidiary available to pay benefits under the Plan will be subject to the claims of general creditors of Belo or such subsidiary and may be used for any purpose by Belo or such subsidiary. (b) If the Plan benefit payable to a Participant is attributable to periods of employment with Belo and/or one or more subsidiaries of Belo, the Committee may allocate liability for the payment of the benefit among Belo and one or more subsidiaries in any manner the Committee, in its sole discretion, determines to be appropriate. (c) Notwithstanding the provisions of Section 13(a), Belo may, at the direction and in the absolute discretion, of the Committee, transfer to the trustee of one or more trusts established for the benefit of one or more Participants assets from which all or a portion of the benefits provided under the Plan will be satisfied, provided that such assets held in trust will at all times be subject to the claims of general unsecured creditors of Belo and the subsidiaries of Belo, and no Participant will at any time have a prior claim to such assets. To the extent that Plan benefits are paid from any such trust, Belo and each Belo subsidiary will be relieved of all liability for such Plan benefits. 14. ADMINISTRATION OF THE PLAN. (a) The Committee will administer the Plan and will have the full authority and discretion to accomplish that purpose, including without limitation, the authority and discretion to (i) interpret the Plan and correct any defect, supply any omission or reconcile any inconsistency or ambiguity in the Plan in the manner and to the extent that the 8 Committee deems desirable to carry the purpose of the Plan, (ii) resolve all questions relating to the eligibility of employees to become Participants, (iii) determine the amount of benefits payable to Participants and authorize and direct Belo with respect to the payment of benefits under the Plan, (iv) make all other determinations and resolve all questions of fact necessary or advisable for the administration of the Plan, and (v) make, amend and rescind such rules as it deems necessary for the proper administration of the Plan. The Committee will keep a written record of its action and proceedings regarding the Plan and all dates, records and documents relating to its administration of the Plan. The Committee may, from time to time, delegate to one or more of its members and to any other persons any of its rights, duties and responsibilities with respect to the administration of the Plan and may terminate any such delegation upon such notice as the Committee determines to be appropriate. (b) In determining the amount of a Participant's Target Benefit under the Plan, the Committee will adopt, with the advice of actuaries or such other consultants as it may select, such assumptions as in its sole discretion it determines to be necessary, desirable or appropriate as to interest rates, mortality, rates of inflation, increases in Participant compensation and any other matter that the Committee deems relevant in making the calculations required under the Plan. The Committee may revise any such assumptions from time to time to the extent that the Committee deems necessary, desirable or appropriate, and any such revised assumptions will be taken into account in determining the amount of future contribution credits required to provide a Participant's Plan benefit. The Committee's determinations made under Sections 4, 5, 6 and 7 will be binding and conclusive on Belo and on each Participant (c) Any action taken or determination made by the Committee will, except as otherwise provided in Section 15 below, be conclusive on all parties. No member of the Committee will vote on any matter relating specifically to such member. In the event that a majority of the members of the Committee will be specifically affected by any action proposed to be taken (as opposed to being affected in the same manner as each other Participant in the Plan), such action will be taken by the Board of Directors. 15. CLAIMS PROCEDURE. (a) If a Participant does not receive the benefits which he believes he is entitled to receive under the Plan, he may file a claim for benefits with the Committee. All claims will be made in writing and will be signed by the claimant. If the claimant does not furnish sufficient information to determine the validity of the claim, the Committee will indicate to the claimant any additional information which is required. (b) Each claim will be approved or disapproved by the Committee within 90 days following the receipt of the information necessary to process the claim. In the event the Committee denies a claim for benefits in whole or in part, the Committee will notify the claimant in writing of the denial of the claim. Such notice by the Committee will also set forth, in a manner calculated to be understood by the claimant, the specific reason for such denial, the specific Plan provisions on which the denial is based, a description of any additional material or information necessary to perfect the claim with an explanation of why such material or information is necessary, and an explanation of the Plan's claim review procedure as set forth below. If no action is taken by the Committee on a claim within 90 days, the claim will be deemed to be denied for purposes of the review procedure. 9 (c) A claimant may appeal a denial of his claim by requesting a review of the decision by the Committee or a person designated by the Committee. An appeal must be submitted in writing within six months after the denial and must (i) request a review of the claim for benefits under the Plan, (ii) set forth all of the grounds upon which the claimant's request for review is based and any facts in support thereof, and (iii) set forth any issues or comments which the claimant deems pertinent to the appeal. The Committee or the named fiduciary designated by the Committee will make a full and fair review of each appeal and any written materials submitted in connection with the appeal. The Committee or the named fiduciary designated by the Committee will act upon each appeal within 60 days after receipt thereof unless special circumstances require an extension of the time for processing, in which case a decision will be rendered as soon as possible but not later than 120 days after the appeal is received. The claimant will be given the opportunity to review pertinent documents or materials upon submission of a written request to the Committee or named fiduciary, provided the Committee or named fiduciary finds the requested documents or materials are pertinent to the appeal. On the basis of its review, the Committee or named fiduciary will make an independent determination of the claimant's eligibility for benefits under the Plan. The decision of the Committee or named fiduciary on any claim for benefits will be final and conclusive upon all parties thereto. In the event the Committee or named fiduciary denies an appeal in whole or in part, it will give written notice of the decision to the claimant, which notice will set forth in a manner calculated to be understood by the claimant the specific reasons for such denial and which will make specific reference to the pertinent Plan provisions on which the decision was based. 16. MISCELLANEOUS. (a) Nothing in the Plan will confer upon a Participant the right to continue in the employ of Belo or any Belo subsidiary or will limit or restrict the right of Belo or any Belo subsidiary to terminate the employment of a Participant at any time with or without cause. (b) Except as otherwise provided in the Plan, no right or benefit under the Plan will be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge such right or benefit will be void. No such right or benefit will in any manner be subject to the debts, liabilities or torts of a Participant. (c) The Plan may be amended at any time by the Committee provided such amendment does not have the effect of increasing, directly or indirectly, the benefit of any Participant. The Plan may also be amended or terminated by the Board of Directors at any time. No action taken by the Committee or by the Board of Directors to amend or terminate the Plan will have the effect of decreasing a Participant's account balance as of the date of such action. (d) The Plan is intended to provide benefits for "management or highly compensated" employees within the meaning of Sections 201, 301 and 401 of ERISA, and therefore to be exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA. Accordingly, the Plan will terminate and no further benefits will accrue hereunder in the event it is determined by a court of competent jurisdiction or by an opinion of counsel that the Plan constitutes an employee pension benefit plan within the meaning of Section 3(2) of ERISA, which is not so 10 exempt. In addition, in the absolute discretion of the Committee, the benefit of each Participant accrued under such balance of the Plan on the date of termination will be paid immediately to such Participant in a single lump sum cash payment. (e) If any provision in the Plan is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions will nevertheless continue in full force and effect without being impaired or invalidated in any way. (f) THE PLAN WILL BE CONSTRUED AND GOVERNED IN ALL RESPECTS IN ACCORDANCE WITH APPLICABLE FEDERAL LAW AND, TO THE EXTENT NOT PREEMPTED BY SUCH FEDERAL LAW, IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, INCLUDING WITHOUT LIMITATION, THE TEXAS STATUTE OF LIMITATIONS, BUT WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS OF SUCH STATE. Executed at Dallas, Texas, this 16th day of December, 1999. A. H. BELO CORPORATION By /s/ MARIAN SPITZBERG -------------------------------- Name: Marian Spitzberg -------------------------- Title: Secretary ------------------------- EX-12 16 RATIO OF EARNINGS TO FIXED CHARGES 1 EXHIBIT 12 A. H. Belo Corporation Computation of Ratio of Earnings to Fixed Charges (Dollars in thousands)
Year Ended December 31, ---------------------------------------------------------------------- 1995 1996 1997 1998 1999 ---------- ---------- ---------- ---------- ---------- Earnings: Earnings before income taxes and the cumulative effect of accounting changes $ 111,014 $ 144,040 $ 154,122 $ 130,460 $ 276,453 Add: Total fixed charges 32,089 29,009 94,069 112,082 116,032 Less: Interest capitalized 957 255 510 1,680 2,552 ---------- ---------- ---------- ---------- ---------- Adjusted earnings $ 142,146 $ 172,794 $ 247,681 $ 240,862 $ 389,933 ========== ========== ========== ========== ========== Fixed Charges: Interest $ 30,944 $ 27,898 $ 91,288 $ 109,318 $ 113,160 Portion of rental expense representative of the interest factor (1) 1,145 1,111 2,781 2,764 2,872 ---------- ---------- ---------- ---------- ---------- Total fixed charges $ 32,089 $ 29,009 $ 94,069 $ 112,082 $ 116,032 ========== ========== ========== ========== ========== Ratio of Earnings to Fixed Charges 4.43x 5.96x 2.63x 2.15x 3.36x ========== ========== ========== ========== ==========
- --------------------------------------- (1) For purposes of calculating fixed charges, an interest factor of one third was applied to total rent expense for the period indicated. EX-13 17 PORTIONS OF 1999 ANNUAL REPORT YEAR END 12/31/99 1 EXHIBIT 13 PORTIONS OF THE COMPANY'S 1999 ANNUAL REPORT TO SHAREHOLDERS 2 MARKET DATA The following table lists the high and low trading prices and the closing prices for Series A Common Stock as reported on the New York Stock Exchange for each of the quarterly periods in the last two years.
- ------------------------------------------------------------------------------------------------------------ HIGH LOW CLOSE DIVIDENDS - ------------------------------------------------------------------------------------------------------------ > 1999 Fourth Quarter $20 3/4 $17 5/8 $19 1/16 $.07 Third Quarter $20 5/8 $18 1/16 $19 1/8 $.07 Second Quarter $24 1/2 $17 1/2 $19 11/16 $.06 First Quarter $19 15/16 $16 3/8 $18 1/4 $.06 - ------------------------------------------------------------------------------------------------------------ 1998 Fourth Quarter $19 15/16 $13 15/16 $19 15/16 $.06 Third Quarter $25 5/8 $18 3/8 $20 $.06 Second Quarter $27 3/4 $22 1/8 $24 3/8 $.06 First Quarter $28 15/32 $26 3/16 $27 1/2 $.06 - ------------------------------------------------------------------------------------------------------------
On February 29, 2000, the closing price for the Company's Series A Common Stock as reported on the New York Stock Exchange was $12.875. The approximate number of shareholders of record of the Series A and Series B Common Stock at the close of business on such date was 10,225 and 615, respectively. 1 3 SELECTED FINANCIAL DATA The following table presents selected financial data of the Company for each of the five years in the period ended December 31, 1999. For a more complete understanding of this selected financial data, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Consolidated Financial Statements" and "Notes to Consolidated Financial Statements." Certain prior year results have been reclassified to conform to current year presentation, including the reclassification of prior year data to reflect the results of the Interactive media segment.
- ------------------------------------------------------------------------------------------------------------------- In thousands, except per share amounts 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------- Broadcasting revenues (a) $ 598,637 $ 593,426 $ 522,560 $ 333,396 $ 322,642 Newspaper publishing revenues (b) 816,976 784,327 693,777 487,560 409,099 Interactive media revenues 6,520 3,214 718 --- --- Other revenues (c) 11,849 10,736 17,149 3,352 3,602 ------------ ------------ ------------ ------------ ------------ Net operating revenues $ 1,433,982 $ 1,391,703 $ 1,234,204 $ 824,308 $ 735,343 ============ ============ ============ ============ =========== Net earnings (d) $ 178,306 $ 64,902 $ 82,972 $ 87,505 $ 66,576 ============ ============ ============ ============ =========== Per share amounts: Basic earnings per share (d) $ 1.51 $ .53 $ .72 $ 1.07 $ .85 Diluted earnings per share (d) $ 1.50 $ .52 $ .71 $ 1.05 $ .84 Cash dividends paid $ .26 $ .24 $ .22 $ .21 $ .16 Segment data: Operating cash flow: (e) Broadcasting (f) $ 245,925 $ 238,743 $ 216,654 $ 122,837 $ 121,716 Newspaper publishing (g) $ 236,167 $ 210,351 $ 206,440 $ 127,945 $ 90,915 Interactive media $ (8,365) $ (2,687) $ (1,542) $ - $ - Other $ (4,990) $ (4,182) $ (7,672) $ (865) $ (3,941) Operating cash flow margins: Broadcasting (f) 41.1% 40.2% 41.5% 36.8% 37.7% Newspaper publishing (g) 28.9% 26.8% 29.8% 26.2% 22.2% Interactive media - - - - - Other - - - - - ------------ ------------ ------------ ------------ ------------ Total assets (a) (b) $ 3,976,264 $ 3,539,089 $3,622,954 $ 1,224,072 $ 1,154,022 Long-term debt (h) $ 1,849,490 $ 1,634,029 $1,614,045 $ 631,857 $ 557,400 ------------ ------------ ------------ ------------ ------------
(a) The Company purchased KIRO in February 1995, nine television stations as part of the PJC acquisition in February 1997, KENS in October 1997 and KTVK in November 1999. KMOV was acquired in exchange for KIRO in June 1997 and KVUE was acquired in June 1999 in exchange for KXTV. Belo also sold KASA and KHNL in October 1999. (b) The Company purchased The Eagle in December 1995, the Messenger-Inquirer in January 1996, The Providence Journal in February 1997, The Gleaner in March 1997, The Press-Enterprise in July 1997, and the Denton Record-Chronicle in June 1999. (c) "Other" includes revenues associated with the Company's cable news operations (beginning in March 1997), television production subsidiary and a programming distribution partnership. The Company sold its interest in the partnership in February 1996 and the operations of the television production subsidiary were terminated in December 1998. From March 1997 through June 1997, "Other" also included a cable network acquired in connection with the PJC acquisition. The cable network was subsequently disposed of and its operations are excluded effective July 1, 1997. (d) Net earnings in 1999 include the following after-tax gains for certain non-recurring transactions: 1) $49,060 (41 cents per share) non-cash gain on the exchange of KXTV for KVUE; 2) $16,348 (14 cents per share) gain on the sale of KASA and KHNL and 3) $28,489 (24 cents per share) gain on the sale of Belo's investment in Falcon Communications. (e) Operating cash flow is defined as segment earnings from operations plus depreciation and amortization. Operating cash flow is used in the broadcasting and publishing industries to analyze and compare companies on the basis of operating performance, leverage and liquidity. However, operating cash flow should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. (f) Broadcast operating cash flow in 1998 includes a non-recurring charge for a voluntary early retirement program and other employee reduction initiatives, totaling $6,996. (g) Newspaper publishing operating cash flow in 1998 includes certain voluntary early retirement charges of $6,344 and excludes a non-cash charge of $11,478 for the write-down of a press at TDMN. (h) Long-term debt increased in 1997 and 1999 due to net borrowings of $1,100,545 and $298,796, respectively, to finance various acquisitions and in 1998 due to the repurchase of 6,727,400 shares of the Company's stock for $129,786. 2 4 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company is an owner and operator of 16 television stations and publisher of seven daily newspapers. The following table sets forth the Company's major media assets by segment as of December 31, 1999:
- ---------------------------------------------------------------------------------------------------------------------------- Television Broadcasting - ---------------------------------------------------------------------------------------------------------------------------- Network Market Market Rank (a) Station Affiliation Status Acquired - ---------------------------------------------------------------------------------------------------------------------------- Dallas/Fort Worth 7 WFAA ABC Owned March 1950 Houston 11 KHOU CBS Owned February 1984 Seattle/Tacoma 12 KING NBC Owned February 1997 Seattle/Tacoma 12 KONG IND LMA(c) February 1997(c) Phoenix 17 KTVK IND Owned November 1999 Phoenix 17 KASW WB LMA(c) November 1999(c) St. Louis 21 KMOV CBS Owned June 1997 Portland 23 KGW NBC Owned February 1997 Charlotte 28 WCNC NBC Owned February 1997 San Antonio 37 KENS CBS Owned October 1997 New Orleans 41 WWL CBS Owned June 1994 Hampton/Norfolk 42 WVEC ABC Owned February 1984 Louisville 48 WHAS ABC Owned February 1997 Tulsa 58 KOTV CBS Owned February 1984 Austin 61 KVUE ABC Owned June 1999 Tucson 72 KMSB FOX Owned February 1997 Tucson 72 KTTU UPN LMA February 1997 Spokane 78 KREM CBS Owned February 1997 Spokane(b) 78 KSKN UPN/WB LMA February 1997 Boise 125 KTVB NBC Owned February 1997 - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- Newspaper Publishing - ---------------------------------------------------------------------------------------------------------------------------- Daily Sunday Newspaper Location Acquired Circulation(e) Circulation(e) - ---------------------------------------------------------------------------------------------------------------------------- The Dallas Morning News ("TDMN") Dallas, TX (d) 518,548 781,959 The Providence Journal ("PJ") Providence, RI February 1997 166,888 237,629 The Press-Enterprise ("PE") Riverside, CA July 1997 165,043 171,813 Messenger-Inquirer Owensboro, KY January 1996 31,764 34,574 The Eagle Bryan-College Station, TX December 1995 23,493 28,295 Denton Record-Chronicle Denton, TX June 1999 15,967 18,808 The Gleaner Henderson, KY March 1997 11,109 13,044 - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- Other - ---------------------------------------------------------------------------------------------------------------------------- Company Description - ---------------------------------------------------------------------------------------------------------------------------- Northwest Cable News ("NWCN") Cable news network offering regional news distributed to approximately 2 million homes in the Pacific Northwest Texas Cable News ("TXCN") Cable news network offering regional news in Texas beginning January 1, 1999 - ----------------------------------------------------------------------------------------------------------------------------
(a) Market rank is based on the relative size of the television market, or Designated Market Area ("DMA"), among the 210 generally recognized DMAs in the United States, based on November 1999 Nielsen estimates. (b) The primary affiliation is with UPN. The WB network is currently a secondary affiliation. (c) Belo acquired KONG-TV and KASW-TV on March 1, 2000 for $16,100 in cash. (d) The first issue of The Dallas Morning News was published by Belo on October 1, 1885. (e) Average paid circulation for the six months ended September 30, 1999, according to the Audit Bureau of Circulation's FAS-FAX report except for the Denton Record-Chronicle, for which circulation data is taken from the Certified Audit of Circulations Report for the twelve-month period ended December 31, 1999 (unaudited). The Company depends on advertising as its principal source of revenues. As a result, the Company's operations are sensitive to changes in the economy, particularly in the Dallas/Fort Worth metropolitan area, where its two largest properties are located. The Company also derives revenues, to a much lesser extent, from the daily sale of 3 5 newspapers and from compensation paid by networks to its television stations for broadcasting network programming. All references to earnings per share represent diluted earnings per share. Current and prior year results have been reclassified for the presentation of the Interactive media segment. Statements in "Management's Discussion and Analysis of Financial Position and Results of Operations" and "Market Risks" and elsewhere in this Annual Report to Shareholders concerning Belo's business outlook or future economic performance, anticipated profitability, revenues, expenses, capital expenditures or other financial items, and other statements that are not historical facts, are "forward-looking statements" as that term is defined under applicable Federal securities laws. Forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those statements. Such risks, uncertainties and factors include, but are not limited to, changes in advertising demand, interest rates and newsprint prices; technological changes; development of Internet commerce; industry cycles; changes in pricing or other actions by competitors and suppliers; regulatory changes; the effects of Company acquisitions and dispositions; and general economic conditions, as well as other risks detailed in Belo's filings with the Securities and Exchange Commission ("SEC"), and elsewhere in this Annual Report to Shareholders. RESULTS OF OPERATIONS (dollars in thousands, except per share amounts) 1999 COMPARED WITH 1998 Results for 1999 include the effect of the following acquisitions and dispositions: The exchange of KXTV (ABC) in Sacramento, California for KVUE-TV(ABC) in Austin, Texas, effective June 1, 1999; the purchase of Denton Publishing Company, publisher of the Denton Record-Chronicle on June 30, 1999; the sale of stations KASA-TV (FOX) in Albuquerque, New Mexico and KHNL-TV (NBC) in Honolulu, Hawaii along with rights to operate KFVE-TV, also in Honolulu, under a local marketing agreement ("LMA"), effective October 29, 1999; and the purchase of KTVK-TV (IND) in Phoenix, Arizona along with rights to operate KASW-TV (WB) under an LMA, effective November 1, 1999. Consolidated Results of Operations Belo recorded net earnings of $178,306 or $1.50 per share in 1999 compared with net earnings of $64,902 or 52 cents per share in 1998. Net earnings in 1999 include a gain on the exchange of KXTV for KVUE of $50,312 ($49,060 net of taxes or 41 cents per share), a gain on the sale of KASA and KHNL of $20,448 ($16,348 net of taxes or 14 cents per share) and a $47,006 gain ($28,489 net of taxes or 24 cents per share) on the sale of its investment in Falcon Communications. Net non-recurring charges of $2,398 (2 cents per share) were also recorded in December 1999 for certain programming adjustments and early retirement charges. Net earnings in 1998 included non-recurring charges of $26,157 ($15,937 net of taxes or 13 cents per share), comprised of an $11,478 non-cash charge for the write-down of a press at The Dallas Morning News, separation costs of $14,229 associated with a voluntary early retirement program and other employee reduction initiatives and $450 for severance and asset disposal costs related to the termination of operations of Belo's programming subsidiary. Also in 1998, Belo realized a net gain of two cents per share related to the disposition of its investment in Peapod, Inc. stock. Excluding non-recurring items and transaction gains in 1999 and 1998, comparable earnings per share in 1999 and 1998 were 73 cents and 63 cents, respectively. Depreciation and amortization expense in 1999 was $168,961, compared with $159,442 in 1998, excluding the $11,478 press write-down. The increase in 1999 is due primarily to depreciation expense for 1998 capital additions and amortization expense due to the incremental increase in intangibles from current year acquisitions and dispositions. 4 6 Interest expense in 1999 was $110,608, an increase of 2.8 percent over 1998 expense of $107,638. The increase is due to higher debt levels in 1999 as a result of acquisitions and share repurchases in the second half of 1998, slightly offset by the effect of weighted average interest rates that were slightly lower in 1999 compared with 1998. The effective tax rate in 1999 was 35.5 percent, compared with 50.3 percent in 1998. The rate in 1998 was effected by lower pre-tax earnings and higher state tax rates while the 1999 effective rate was lower due to non-taxable gains on like-kind exchanges. Excluding the effect of these transactions, the 1999 effective rate would have been 45.1 percent. Segment Results of Operations
- ------------------------------------------------------------------------------------------------------------------- As Adjusted As Reported ---------------------------------- --------------------------------- % % Year ended December 31, 1999 1998 Change 1999 1998 Change - ------------------------------------------------------------------------------------------------------------------- Net Operating Revenues: Broadcasting $637,293 $627,010 1.6% $598,637 $593,426 0.9% Newspaper publishing 822,655 795,623 3.4% 816,976 784,327 4.2% Interactive media 7,289 3,823 90.7% 6,520 3,214 102.9% Other 11,849 10,736 10.4% 11,849 10,736 10.4% Operating Cash Flow: Broadcasting $257,111 $250,796 2.5% $245,925 $238,743 3.0% Newspaper publishing(1) 236,543 211,219 12.0% 236,167 210,351 12.3% Interactive media (8,106) (2,575) (214.8)% (8,365) (2,687) (211.3)% Other (4,990) (4,182) (19.3)% (4,990) (4,182) (19.3)% - -------------------------------------------------------------------------------------------------------------------
(1) Both as reported and as adjusted operating cash flow for newspaper publishing in 1998 exclude the effect of the $11,478 non-cash charge to write down a press at TDMN. All references herein to segment operating cash flow refer to segment earnings from operations plus depreciation and amortization, as defined in "Selected Financial Data." Operating cash flow as defined should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. To enhance comparability of Belo's segment results of operations for the years ended December 31, 1999 and 1998, certain information above is presented on an "as adjusted" basis and takes into account the 1999 exchange of KXTV for KVUE, the acquisitions of the Denton Record-Chronicle and KTVK and the disposition of KASA and KHNL, as if each transaction had occurred at the beginning of 1998. The discussion that follows compares segment operations on an "as adjusted" basis only. BROADCAST DIVISION Broadcast revenues in 1999 were $637,293, an increase of $10,283 over 1998 broadcast revenues of $627,010. This improvement came despite more than $40,000 of political and Olympic related advertising revenues in 1998, which was an election year in many states, compared with $10,550 in political advertising revenues in 1999. Revenues improved most significantly in the Dallas/Fort Worth, Seattle/Tacoma, Phoenix, Charlotte and Austin markets, primarily in the automotive and .com advertising categories. Revenues declined in Houston, St. Louis, Portland, Hampton/Norfolk, Louisville and Spokane due primarily to political advertising losses compared with 1998. Excluding political revenues in 1999 and 1998, spot advertising revenues increased 6.1 percent in 1999 compared with 1998. Broadcast operating cash flow of $257,111 in 1999 was 2.5 percent better than operating cash flow of $250,796 in 1998. The 1999 broadcast operating cash flow margin was 40.3 percent, compared with 40 percent in 1998. Cash expenses in 1999 were up 1.1 percent over 1998 cash expenses. Excluding the effect of a $6,996 charge in 1998 for early retirement and other employee reduction initiatives and a $2,632 charge in 1999 for programming write downs, operating cash flow increased .8 percent, the operating cash flow margin was 40.8 percent and 41.1 percent in 1999 and 1998, respectively, and cash expenses increased 2.3 percent. Excluding the charges, salaries, wages and employee benefits costs in 1999 were flat compared with 1998 and other production, distribution and operating costs increased 3.8 percent primarily due to higher programming costs. Outside services and sales project expenses were also higher in 1999 than 1998, offset somewhat by savings in communications expense. 5 7 NEWSPAPER PUBLISHING DIVISION Newspaper publishing revenues of $822,655 for 1999 increased 3.4 percent over 1998 revenues of $795,623. Revenues increased at each of Belo's major market newspapers, including 1.8 percent at The Dallas Morning News, 4.9 percent at The Providence Journal and 10 percent at The Press-Enterprise. Advertising revenues comprised 85 percent of total newspaper publishing revenues in 1999, circulation revenues accounted for 12 percent and commercial printing contributed most of the remainder. Newspaper volume is measured in column inches. Volume for TDMN was as follows (in thousands):
- ---------------------------------------------------------------------------------------------- Year ended December 31, 1999 1998 % Change - ---------------------------------------------------------------------------------------------- Full-run ROP inches (1) Classified 1,931 1,989 (2.9)% Retail 1,351 1,376 (1.8)% General 340 304 11.8 % ------ ------ ------ Total 3,622 3,669 (1.3)% ------ ------ --------
(1) Full-run ROP inches refers to the number of column inches of display and classified advertising that is printed and distributed in all editions of the newspaper. TDMN classified advertising revenues declined 5.4 percent in 1999 compared with 1998 due to lower volumes in employment advertising, which has been down over the last 18 months due in part to low unemployment levels in the Dallas/Fort Worth metropolitan area. Real estate and automotive classified advertising volumes improved, partially offsetting the declines in the employment category. Retail advertising revenue at TDMN improved 3.3 percent overall, despite the 1.8 percent decline in full-run retail volume, due to higher average rates. Department store linage was flat in 1999 when compared with 1998 linage. General advertising revenues increased 24 percent as both average rates and volumes were higher in 1999 than in 1998. Circulation revenues at TDMN were up 1.6 percent over 1998 due to both slightly higher daily and Sunday circulation volumes, as well as the effect of a home delivery rate increase implemented at the end of 1998. Revenues in all major advertising categories at PJ were higher in 1999 compared with 1998, with classified up 5.7 percent, retail up 8.4 percent and general advertising up 7.1 percent. The classified advertising revenue increase was primarily due to higher rates, particularly in the employment and automotive categories. The retail advertising revenue increase was due to both higher average rates and increased linage from the amusements, automotive and department store categories. The increase in general advertising revenues in 1999 compared with 1998 was due to volume gains in the automotive, tobacco and travel categories offset somewhat by lower average rates. Circulation revenues at PJ were flat in 1999 compared with 1998. Total revenues at PE were up 10 percent in 1999 compared with 1998, led by substantial increases in classified and general advertising, which increased 11.3 percent and 12 percent, respectively. The increase in classified advertising was due to improved linage in employment, automotive and real estate combined with higher average rates. Higher general advertising revenue was due to increased linage in the automotive and telecommunications categories, offset somewhat by lower average rates. Retail advertising improved 1.5 percent in 1999 compared with 1998 and circulation revenues were higher by 3.4 percent due to increased volume for daily and Sunday deliveries. Newspaper operating cash flow for 1999 was $236,543, an increase of 12 percent compared with $211,219 in 1998. Operating cash flow margin was 28.8 percent in 1999 compared with 26.5 percent in 1998. Cash expenses in 1999 were up .3 percent over 1998. Excluding the effect of early retirement charges of $690 and $6,344 in the fourth quarters of 1999 and 1998, respectively, operating cash flow increased 9 percent, the operating cash flow margin improved from 27.3 percent to 28.8 percent and cash expenses increased 1.3 percent. Substantial savings in newsprint, ink and other supplies expense were realized in 1999 as the net average cost per metric ton of newsprint in 1999 was 14 percent lower than in 1998. Communications expense was also lower in 1999 compared with 1998. These savings were offset, however, by higher 1999 compensation and benefits expense, due to incentive bonuses and an increase in the number of employees, and higher outside services and advertising and promotion costs. 6 8 INTERACTIVE MEDIA Revenues in the interactive media segment, Belo Interactive ("BI"), for 1999 were $7,289 compared with $3,823 in 1998. BI's revenues in 1999 and 1998 were principally derived from advertising revenues on its various Web sites and fees generated from internet service provider subscriptions and data retrieval services. The revenue improvement is due to the increased focus placed on this newly emerging segment, particularly with the addition of a dedicated management team in mid-1999. The 1999 and 1998 cash flow deficits of $8,106 and $2,575, respectively, are the result of expenses exceeding revenues at the existing interactive operations and start-up spending at BI. BI is developing interactive businesses and alliances related to the Company's existing newspapers and television stations and creating distinct interactive products. OTHER Other revenues of $11,849 in 1999 were 10.4 percent higher than 1998 revenues of $10,736 due to an increase at Northwest Cable News and the start-up of Texas Cable News, which began broadcasting on January 1, 1999. The operating cash flow deficit in 1999 of $4,990 was primarily due to start-up efforts at TXCN, as NWCN produced near break-even results for the first time since it began operations in 1995. 1998 COMPARED WITH 1997 Results for 1998 include a full year's operations for each of the following 1997 acquisitions: The Providence Journal Company ("PJC"), acquired February 28, 1997, The Gleaner, acquired March 31, 1997, The Press-Enterprise, acquired July 25, 1997 and KENS, acquired October 15, 1997. Also in 1997, TVFN, a cable network acquired in connection with PJC, was disposed of as a part of the acquisition of KENS. In addition, KIRO was exchanged for KMOV effective June 2, 1997. Consolidated Results of Operations Belo recorded net earnings of $64,902 or 52 cents per share for 1998, compared with $82,972 or 71 cents per share in 1997. Results for 1998 include non-recurring charges of $26,157, comprised of an $11,478 non-cash charge for the write-down of a press at The Dallas Morning News, separation costs of $14,229 associated with a voluntary early retirement program and other employee reduction initiatives and $450 for severance and asset disposal costs related to the termination of operations of Belo's programming subsidiary. These charges resulted in a reduction in earnings per share of 13 cents in 1998. In addition, Belo realized a net gain of two cents per share related to the disposition of its investment in Peapod, Inc. stock, which was acquired in the PJC acquisition. Excluding these non-recurring items, earnings per share for 1998 were 63 cents compared with 71 cents for 1997. Depreciation and amortization expense for 1998 was $159,442, excluding the $11,478 write-down of a press at TDMN, compared with 1997 depreciation and amortization of $134,993. The increase in 1998 is due to a full year's effect of the 1997 acquisitions. Interest expense in 1998 was $107,638, compared with $90,778 in 1997. Average debt levels in 1998 were up 14.3 percent from 1997 average debt levels, due to a full year's effect of the debt incurred to finance 1997 acquisitions and 1998 share repurchases of $129,786. The 1998 weighted average interest rate on total debt was 6.7 percent, compared with 6.6 percent in 1997. This increase was due to the conversion of $1 billion of revolving debt to fixed-rate debt during the second and third quarters of 1997. The effective tax rate in 1998 was 50.3 percent compared with 46.2 percent in 1997. The increase for 1998 was due primarily to lower pre-tax earnings and a full year's effect of non-deductible goodwill amortization expense. Segment Results of Operations To enhance comparability of Belo's segment results of operations for the years ended December 31, 1998 and 1997, certain information below is presented on an "as adjusted" basis and takes into account the acquisitions of 7 9 PJC, The Gleaner, The Press-Enterprise and KENS and reflects the KIRO/KMOV exchange as though each had occurred at the beginning of 1997. The "as adjusted" amounts exclude TVFN, which was acquired from PJC but subsequently disposed of in connection with the KENS acquisition. Adjusted results for 1998 and 1997 exclude consideration of all 1999 acquisitions and dispositions; accordingly, the 1998 "As Adjusted" results in the table below differ from those reflected in the 1999 versus 1998 table shown previously.
- -------------------------------------------------------------------------------------------------------- As Adjusted As Reported --------------------------------- ------------------------------- % % Year ended December 31, 1998 1997 Change 1998 1997 Change - -------------------------------------------------------------------------------------------------------- Net Operating Revenues: Broadcasting $593,426 $566,211 4.8% $593,426 $522,560 13.6% Newspaper publishing 784,327 769,995 1.9% 784,327 693,777 13.1% Interactive media 3,214 718 347.6% 3,214 718 347.6% Other 10,736 9,185 16.9% 10,736 17,149 (37.4)% Operating Cash Flow: Broadcasting $238,743 $235,375 1.4% $238,743 $216,654 10.2% Newspaper publishing (1) 210,351 219,470 (4.2)% 210,351 206,440 1.9% Interactive media (2,687) (1,542) (74.3)% (2,687) (1,542) (74.3)% Other (4,182) (2,496) (67.5)% (4,182) (7,672) 45.5% -------- -------- ------ -------- -------- ------
(1) Both as reported and as adjusted operating cash flow for newspaper publishing in 1998 exclude the effect of the $11,478 non-cash charge to write down a press at TDMN. The discussion that follows compares segment operations on an "as adjusted" basis only. BROADCAST DIVISION Broadcast revenues in 1998 were $593,426, an increase of 4.8 percent over 1997 revenues of $566,211. Double-digit revenue increases were realized by several Belo television stations, including three stations in the top 25 markets (Sacramento, St. Louis and Portland). The majority of these revenue increases were attributable to political advertising revenues. Congressional and gubernatorial races in several states contributed to political advertising revenues of more than $36,000 in 1998, compared with 1997 political advertising revenues of just over $7,000. Local advertising revenues in 1998 increased by 1.8 percent over the prior year due to early gains in automotive advertising and broadcast of the Winter Olympics on Belo's six CBS stations. These gains were offset by lower national advertising revenues, which were down 3.8 percent compared with 1997. The decline was attributable to generally weak demand from national automobile advertisers during the General Motors strike. During 1998, Belo's Television Group included four ABC affiliates, five NBC affiliates and six CBS affiliates, with the top three stations by market rank each affiliated with a different network (ABC in Dallas/Fort Worth, CBS in Houston and NBC in Seattle/Tacoma). This balance contributes to more stable revenues despite variations in network ratings performance, caused by factors such as prime time programming preferences and special events like the Olympics and the Super Bowl. Revenue increases by affiliate group in 1998 compared with 1997 were as follows: ABC, 4.6 percent; NBC, 4.2 percent; and CBS, 4.7 percent. Broadcast operating cash flow increased 1.4 percent to $238,743 during 1998 compared with 1997 broadcast operating cash flow of $235,375. Broadcast operating cash flow margin of 40.2 percent was down from the 1997 margin of 41.6 percent. Excluding the effect of the fourth quarter 1998 charge for the voluntary early retirement program and other employee reduction initiatives totaling $6,996, operating cash flow was $245,739 and operating cash flow margin was 41.4 percent. Total cash expenses increased 7.2 percent in 1998, including the fourth quarter non-recurring charge. Excluding this charge, total cash expenses were up 5.1 percent, led by an increase in employee costs of 6 percent due to an increased number of employees (primarily in sales), normal merit adjustments, overtime and higher benefit costs. Programming expenses were higher in 1998 by nearly 10 percent as programming content was improved at some of Belo's recently acquired stations. Other expenses were relatively flat when compared with 1997 as higher costs related to Olympic coverage were substantially offset by lower expenditures for advertising and promotion. 8 10 NEWSPAPER PUBLISHING DIVISION Newspaper publishing revenues of $784,327 increased 1.9 percent in 1998 compared with 1997 revenues of $769,995. Revenues increased at all of Belo's newspapers, including .4 percent at The Dallas Morning News, 4.2 percent at The Providence Journal and 6.4 percent at The Press-Enterprise. Advertising revenues comprised 85 percent of total 1998 newspaper publishing revenues, circulation revenues accounted for 12 percent, and commercial printing contributed most of the remainder. Newspaper volume is measured in column inches. Volume for TDMN was as follows (in thousands):
Year ended December 31, 1998 1997 % Change - ---------------------------------------------------------------- Full-run ROP inches (1) Classified 1,989 2,053 (3.1)% Retail 1,376 1,485 (7.3)% General 304 327 (7.0)% ------ ------ Total 3,669 3,865 (5.1)%
(1) Full-run ROP inches refers to the number of column inches of display and classified advertising that is printed and distributed in all editions of the newspaper. While full-run ROP advertising linage decreased in all three major categories at TDMN in 1998 versus 1997, the newspaper instituted rate increases in all categories effective January 1, 1998. These rate increases ranged from 5 percent to 12.75 percent. The decline in classified advertising volume was primarily in the classified employment category. In 1997, TDMN had a year of record performance and classified employment linage reached a five-year high. However, low unemployment levels in North Texas contributed to an 11.1 percent decline in employment classified advertising volume during 1998. Despite the decline in employment classified volume, higher average rates and increased linage in the automotive and real estate categories contributed to an overall year-to-year increase in total classified advertising revenues. Retail volumes declined 7.3 percent while average rates increased 3.9 percent, resulting in a 3.8 percent decrease in retail revenue in 1998 versus 1997. The decrease in retail advertising was primarily due to a decline in department store linage. General advertising revenues were down 8.2 percent due to a volume decline of 7 percent and lower average rates. Circulation revenues were lower by 5 percent due to declines in both daily and Sunday volumes of 1 percent and 1.5 percent, respectively, and higher contractor rates. Revenues for PJ were higher in 1998 versus 1997 due to gains in both retail and classified advertising. Higher rates contributed the majority of the increase in retail advertising revenue, with average rates during 1998 up 6.1 percent over the prior year. The 1998 classified advertising gain over the previous year was largely due to higher rates as volume gains in classified employment were offset by lower linage in automotive, rentals and merchandise classified advertising. General advertising volumes were down at PJ, primarily due to a decline in airline advertising. Circulation revenues were down .9 percent due to declines in daily and Sunday volume of 1.5 percent and 1.4 percent, respectively. Advertising revenue at PE increased 7.5 percent in 1998 compared with 1997, due primarily to increases in classified advertising, which improved 15.8 percent. Classified volumes were up 3.5 percent, most significantly in employment advertising, and average rates were better by 3.9 percent. Advertising revenue improvement was also the result of the expansion of PE's total market coverage program and an increase in preprints. Circulation revenues for PE in 1998 were unchanged relative to 1997 as increased volume in daily circulation was offset by decreased Sunday circulation. Newspaper publishing operating cash flow for 1998 was $210,351, a decrease of 4.2 percent when compared with $219,470 in 1997. Operating cash flow margin was 26.8 percent in 1998 compared to 28.5 percent in 1997. Excluding the effect of a $6,344 non-recurring charge for early retirement costs in the fourth quarter, newspaper publishing operating cash flow for 1998 was $216,695 and the margin was 27.6 percent. Total cash expenses for the publishing segment were up $23,451 or 4.3 percent in 1998 compared with 1997, including the fourth quarter charge. Excluding the charge, cash expenses increased 3.1 percent. The largest contributing factor to the increase was newsprint, ink and other supplies expense, which was up 5.8 percent over 1997 as a result of higher newsprint prices. Employee costs for the publishing segment during 1998, excluding the early retirement charge, increased 2.6 9 11 percent over the prior year. Other production, distribution and operating costs were 3.4 percent higher in 1998, due to higher distribution costs and advertising and promotion efforts. INTERACTIVE MEDIA Interactive media revenues improved from 1997 to 1998 due to the addition of more interactive media products and services in 1998. Operating cash losses increased from 1997 to 1998 as start-up efforts resulted in incrementally more cash expenses than revenues. OTHER Other revenues in 1998 and 1997 included Belo's regional cable news operation and a programming subsidiary. The improvement in 1998 was due to increased revenues at Northwest Cable News, offset somewhat by slightly lower revenues at the programming subsidiary. Other operating cash flow declined due to start-up costs associated with Texas Cable News, a regional cable news operation that was launched on January 1, 1999. Other operating cash flow in 1998 also included a $450 non-recurring charge for severance and asset disposition costs related to the termination of operations of the programming subsidiary. LIQUIDITY AND CAPITAL RESOURCES (dollars in thousands, except per share amounts) Net cash provided by operations, bank borrowings and term debt are Belo's primary sources of liquidity. On an as reported basis, 1999 net cash provided by operations was $220,814, compared with $234,872 in 1998. The timing of accounts receivable collections and payment of taxes in 1999 contributed to the decrease in cash provided by operations. Net cash provided by operations was sufficient to fund capital expenditures, share repurchases and common stock dividends. Total debt increased $218,918 from December 31, 1998 due mainly to net borrowings of $298,796 to complete acquisitions, partially offset by reductions in debt from cash provided by operations. At December 31, 1999, Belo had $1 billion in fixed-rate debt securities as follows: $250,000 of 6-7/8% Senior Notes due 2002; $300,000 of 7-1/8% Senior Notes due 2007; $200,000 of 7-3/4% Senior Debentures due 2027; and $250,000 of 7-1/4% Senior Debentures due 2027. The weighted average effective interest rate for these debt instruments is 7.3 percent. Belo also has $500,000 of additional debt securities available for issuance under a shelf registration statement filed in April 1997. Future issues of debt may be used to refinance variable-rate debt in whole or in part or for other corporate needs as determined by management. At December 31, 1999, Belo had a $1 billion variable-rate revolving credit agreement with a syndicate of 24 banks under which borrowings were $830,000. Borrowings under the agreement mature upon expiration of the agreement on August 29, 2002, with one year extensions possible through August 29, 2004, at the request of Belo and with the consent of the participating banks. Belo also had $12,900 of short-term unsecured notes outstanding at December 31, 1999. These borrowings may be converted at Belo's option to revolving debt. Accordingly, such borrowings are classified as long-term in Belo's financial statements. Available borrowings under Belo's revolving credit agreement at December 31, 1999 was $170,000. Belo is required to maintain certain financial ratios as of the end of each quarter, as defined in its revolving credit agreement. For the four quarters ended December 31, 1999, Belo's ratio of funded debt to pro forma operating cash flow, which is not to exceed 5.0, was 4.1. Belo's interest coverage ratio for the four quarters ended December 31, 1999 was 4.1 times, compared with a minimum coverage requirement of 2.5 times. In June 1999, Belo acquired KVUE-TV (ABC) in Austin, Texas in an exchange for KXTV (ABC) in Sacramento, California and $55,000 in cash. On October 29, 1999, Belo sold television stations KASA-TV (FOX) in Albuquerque, New Mexico and KHNL-TV (NBC) in Honolulu, Hawaii for approximately $88,000. On November 1, 1999, Belo acquired KTVK-TV (IND) in Phoenix, Arizona, along with rights to operate KASW-TV (WB), also in Phoenix, under a local marketing agreement for $315,000 in cash. On November 15, 1999, Belo sold its investment in Falcon Communications, a cable system operator, for estimated proceeds of approximately $69,000. Estimated taxes due on this transaction of approximately $36,500 will be paid in the first quarter of 2000. 10 12 During 1999, Belo purchased 1,187,300 treasury shares for an aggregate cost of $21,793. These purchases were funded primarily through cash from operations. All treasury shares purchased during 1999 have been retired. Remaining authorization for the repurchase of shares as of December 31, 1999 was 2,759,044 shares. During 1999, Belo paid dividends of $30,772 or 26 cents per share on Series A and Series B Common Stock outstanding, compared with $29,694 or 24 cents per share during 1998. Total capital expenditures for 1999 were $92,386. Belo's television stations spent $40,859, primarily on new broadcast equipment, including $16,852 for equipment to be used in the transmission of digital television ("DTV"). Newspaper publishing capital expenditures of $40,036 included a $15,220 installment payment for a new press at TDMN, and amounts for certain equipment and system replacements. Capital spending in 2000 is expected to be approximately $115,000 and includes $18,500 for additional DTV expenditures and $21,000 to complete the installation of the new press at TDMN. The $115,000 also includes approximately $14,000 for system initiatives and other equipment at Belo Interactive. As of December 31, 1999, required future payments for capital projects in 2000 were $29,025. Belo expects to finance future capital expenditures using cash generated from operations and, when necessary, borrowings under the revolving credit agreement. During 1999, Belo Interactive made investments in certain companies that provide solutions for strategy implementation. Investments in these companies of approximately $20,000 were funded during 1999 and $8,000 was funded in February 2000. Belo expects to make additional strategic Internet investments during 2000. In addition, as BI continues in the start-up phase, its estimated 2000 operating cash flow deficit is expected to be approximately $15,000. During 1999, Belo acquired a 12.38 percent interest in the limited partnership that owns the Dallas Mavericks basketball team, along with a 6.19 percent non-voting interest in the entity that owns the arena that will become home to the Mavericks and the Dallas Stars hockey team. The total investment made in these interests in 1999 was approximately $24,500. The Company believes its current financial condition and credit relationships are adequate to fund both its current obligations as well as near-term growth. OTHER MATTERS On March 1, 2000, Belo acquired KONG-TV in Seattle/Tacoma, Washington and KASW-TV in Phoenix, Arizona for $16,100 in cash. Both stations were previously operated by Belo under local marketing agreements. YEAR 2000 In 1997, Belo began a program involving an enterprise-wide evaluation to assess the ability of its information technology ("IT") and non-IT systems to function properly and execute transactions relating to the year 2000. Belo completed its Year 2000 program on a timely basis and experienced no significant disruption to its operations as a result of internal or external system failures. MARKET RISKS The market risk inherent in Belo's financial instruments represents the potential loss arising from adverse changes in interest rates. Belo's strategy in managing its exposure to interest rate changes is to maintain a balance of fixed and variable-rate debt instruments. See Note 4 to the Consolidated Financial Statements for information concerning the contractual interest rates of Belo's debt. At December 31, 1999 and 1998, the fair value of Belo's fixed-rate debt was estimated to be $948,435 and $1,035,965, respectively, using quoted market prices and yields obtained through independent pricing sources, taking into consideration the underlying terms of the debt, such as the coupon rate and term to maturity. The carrying value of fixed-rate debt at December 31, 1999 and 1998 was $1,000,000. Various financial instruments issued by Belo are sensitive to changes in interest rates. Interest rate changes would result in gains or losses in the market value of Belo's fixed-rate debt due to differences between the current 11 13 market interest rates and the rates governing these instruments. With respect to Belo's fixed-rate debt outstanding at December 31, 1999 and 1998, a 10 percent decline in interest rates would have resulted in no material effect on Belo's consolidated financial position, results of operations or cash flows. With respect to the floating-rate debt at December 31, 1999 and 1998, a 10 percent increase in interest rates would result in annual changes in Belo's pre-tax earnings and cash flows of $5,530 and $3,492, respectively. In addition to interest rate risk, Belo has exposure to changes in the price of newsprint. The average price of newsprint is expected to be higher in 2000 than in 1999, although future prices for newsprint cannot be predicted with certainty. Belo believes the newsprint environment for 2000, giving consideration to both cost and supply, to be manageable through existing relationships and sources. Belo has investments in other businesses, including those related to its Interactive media segment. The risk of market changes in the fair value of these investments is mitigated primarily by the diversity of such investments. A 10 percent change in market price of these investments would result in a change in fair value of approximately $4,200. 12 14 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders Belo We have audited the accompanying consolidated balance sheets of Belo and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of earnings, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Belo and subsidiaries at December 31, 1999 and 1998, and the consolidated results of their operations and cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. /s/ ERNST & YOUNG LLP Dallas, Texas January 31, 2000 13 15 CONSOLIDATED STATEMENTS OF EARNINGS
Years ended December 31, - ------------------------------------------------------------------------------------------------------------------ In thousands, except per share amounts 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------ NET OPERATING REVENUES (Note 3) Broadcasting $ 598,637 $ 593,426 $ 522,560 Newspaper publishing 816,976 784,327 693,777 Interactive media 6,520 3,214 718 Other 11,849 10,736 17,149 ------------ ------------- ----------- Total net operating revenues 1,433,982 1,391,703 1,234,204 ------------ ------------- ----------- OPERATING COSTS AND EXPENSES Salaries, wages and employee benefits (Notes 6 and 7) 482,256 455,526 391,726 Other production, distribution and operating costs (Note 8) 356,717 343,582 314,542 Newsprint, ink and other supplies 161,553 173,911 152,141 Depreciation 91,819 84,578 73,089 Amortization (Note 3) 77,142 74,864 61,904 Non-recurring charges (Note 2) --- 26,157 --- ------------ ------------- ----------- Total operating costs and expenses 1,169,487 1,158,618 993,402 ------------ ------------- ----------- Earnings from operations 264,495 233,085 240,802 ------------ ------------- ----------- OTHER INCOME AND EXPENSE Interest expense (Note 4) (110,608) (107,638) (90,778) Gains on the sale of subsidiaries and investments (Notes 3 and 10) 117,766 -- -- Other, net (Note 10) 4,800 5,013 4,098 ------------ ------------- ----------- Total other income and expense 11,958 (102,625) (86,680) ------------ ------------- ----------- EARNINGS Earnings before income taxes 276,453 130,460 154,122 Income taxes (Note 5) 98,147 65,558 71,150 ------------ ------------- ----------- Net earnings (Note 12) $ 178,306 $ 64,902 $ 82,972 ============ ============= ============= Net earnings per share (Note 11): Basic $ 1.51 $ .53 $ .72 Diluted $ 1.50 $ .52 $ .71 Weighted average shares outstanding (Note 11): Basic 118,322 123,508 115,692 Diluted 119,177 124,836 117,122 Dividends per share $ .26 $ .24 $ .22 ------------ ------------- -----------
See accompanying Notes to Consolidated Financial Statements. 14 16 CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------------------------------- ASSETS December 31, In thousands 1999 1998 - -------------------------------------------------------------------------------------------------------- Current assets: Cash and temporary cash investments $ 45,593 $ 19,451 Accounts receivable (net of allowance of $6,881 and $7,823 at December 31, 1999 and 1998, respectively) 245,949 211,428 Inventories 23,539 20,308 Deferred income taxes (Note 5) 13,288 11,742 Other current assets 23,589 12,852 ----------- ---------- Total current assets 351,958 275,781 ----------- ---------- Property, plant and equipment, at cost: Land 78,090 72,904 Buildings and improvements 280,244 266,426 Broadcast equipment 303,447 263,553 Newspaper publishing equipment (Note 2) 255,182 246,467 Other 176,985 144,236 Advance payments on plant and equipment expenditures (Note 8) 53,044 61,921 ----------- ---------- Total property, plant and equipment 1,146,992 1,055,507 Less accumulated depreciation 491,990 428,754 ----------- ---------- Property, plant and equipment, net 655,002 626,753 Intangible assets, net (Note 3) 2,853,192 2,543,143 Other assets (Note 6) 116,112 93,412 ----------- ---------- Total assets $ 3,976,264 $ 3,539,089 ----------- ----------
15 17 CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND SHAREHOLDERS' EQUITY December 31, - ------------------------------------------------------------------------------------------------------------------ In thousands, except share and per share amounts 1999 1998 - ------------------------------------------------------------------------------------------------------------------ Current liabilities: Accounts payable $ 69,891 $ 56,044 Accrued compensation and benefits 58,929 58,861 Other accrued expenses 50,395 32,485 Income taxes payable (Note 5) 45,038 -- Advance subscription payments 20,202 21,538 Accrued interest payable 15,383 11,820 ----------- ----------- Total current liabilities 259,838 180,748 Long-term debt (Note 4) 1,849,490 1,634,029 Deferred income taxes (Note 5) 422,465 439,240 Other liabilities 54,634 36,972 Commitments and contingent liabilities (Note 8) Shareholders' equity (Note 9): Preferred stock, $1.00 par value. Authorized 5,000,000 shares; none issued. Common stock, $1.67 par value. Authorized 450,000,000 shares Series A: Issued 99,515,495 and 100,028,891 shares at December 31, 1999 and 1998, respectively; 166,191 167,048 Series B: Issued 19,142,616 and 18,896,263 shares at December 31, 1999 and 1998, respectively. 31,968 31,557 Additional paid-in capital 885,522 879,856 Retained earnings 306,156 169,639 ----------- ----------- Total shareholders' equity 1,389,837 1,248,100 ----------- ----------- Total liabilities and shareholders' equity $ 3,976,264 $3,539,089 ----------- -----------
See accompanying Notes to Consolidated Financial Statements. 16 18 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------------------- Dollars in thousands - ----------------------------------------------------------------------------------------------------------------- COMMON STOCK Additional Shares Shares Paid-in Retained Series A Series B Amount Capital Earnings - ----------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1996 35,404,850 9,177,133 $ 74,452 $ 302,737 $ 301,316 Exercise of stock options 416,446 110,239 880 11,046 Stock issued in acquisition of PJC 25,394,564 42,409 827,990 Restricted shares 672 Tax benefit from long- term incentive plan 4,560 Employer's matching contribution to Savings and Investment Plan 100,055 167 4,005 Unrealized holding gains on available-for-sale securities, net of tax Reclassification of unrealized gains subsequently recognized in net earnings Retirement of treasury stock (8,321,700) (13,897) (135,665) (156,584) Net earnings 82,972 Cash dividends (24,428) Conversion of Series B to Series A 104,426 (104,426) ----------- ---------- --------- ---------- --------- BALANCE AT DECEMBER 31, 1997 52,998,586 9,283,001 $ 104,011 $1,015,345 $ 203,276 Exercise of stock options 298,185 169,557 781 8,173 Change in valuation of incentive plans 392 Restricted shares (18,540) (31) (528) Tax benefit from long- term incentive plan 3,900 Employer's matching contribution to Savings and Investment Plan 267,824 447 6,912 Reclassification of unrealized gains subsequently recognized in net earnings Purchases and subsequent retirement of treasury stock (6,727,400) (11,235) (49,706) (68,845) Two-for-one stock split 53,306,307 9,347,634 104,632 (104,632) Net earnings 64,902 Cash dividends (29,694) Conversion of Series B to Series A 171,753 (171,753) ----------- ---------- --------- ---------- --------- BALANCE AT DECEMBER 31, 1998 100,028,891 18,896,263 $ 198,605 $ 879,856 $ 169,639 Exercise of stock options 391,430 121,800 857 5,620 Change in valuation of incentive plans 166 Tax benefit from long- term incentive plan 1,466 Employer's matching contribution to Savings and Investment Plan 407,027 680 7,207 Purchases and subsequent retirement of treasury stock (1,187,300) (1,983) (8,793) (11,017) Net earnings 178,306 Cash dividends (30,772) Conversion of Series B to Series A 282,474 (282,474) ----------- ---------- --------- ---------- --------- BALANCE AT DECEMBER 31, 1999 99,515,495 19,142,616 $ 198,159 $ 885,522 $ 306,156 - ----------------------------------------------------------------------------------------------------------- Dollars in thousands Three years ended December 31, 1999 - ----------------------------------------------------------------------------------------------------------- TREASURY STOCK Accumulated Deferred Other Compensation- Comprehensive Shares Restricted Income Series A Amount Shares Total - ----------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1996 $ -- (8,321,700) $(306,146) $(1,876) $ 370,483 Exercise of stock options 11,926 Stock issued in acquisition of PJC 870,399 Restricted shares 1,104 1,776 Tax benefit from long- term incentive plan 4,560 Employer's matching contribution to Savings and Investment Plan 4,172 Unrealized holding gains on available-for-sale securities, net of tax 6,505 6,505 Reclassification of unrealized gains subsequently recognized in net earnings (2,361) (2,361) Retirement of treasury stock 8,321,700 306,146 -- Net earnings 82,972 Cash dividends (24,428) Conversion of Series B to Series A -- ------- ---------- --------- ------- ---------- BALANCE AT DECEMBER 31, 1997 $ 4,144 -- $ -- $ (772) $1,326,004 Exercise of stock options 8,954 Change in valuation of incentive plans 392 Restricted shares 772 213 Tax benefit from long- term incentive plan 3,900 Employer's matching contribution to Savings and Investment Plan 7,359 Reclassification of unrealized gains subsequently recognized in net earnings (4,144) (4,144) Purchases and subsequent retirement of treasury stock (129,786) Two-for-one stock split -- Net earnings 64,902 Cash dividends (29,694) Conversion of Series B to Series A - -- ------- ---------- --------- ------- ---------- BALANCE AT DECEMBER 31, 1998 $ -- -- $ -- $ -- $1,248,100 Exercise of stock options 6,477 Change in valuation of incentive plans 166 Tax benefit from long- term incentive plan 1,466 Employer's matching contribution to Savings and Investment Plan 7,887 Purchases and subsequent retirement of treasury stock (21,793) Net earnings 178,306 Cash dividends (30,772) Conversion of Series B to Series A -- ------- ---------- -------- ------- ---------- $ -- -- $ -- $ -- $1,389,837
See accompanying Notes to Consolidated Financial Statements. 17 19 CONSOLIDATED STATEMENTS OF CASH FLOWS
CASH PROVIDED (USED) Years ended December 31, - ------------------------------------------------------------------------------------------------------------------- In thousands 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------- OPERATIONS Net earnings $ 178,306 $ 64,902 $ 82,972 Adjustments to reconcile net earnings to net cash provided by operations: Net gain on sale of subsidiaries and investments (93,897) - - Depreciation and amortization 168,961 159,442 134,993 Deferred income taxes (10,817) 1,705 (4,198) Non-cash portion of non-recurring charges - 11,764 - Other non-cash expenses 16,107 12,303 7,950 Other, net (10,099) (2,037) 493 Net change in current assets and liabilities: Accounts receivable (30,928) 9,560 (21,244) Inventories and other current assets (8,191) 575 (3,859) Accounts payable 10,203 9,026 8,808 Accrued compensation and benefits (93) (10,782) 9,931 Other accrued liabilities (3,673) (4,080) 12,735 Income taxes payable 4,935 (17,506) 27,837 ---------- ---------- ----------- Net cash provided by operations 220,814 234,872 256,418 ---------- ---------- ----------- INVESTMENTS Capital expenditures (92,386) (102,927) (83,317) Acquisitions (386,528) - (946,259) Net proceeds from sale of subsidiaries and investments 155,266 7,995 3,045 Investments in interactive media (20,006) - - Other investments (24,456) - - Other, net 2,282 (4,999) 1,124 ---------- ---------- ----------- Net cash used for investments (365,828) (99,931) (1,025,407) ---------- ---------- ----------- FINANCING Net borrowings for acquisitions 298,796 - 1,100,545 Net proceeds from (payments on) revolving debt (81,552) 23,184 (1,111,025) Payments of dividends on stock (30,772) (29,694) (24,428) Net proceeds from exercise of stock options 6,477 8,954 11,926 Purchase of treasury stock (21,793) (129,786) - Refinancing of Providence Journal debt - - (200,000) Net proceeds from fixed-rate debt offerings - - 989,994 ---------- ---------- ----------- Net cash provided by (used for) financing 171,156 (127,342) 767,012 ---------- ---------- ----------- Net increase (decrease) in cash and temporary cash investments 26,142 7,599 (1,977) ---------- ---------- ----------- Cash and temporary cash investments at beginning of year 19,451 11,852 13,829 Cash and temporary cash investments at end of year $ 45,593 $ 19,451 $ 11,852 ---------- ---------- ----------- SUPPLEMENTAL DISCLOSURES (Note 13) - -------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements. 18 20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - -------------------------------------------------------------------------------- A) Principles of Consolidation The consolidated financial statements include the accounts of A. H. Belo Corporation (the "Company" or "Belo") and its wholly-owned subsidiaries after the elimination of all significant intercompany accounts and transactions. All dollar amounts are in thousands, except per share amounts, unless otherwise indicated. Certain amounts for prior years have been reclassified to conform to the current year presentation, including the reclassification of prior year data to reflect separate segment operations of the Interactive media segment and a change in presentation of revenue and expense with respect to certain programming transactions. B) Cash and Temporary Cash Investments Belo considers all highly liquid instruments purchased with a remaining maturity of three months or less to be temporary cash investments. Such temporary cash investments are classified as available-for-sale and are carried at fair value. C) Accounts Receivable Accounts receivable are net of a valuation reserve that represents an estimate of amounts considered uncollectible. Expense for such uncollectible amounts, which is included in other production, distribution and operating costs, was $7,131, $6,497 and $9,273 in 1999, 1998 and 1997, respectively. Accounts written off during 1999, 1998 and 1997 were $8,073, $6,988 and $9,988, respectively. D) Inventories Inventories, consisting primarily of newsprint, ink and other supplies used in printing newspapers, are stated at the lower of average cost or market value. E) Property, Plant and Equipment Depreciation of property, plant and equipment is provided principally on a straight-line basis over the estimated useful lives of the assets as follows:
--------------- ESTIMATED USEFUL LIVES --------------- Buildings and improvements 5-30 years Broadcast equipment 5-15 years Newspaper publishing equipment 5-20 years Other 3-10 years -------------
F) Intangible Assets, Net Intangible assets consists of excess cost over values assigned to tangible assets of purchased subsidiaries and is amortized primarily on a straight-line basis over 40 years. Accumulated amortization of intangible assets was $339,744 and $292,931 at December 31, 1999 and 1998, respectively. The carrying values of all intangible assets are periodically reviewed to determine whether impairment exists, and adjustments to net realizable value are made as needed. No such adjustments were required in any of the periods presented. G) Stock Options Stock options granted to employees and outside directors are accounted for using the intrinsic value of the options granted. Because it is Belo's policy to grant stock options at the market price on the date of the grant, the intrinsic value is zero, and therefore no compensation expense is recorded. H) Revenue Recognition Belo's primary sources of revenue are the sale of air time on its television stations, advertising space in published issues of its newspapers, and the sale of newspapers to distributors and individual subscribers. Broadcast revenue is recorded, net of agency commissions, when commercials are aired. Newspaper advertising revenue is recorded, net of agency commissions, when the advertisements are published in the newspaper. Proceeds from subscriptions are deferred and are included in revenue on a pro-rata basis over the term of the subscriptions. I) Advertising Expense The cost of advertising is expensed as incurred. Belo incurred $28,034, $25,858 and $25,557 in advertising and promotion costs during 1999, 1998 and 1997, respectively. 19 21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS J) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. NOTE 2: NON-RECURRING CHARGES - -------------------------------------------------------------------------------- Earnings from operations for 1998 include non-recurring charges of $26,157 comprised primarily of an $11,478 non-cash charge for the write-down of a press at The Dallas Morning News ("TDMN") and separation costs of $14,229 associated with 189 employees who accepted a voluntary early retirement offer and 31 employees who were terminated under other employee reduction initiatives. The workforce reduction initiatives were the result of the Company's ongoing review of its operations and organizational structure. The press write-down followed a decision by TDMN to replace one of its less productive presses with a new $36,000 WIFAG press that offers improved production capacity and greater flexibility. The write-down of the press resulted in a remaining estimated salvage value of $2,000, which was included in Other current assets in the Company's Balance Sheet as of December 31, 1998. The salvage value was based upon a third-party estimate of current market rates for used press equipment. The press write-down resulted in lower annual depreciation expense of approximately $900. The $14,229 charge for certain employee-related costs includes $12,449 of cash payments made as of December 31, 1998, $946 made in January 1999 and the remaining $834 to be paid in monthly installments through December 31, 2001, under contractual arrangements. NOTE 3: ACQUISITIONS AND DISPOSITIONS - -------------------------------------------------------------------------------- On June 1, 1999, Belo acquired ABC-affiliated KVUE-TV in Austin, Texas, in exchange for ABC-affiliated KXTV in Sacramento, California, and $55,000 in cash consideration. The transaction was accounted for as a purchase and recorded based on the fair value of the assets exchanged, resulting in a gain on the transaction of $50,312 ($49,060 net of taxes). The preliminary purchase price allocation resulted in a net increase in intangible assets of $108,110. The excess cost over values assigned to tangible assets of KVUE is being amortized on a straight-line basis over 40 years. On October 29, 1999, Belo completed the sale of KASA-TV in Albuquerque, New Mexico, and KHNL-TV in Honolulu, Hawaii, along with its rights to operate KFVE-TV in Honolulu under a local marketing agreement, for $88,000. A gain of $20,448 ($16,348 net of taxes) was recognized on the transaction. On November 1, 1999, Belo completed the acquisition of independent television station KTVK-TV in Phoenix, Arizona, along with the rights to operate WB-affiliated KASW-TV in Phoenix through a local marketing agreement and an option to purchase KASW-TV. The acquisition also included a 50 percent interest in a cable news joint venture. The acquisition price was $315,000 in cash and was partially funded with $88,000 in proceeds from the sale of KASA and KHNL, with the remaining funding provided by borrowings under Belo's revolving credit facility. The transaction was accounted for as a purchase and recorded based on the fair value of the assets acquired. The preliminary purchase price allocation resulted in an increase in intangible assets of $317,306, which is being amortized on a straight-line basis over 40 years. Results of 1999 acquisitions and dispositions have not been presented on a pro forma basis as the combined impact on results of operations was not material. On February 28, 1997, Belo completed the acquisition of The Providence Journal Company ("PJC") by issuing 25,394,564 shares of Series A Common Stock (on a pre-split basis) and paying $587,096 to former shareholders of PJC. Belo also incurred approximately $100,000 in employee and transaction costs and refinanced $200,000 of PJC debt. The acquisition was accounted for as a purchase. The Company's consolidated financial results for the year ended December 31, 1997 include the operations of PJC since March 1, 1997 and exclude the results of the Company's interest in America's Health Network ("AHN"), a cable network acquired as part of the PJC transaction, but subsequently disposed of effective July 31, 1997. The results of the Television Food Network ("TVFN"), also acquired as part of the PJC transaction, are excluded effective July 1, 1997, as a result of the Company's decision in June 1997 to divest its interest in TVFN. 20 22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As a result of the PJC acquisition, the Company initially owned two television stations in the Seattle/Tacoma, Washington market (KIRO and KING). To comply with FCC regulations that required the Company to divest one of these stations, the Company completed an exchange of assets among multiple parties on June 2, 1997, whereby KIRO was exchanged for CBS affiliate KMOV-TV in St. Louis, Missouri. On July 25, 1997, the Company completed the acquisition of The Press-Enterprise Company ("PE"), publisher of a daily newspaper serving Riverside County and the inland southern California area. On October 15, 1997, Belo exchanged its partnership interest in TVFN and $75,000 in cash for CBS affiliate KENS-TV in San Antonio, Texas. The pro forma financial results of operations that follow assume the PJC, PE and KENS acquisitions, the KIRO/KMOV exchange and the disposition of TVFN were completed as of January 1, 1997 and include adjustments for incremental interest costs, depreciation, amortization and taxes as they relate to the purchase price allocations of the transactions for the year ended December 31, 1997.
---------------------------------------------------- 1997 ---------------------------------------------------- Net operating revenues $ 1,345,536 Net earnings (a) $ 83,910 Net earnings per share $ .67 ------------ ------------
(a) Net earnings for the year ended December 31, 1997 include a pre-tax gain of $10,672 on the sale of an investment. Pro forma results exclude the effect of AHN and TVFN. NOTE 4: LONG-TERM DEBT - -------------------------------------------------------------------------------- Long-term debt consists of the following at December 31, 1999 and 1998:
- ---------------------------------------------------------------------------------- 1999 1998 - ---------------------------------------------------------------------------------- 6-7/8% Senior Notes Due June 1, 2002 $ 250,000 $ 250,000 7-1/8% Senior Notes Due June 1, 2007 300,000 300,000 7-3/4% Senior Debentures Due June 1, 2027 200,000 200,000 7-1/4% Senior Debentures Due September 15, 2027 250,000 250,000 ------------ ------------ Fixed-rate debt 1,000,000 1,000,000 Revolving credit agreement, including short-term unsecured notes classified as long-term 842,900 611,500 Other 13,357 25,839 Less: current maturities of long-term debt (6,767) (3,310) ------------ ------------ Total $ 1,849,490 $ 1,634,029 ------------ ------------
The Company's long-term debt maturities for the five years following December 31, 1999 are $6,767 in 2000, $110 in 2001, $1,092,980 in 2002 and $0 in 2003 and 2004. Of the amount due in 2002, $830,000 represents revolving debt and $12,900 represents short-term unsecured notes which could be converted, at the Company's option, to revolving debt. At the end of 1999, Belo had a $1 billion revolving credit facility. Loans under the revolving credit agreement bear interest at a rate based, at Belo's option, on the bank's alternate base rate, certificate of deposit rate, LIBOR or competitive bid. The rate obtained through competitive bid is either a Eurodollar rate or a rate agreed to by Belo and the bank. At December 31, 1999 and 1998, the weighted average interest rates for borrowings under the revolving credit agreement, which includes a facility fee of up to 0.15 percent on the total commitment, were 6.6 percent and 5.7 percent, respectively. Borrowings under the agreement mature upon expiration of the agreement on August 29, 2002, with one year extensions possible through August 29, 2004, at the request of Belo and with the consent of the participating banks. The carrying value of borrowings under Belo's revolving credit agreement approximates fair value. 21 23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The revolving credit agreement contains certain covenants, including a requirement to maintain, as of the end of each quarter and measured over the preceding four quarters, (1) a Funded Debt to Pro Forma Operating Cash Flow ratio not exceeding 5.5 to 1.0, (2) a Funded Debt (excluding subordinated debt) to Pro Forma Operating Cash Flow ratio not exceeding 5.0 to 1.0, and (3) an Interest Coverage ratio of not less than 2.5 to 1.0, all as such terms are defined in the agreement. At December 31, 1999, Belo was in compliance with these requirements. During 1999, Belo used various short-term unsecured notes as an additional source of financing. The weighted average interest rate on this debt was 6.0 percent and 5.9 percent at December 31, 1999 and 1998, respectively. Due to Belo's intent to renew the short-term notes and its continued ability to refinance these borrowings on a long-term basis through its revolving credit agreement, $12,900 and $31,500 of short-term notes outstanding at December 31, 1999 and 1998, respectively, have been classified as long-term. During 1997, the Company issued $1 billion in fixed-rate debt. The net proceeds from these debt offerings were used to retire debt previously outstanding under the Company's revolving credit facility. At December 31, 1999, the weighted average effective interest rate on the fixed-rate debt was 7.3 percent and the fair value was $51,565 less than the carrying value. At December 31, 1998, the fair value of this same debt exceeded the carrying value by $35,965. The fair value for both December 31, 1999 and 1998 was estimated using quoted market prices for those instruments publicly traded. In 1999, Belo made certain investments in other businesses, including those related to its Interactive media segment. At December 31, 1999, the fair value of these investments approximated the carrying value. In 1999, 1998 and 1997, Belo incurred interest costs of $113,160, $109,318 and $91,288, respectively, of which $2,552, $1,680 and $510, respectively, were capitalized as components of construction cost. At December 31, 1999, Belo had outstanding letters of credit of $20,561 issued in the ordinary course of business. NOTE 5: INCOME TAXES - -------------------------------------------------------------------------------- Belo uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Income tax expense for the years ended December 31, 1999, 1998 and 1997 consists of the following:
- --------------------------------------------------------------------------------- 1999 1998 1997 - --------------------------------------------------------------------------------- Current Federal $ 109,459 $ 53,812 $ 56,792 State 9,978 10,041 18,556 --------- -------- -------- Total current 119,437 63,853 75,348 Deferred Federal (25,183) (2,200) 1,587 State 3,893 3,905 (5,785) --------- -------- -------- Total deferred (21,290) 1,705 (4,198) --------- -------- -------- Total tax expense $ 98,147 $ 65,558 $ 71,150 Effective tax rate 35.5% 50.3% 46.2% --------- -------- --------
Income tax provisions for the years ended December 31, 1999, 1998 and 1997 differ from amounts computed by applying the applicable U.S. federal income tax rate as follows:
- ------------------------------------------------------------------------------------------ 1999 1998 1997 - ------------------------------------------------------------------------------------------ Computed expected income tax expense $ 96,759 $ 45,661 $ 53,943 Non-taxable gain on like-kind exchanges (19,969) - - Amortization of excess cost 11,415 11,533 9,645 State income taxes 9,016 9,065 8,301 Other 926 (701) (739) --------- --------- ---------- $ 98,147 $ 65,558 $ 71,150 --------- --------- ----------
22 24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The increase in current income tax expense is due primarily to a $36,382 tax liability associated with the sale of Belo's investment in Falcon Communications. Because of a difference in the book and tax basis of this investment, this increase is partially offset by a reduction in deferred taxes of $17,865. Significant components of Belo's deferred tax liabilities and assets as of December 31, 1999 and 1998, are as follows:
- -------------------------------------------------------------------------------------- 1999 1998 - -------------------------------------------------------------------------------------- Deferred tax liabilities: Excess tax depreciation and amortization $ 461,764 $ 458,022 Basis differences in investments 2,724 20,986 Expenses deductible for tax purposes in a year different from the year accrued 779 2,584 Other 3,855 4,277 ---------- ---------- Total deferred tax liabilities 469,122 485,869 ---------- ---------- Deferred tax assets: Deferred compensation and benefits 9,457 10,176 State net operating losses 3,979 6,938 State taxes 6,208 6,602 Expenses deductible for tax purposes in a year different from the year accrued 25,489 22,246 Other 14,812 12,409 ---------- ---------- Total deferred tax assets 59,945 58,371 ---------- ---------- Net deferred tax liability $ 409,177 $ 427,498 ---------- ----------
State net operating loss carryforwards are generally associated with entities acquired in the PJC acquisition and have expiration dates ranging from 2001 through 2003. NOTE 6: EMPLOYEE RETIREMENT PLANS - -------------------------------------------------------------------------------- Belo sponsors a noncontributory defined benefit pension plan covering the majority of employees. The benefits are based on years of service and the average of the employee's five consecutive years of highest annual compensation earned during the most recently completed 10 years of employment. The funding policy is to contribute annually to the plan an amount at least equal to the minimum required contribution for a qualified retirement plan, but not in excess of the maximum tax deductible contribution. The following table sets forth the plan's funded status and prepaid pension costs (included in Other assets on the Consolidated Balance Sheets) at December 31, 1999 and 1998:
- ---------------------------------------------------------------------------- 1999 1998 - ---------------------------------------------------------------------------- Accumulated benefit obligation $ (231,028) $ (233,963) Projected benefit obligation $ (297,864) $ (304,375) Estimated fair value of plan assets 334,121 302,831 ---------- ---------- Funded status 36,257 (1,544) Unrecognized net (gain) loss (32,458) 12,494 Unrecognized prior service cost 407 188 ---------- ---------- Prepaid pension cost $ 4,206 $ 11,138 ---------- ----------
23 25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Changes in plan assets for the years ended December 31, 1999 and 1998 were as follows:
- ----------------------------------------------------------------------------- 1999 1998 - ----------------------------------------------------------------------------- Fair value of plan assets at January 1, $ 302,831 $ 274,903 Actual return on plan assets 44,492 39,273 Benefits paid (13,202) (11,345) ---------- ---------- Fair value of plan assets at December 31, $ 334,121 $ 302,831 ========== ========== - -----------------------------------------------------------------------------
Changes in plan benefit obligation for the years ended December 31, 1999 and 1998 were as follows:
- ----------------------------------------------------------------------------- 1999 1998 - ----------------------------------------------------------------------------- Benefit obligation as of January 1, $ 304,375 $ 273,534 Actuarial (gains) losses (27,359) 11,693 Service cost 12,652 11,089 Interest cost 21,398 19,404 Benefits paid (13,202) (11,345) ---------- ---------- Benefit obligation as of December 31, $ 297,864 $ 304,375 ========== ========== - -----------------------------------------------------------------------------
The net periodic pension cost for the years ended December 31, 1999, 1998 and 1997 includes the following components:
- ----------------------------------------------------------------------------------------------------- 1999 1998 1997 - ----------------------------------------------------------------------------------------------------- Service cost - benefits earned during the period $ 12,652 $ 11,089 $ 8,851 Interest cost on projected benefit obligation 21,398 19,404 16,555 Expected return on assets (27,328) (25,875) (21,552) Amortization of: Net asset - (371) (1,233) Unrecognized prior service cost (220) (220) (376) Unrecognized loss 430 311 1,723 ---------- ---------- ---------- Net periodic pension cost $ 6,932 $ 4,338 $ 3,968 ---------- ---------- ----------
Assumptions used in accounting for the defined benefit plan are as follows:
- -------------------------------------------------------------------------------------------------------- 1999 1998 1997 - -------------------------------------------------------------------------------------------------------- Discount rate in determining benefit obligation 7.75% 7.00% 7.25% Discount rate in determining net periodic pension cost 7.00% 7.25% 7.50% Expected long-term rate of return on assets 9.75% 10.25% 10.25% Rate of increase in future compensation 5.50% 5.50% 5.50% ---- ----- -----
Belo sponsors defined contribution plans that cover substantially all of its employees. Subject to certain dollar limits, employees may contribute a percentage of their salaries to these plans, and Belo will match a portion of the employees' contributions primarily with shares of Belo's Series B Common Stock. Belo's contributions totaled $9,556, $8,267, and $6,069 in 1999, 1998 and 1997, respectively. Belo also sponsors non-qualified retirement plans for key employees. Expense for the plans recognized in 1999, 1998 and 1997 was $901, $1,316, and $1,138, respectively. 24 26 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 7: LONG-TERM INCENTIVE PLAN - -------------------------------------------------------------------------------- Belo has a long-term incentive plan under which awards may be granted to employees in the form of incentive stock options, non-qualified stock options, restricted shares or performance units, the values of which are based on Belo's long-term performance. In addition, options may be accompanied by stock appreciation rights and limited stock appreciation rights. Rights and limited rights may also be issued without accompanying options. Cash-based bonus awards are also available under the plan. The non-qualified options granted to employees under Belo's long-term incentive plan become exercisable in cumulative installments over periods of three to seven years and expire after 10 years. Shares of common stock reserved for future grants under the plan were 469,549 and 3,589,766 at December 31, 1999 and 1998, respectively. Stock-based activity in the long-term incentive plan relates to non-qualified stock options and is summarized in the following table.
- -------------------------------------------------------------------------------------------------------- 1999 1998 1997 - -------------------------------------------------------------------------------------------------------- Weighted Weighted Weighted Number of Average Number of Average Number of Average Options Price Options Price Options Price - -------------------------------------------------------------------------------------------------------- Outstanding at January 1, 9,406,008 $ 17.78 4,222,341 $ 34.31 3,819,938 $ 28.43 Two-for-one stock split -- -- 3,951,488 $ 17.16 -- -- Granted 3,288,670 $ 19.23 1,882,027 $ 18.16 947,100 $ 51.58 Exercised (513,230) $ 12.62 (467,742) $ 11.47 (526,685) $ 22.64 Canceled (168,453) $ 21.58 (182,106) $ 19.77 (18,012) $ 35.01 ---------- --------- --------- Outstanding at December 31, 12,012,995 $ 18.35 9,406,008 $ 17.78 4,222,341 $ 34.31 Exercisable at December 31, 6,461,345 5,388,934 2,191,315 ---------- --------- --------- --------- --------- --------- Weighted average fair value of options granted $ 5.82 $ 4.76 $ 12.95 - --------------------------------------------------------------------------------------------------------
The following table summarizes information about non-qualified stock options outstanding at December 31, 1999:
- ------------------------------------------------------------------------------------------------------------ Number of Weighted Average Weighted Average Number of Weighted Average Range of Options Remaining Exercise Options Exercise Exercise Prices Outstanding Life (years) Price Exercisable Price - ------------------------------------------------------------------------------------------------------------ $ 7-$11 701,910 (a) 2.3 $ 8.93 701,910 $ 8.93 $12-$15 1,313,892 (a) 4.0 $12.99 1,313,892 $12.99 $17-$20 8,212,989 (b) 8.2 $18.29 3,185,749 $17.75 $22-$27 1,784,204 (b) 7.7 $26.24 1,259,794 $26.42 ----------- --------- $ 7-$27 12,012,995 7.3 $18.35 6,461,345 $17.52 -------- ----------- --- ------- --------- ------
(a) Comprised of Series A Shares (b) Comprised of Series B Shares Pro forma information regarding net earnings and earnings per share has been determined as if Belo had accounted for its employee stock options under the fair value method of Statement of Financial Accounting Standards ("SFAS") No. 123. The fair value for those options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for 1999, 1998 and 1997, respectively: risk-free interest rates of 6.4 percent, 4.62 percent and 5.56 percent; dividend yields of 1.35 percent, 1.33 percent, and .91 percent; volatility factors of the expected market price of Belo's common stock of .256, .243 and .228; and weighted average expected lives of the options of approximately 5, 5 and 4 years. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting periods. Because options vest over a period of several years and additional awards are generally made each year, the full effect of applying SFAS No. 123 for providing pro forma disclosure is first evident in 1998 upon the completion of one full vesting cycle. The pro forma information presented below is not necessarily 25 27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS indicative of the effects on reported or pro forma net earnings for future years. The Company's pro forma information for the three years ended December 31, 1999 follows:
- --------------------------------------------------------------------------------- 1999 1998 1997 - --------------------------------------------------------------------------------- Pro forma net earnings $ 172,313 $ 59,179 $79,581 Pro forma net earnings per share $ 1.47 $ .48 $ .68 --------- -------- -------
Belo's long-term incentive plan also provides for the grant of restricted shares of Series A Common Stock. These restricted shares generally vest over a four-year period and contain certain performance requirements for a portion of the shares. All restricted shares issued and outstanding became fully vested as of December 31, 1998. No additional restricted shares were granted in 1999. Restricted stock activity for the two years ended December 31, 1998 is summarized in the following table. Amounts shown in this table have not been retroactively restated to reflect the June 5, 1998 stock split.
- ----------------------------------------------------------------------------------------------- 1998 1997 - ----------------------------------------------------------------------------------------------- Price Price Shares Per Share Shares Per Share - ----------------------------------------------------------------------------------------------- Outstanding at January 1, 85,392 $27-$56 212,309 $15-$35 Two-for-one stock split 84,332 $13-$28 - - Vested (152,246) $13-$28 (126,917) $15-$56 Forfeited (17,478) $13-$28 - -------- ------- -------- ------- Outstanding at December 31, - - 85,392 $27-$56 -------- ------- -------- -------
A provision for restricted shares is made ratably over the restriction period. Expense recognized under the plan for restricted shares was $167 and $1,776 in 1998 and 1997, respectively. NOTE 8: COMMITMENTS AND CONTINGENT LIABILITIES - -------------------------------------------------------------------------------- Belo is involved in certain claims and litigation related to its operations. In the opinion of management, liabilities, if any, arising from these claims and litigation would not have a material adverse effect on Belo's consolidated financial position, liquidity or results of operations. Commitments for the purchase of future broadcast rights totaled approximately $232,580, at December 31, 1999 for broadcasts scheduled through August 2006. Advance payments on plant and equipment expenditures at December 31, 1999 primarily relate to newspaper production equipment, DTV equipment and construction projects. Required future payments for capital expenditures in 2000 are $29,025 and include $21,000 toward the purchase and installation of the new press at TDMN, $2,150 for DTV equipment, $2,061 for building projects and $1,450 for interactive media software development. 26 28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Total lease expense for property and equipment was $8,617, $8,293, and $8,342 in 1999, 1998 and 1997, respectively. Future minimum rental payments for operating leases at December 31, 1999, are as follows:
- ------------------------------------------ Operating Leases - ------------------------------------------ 2000 $ 5,996 2001 4,583 2002 3,815 2003 2,306 2004 1,818 2005 & beyond 4,256 -------- Total commitments $ 22,774 --------
NOTE 9: COMMON AND PREFERRED STOCK - -------------------------------------------------------------------------------- Belo has two series of common stock authorized, issued and outstanding, Series A and Series B, each with a par value of $1.67 per share. The total number of authorized shares of common stock is 450,000,000 shares. The shares are identical except that Series B shares are entitled to 10 votes per share on all matters submitted to a vote of shareholders, while the Series A shares are entitled to one vote per share. Transferability of the Series B shares is limited to family members and affiliated entities of the holder. Series B shares are convertible at any time on a one-for-one basis into Series A shares. Shares of Belo's Series A Common Stock are traded on the New York Stock Exchange (NYSE symbol: BLC). There is no established public trading market for shares of Series B Common Stock. Each outstanding share of common stock is accompanied by one preferred share purchase right, which entitles shareholders to purchase 1/200 of a share of Series A Junior Participating Preferred Stock. The rights will not be exercisable until a party either acquires beneficial ownership of 30 percent of Belo's common stock or makes a tender offer for at least 30 percent of its common stock. At such time, each holder of a right (other than the acquiring person or group) will have the right to purchase common stock of Belo with a value equal to two times the exercise price of the right, which is initially $75 (subject to adjustment). In addition, if Belo is acquired in a merger or business combination, each right can be used to purchase the common stock of the surviving company having a market value of twice the exercise price of each right. Once a person or group has acquired 30 percent of the common stock but before 50 percent of the voting power of the common stock has been acquired, Belo may exchange each right (other than those held by the acquiring person or group) for one share of Company common stock (subject to adjustment). Belo may reduce the 30 percent threshold or may redeem the rights. The number of shares of Series A Junior Participating Preferred Stock reserved for possible conversion of these rights is equivalent to 1/200 of the number of shares of common stock issued and outstanding plus the number of shares reserved for options outstanding and for grant under the 1995 Executive Compensation Plan and for options outstanding under Belo's predecessor plan. The rights will expire in 2006, unless extended. As discussed in Note 3, on February 28, 1997, in connection with the acquisition of PJC, Belo issued 25,394,564 shares of Series A Common Stock, on a pre-split basis. Belo has in place a stock repurchase program authorizing the purchase of up to $2,500 of Company stock annually and, as of December 31, 1999, Belo has authority to purchase an additional 2,759,044 shares. During 1999, Belo purchased 1,187,300 shares of its Series A Common Stock at an aggregate cost of $21,793. During 1998, Belo purchased 6,727,400 shares of its Series A Common Stock at an aggregate cost of $129,786. No shares of stock were purchased during 1997. All shares were retired in the year of purchase. 27 29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10: OTHER INCOME AND EXPENSE - -------------------------------------------------------------------------------- In November 1999, Belo sold its investment in Falcon Communications, a cable system operator, for estimated proceeds of $68,743. The gain on the sale was $47,006 before taxes of $18,517, for a net gain of $28,489 or 24 cents per share. In 1998, Belo sold 982,000 shares of Peapod, Inc. ("Peapod") common stock and donated 827,113 shares of Peapod common stock to the A. H. Belo Corporation Foundation. These transactions increased 1998 net earnings by $2,042 as the $6,244 charge for the charitable contribution was more than offset by the net gain on the disposition of shares and the tax benefit from the charitable contribution. In 1997, Belo sold 220,000 shares of Gemstar International Group Limited ("Gemstar") common stock and donated 208,440 shares of Gemstar common stock to the A. H. Belo Corporation Foundation. These transactions did not have an effect on 1997 net earnings as the $4,560 charge for the charitable contribution was offset by a net gain on the disposition of the shares and the tax benefit from the charitable contribution. NOTE 11: EARNINGS PER SHARE - -------------------------------------------------------------------------------- The following table sets forth the reconciliation between weighted average shares used for calculating basic and diluted earnings per share for the three years ended December 31, 1999 (in thousands, except per share amounts):
- -------------------------------------------------------------------------------------------- 1999 1998 1997 - -------------------------------------------------------------------------------------------- Weighted average shares for basic earnings per share 118,322 123,508 115,692 Effect of employee stock options 855 1,328 1,430 ------- ------- ------- Weighted average shares for diluted earnings per share 119,177 124,836 117,122 Options excluded due to exercise price in excess of average market price Number outstanding 1,798 1,765 1,728 Exercise price $26.19 $26.41 $26.38 ------- ------- -------
NOTE 12: COMPREHENSIVE INCOME - -------------------------------------------------------------------------------- For the years ended December 31, 1999, 1998 and 1997, total comprehensive income was comprised as follows:
- ------------------------------------------------------------------------------------------------- 1999 1998 1997 - ------------------------------------------------------------------------------------------------- Net earnings $ 178,306 $ 64,902 $ 82,972 Unrealized holding gains, net of taxes of $596 in 1998 and $3,503 in 1997 - 1,107 6,505 Less reclassification for gains included in net earnings, net of taxes of $2,827 in 1998 and $1,271 in 1997 - (5,251) (2,361) --------- -------- ---------- Accumulated other comprehensive income (loss) - (4,144) 4,144 --------- -------- --------- Total comprehensive income $ 178,306 $ 60,758 $ 87,116 --------- -------- ----------
28 30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 13: SUPPLEMENTAL CASH FLOW INFORMATION - -------------------------------------------------------------------------------- Supplemental cash flow information and significant non-cash investing and financing activities for the three years ended December 31, 1999, are as follows:
- ------------------------------------------------------------------------------------------------- 1999 1998 1997 - ------------------------------------------------------------------------------------------------- Supplemental cash flow information Cash paid during the period for: Interest, net of amounts capitalized $ 107,045 $ 107,763 $ 81,676 Income taxes, net of refunds $ 90,869 $ 84,407 $ 54,436 Supplemental non-cash investing and financing activities: KXTV/KVUE asset exchange $ 112,098 $ - $ - Stock issued for PJC acquisition $ - $ - $ 870,399 KIRO/KMOV asset exchange $ - $ - $ 152,000 Non-cash consideration for KENS $ - $ - $ 125,000 --------- --------- ---------
NOTE 14: INDUSTRY SEGMENT INFORMATION - -------------------------------------------------------------------------------- Belo operates in three primary segments: television broadcasting, newspaper publishing and interactive media. Operations in the broadcast industry involve the sale of air time for advertising and the broadcast of news, entertainment and other programming. Belo's television stations are located in Dallas, Houston, San Antonio and Austin, Texas; Seattle and Spokane, Washington; Phoenix and Tucson, Arizona; St. Louis, Missouri; Portland, Oregon; Charlotte, North Carolina; New Orleans, Louisiana; Norfolk, Virginia; Louisville, Kentucky; Tulsa, Oklahoma; and Boise, Idaho. Operations in the newspaper publishing industry involve the sale of advertising space in published issues, the sale of newspapers to distributors and individual subscribers and commercial printing. The Company's major publishing units are The Dallas Morning News, located in Dallas, Texas; The Providence Journal, located in Providence, Rhode Island; and The Press-Enterprise, located in Riverside, California. The Company has other newspaper operations in Owensboro and Henderson, Kentucky and Bryan-College Station, Arlington and Denton, Texas. The operations of the interactive media segment are conducted from corporate headquarters in Dallas, Texas and at each of Belo's individual operating units. Revenues for the interactive media segment result primarily from the sale of advertising on Belo operating unit Web sites and fees generated from Internet service provider subscriptions and data retrieval services. The Company's other industry segment is comprised primarily of cable news operations, which are located in Seattle, Washington and Dallas, Texas. Revenues in the other segment are generated from the sale of advertising time and subscription fees from local cable company operators. Belo's various operating segments share content at no cost. 29 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Selected segment data for the years ended December 31, 1999, 1998 and 1997 is as follows and includes reclassification of prior year results related to the Interactive media segment, which in previous years were primarily included with newspaper publishing operations:
- ------------------------------------------------------------------------------------ 1999(a) 1998 1997(b) - ------------------------------------------------------------------------------------ Net operating revenues Broadcasting $ 598,637 $ 593,426 $ 522,560 Newspaper publishing 816,976 784,327 693,777 Interactive media 6,520 3,214 718 Other 11,849 10,736 17,149 ----------- ----------- ----------- $ 1,433,982 $ 1,391,703 $ 1,234,204 ----------- ----------- ----------- Earnings from operations Broadcasting (c) $ 143,200 $ 143,751 $ 136,715 Newspaper publishing (d) 176,985 138,289 154,612 Interactive media (8,908) (2,778) (1,584) Other (7,726) (5,212) (9,237) Corporate expenses (39,056) (40,965) (39,704) ----------- ----------- ----------- $ 264,495 $ 233,085 $ 240,802 ----------- ----------- ----------- Depreciation and amortization Broadcasting $ 102,725 $ 94,992 $ 79,939 Newspaper publishing (e) 59,182 72,062 51,828 Interactive media 543 91 42 Other 2,736 1,030 1,565 Corporate 3,775 2,745 1,619 ----------- ----------- ----------- $ 168,961 $ 170,920 $ 134,993 ----------- ----------- ----------- Operating cash flow (f) Broadcasting $ 245,925 $ 238,743 $ 216,654 Newspaper publishing 236,167 210,351 206,440 Interactive media (8,365) (2,687) (1,542) Other (4,990) (4,182) (7,672) Corporate (35,281) (38,220) (38,085) ----------- ----------- ----------- $ 433,456 $ 404,005 $ 375,795 ----------- ----------- ----------- Identifiable assets Broadcasting $ 2,665,186 $ 2,310,002 $ 2,345,602 Newspaper publishing 1,100,817 1,063,384 1,117,958 Interactive media 21,143 128 142 Other 23,525 23,922 3,412 Corporate 165,593 141,653 155,840 ----------- ----------- ----------- $ 3,976,264 $ 3,539,089 $ 3,622,954 ----------- ----------- ----------- Capital expenditures Broadcasting $ 40,859 $ 55,035 $ 48,176 Newspaper publishing 40,036 25,847 23,224 Interactive media 124 -- -- Other 3,298 16,898 1,787 Corporate 8,069 5,147 10,130 ----------- ----------- ----------- $ 92,386 $ 102,927 $ 83,317 ----------- ----------- -----------
(a) Broadcasting results for 1999 include KXTV through May and KASA and KHNL through October. Results for KVUE are included beginning in June and KTVK results are reflected beginning in November. Publishing results include the operations of the Denton Record-Chronicle beginning in July. (b) Segment results for 1997 include 10 months of operations of PJC, which Belo acquired on February 28, 1997. PJC operations include nine television stations, a daily newspaper, a cable news operation and a cable network. The cable network was subsequently disposed of and its operations are excluded effective July 1, 1997. 1997 broadcasting segment results also include two-and-one-half months of operations of KENS, which Belo acquired on October 15, 1997. 1997 newspaper publishing segment includes five months of operations of PE, acquired by Belo July 25, 1997. See Note 3. (c) Broadcasting earnings from operations for 1998 include a $6,996 charge for early retirement costs and other employee reduction initiatives. (d) Newspaper publishing earnings from operations for 1998 include a non-cash charge for the write-down of a press at TDMN of $11,478 and a charge of $6,344 for certain early retirement costs. (e) Newspaper publishing depreciation and amortization expense for 1998 includes the $11,478 non-cash charge for the write-down of a press at TDMN. (f) Operating cash flow is defined as segment earnings from operations plus depreciation and amortization. Operating cash flow is used in the broadcasting and publishing industries to analyze and compare companies on the basis of operating performance, leverage and liquidity. 30 32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 15: QUARTERLY RESULTS OF OPERATIONS (unaudited) Following is a summary of the unaudited quarterly results of operations for the years ended December 31, 1999 and 1998. Certain previously reported data has been reclassified to conform to the current year presentation, including a change in the presentation of revenue and expense with respect to certain programming transactions and the reclassification of both current and prior year data for the Interactive media segment:
- ----------------------------------------------------------------------------------------------------------- 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter - ----------------------------------------------------------------------------------------------------------- 1999 Net operating revenues Broadcasting(a) $ 131,255 $ 157,885 $ 138,374 $ 171,123 Newspaper publishing(b) 191,344 204,708 202,038 218,886 Interactive media 1,259 1,448 1,884 1,929 Other 2,762 2,861 2,998 3,228 ---------- --------- ---------- ---------- $ 326,620 $ 366,902 $ 345,294 $ 395,166 ---------- --------- ---------- ---------- Earnings (loss) from operations Broadcasting(a) $ 21,479 $ 46,866 $ 28,777 $ 46,078 Newspaper publishing(b) 38,881 48,238 42,809 47,057 Interactive media (1,244) (1,576) (2,163) (3,925) Other (1,718) (1,948) (1,959) (2,101) Corporate expenses (8,157) (10,180) (9,724) (10,995) ---------- --------- ---------- ---------- $ 49,241 $ 81,400 $ 57,740 $ 76,114 ---------- --------- ---------- ---------- Net earnings(c) $ 12,590 $ 79,763 $ 16,588 $ 69,365 ---------- --------- ---------- ---------- Basic earnings per share(c) $ .11 $ .68 $ .14 $ .59 Diluted earnings per share(c) $ .11 $ .67 $ .14 $ .58 ---------- --------- ---------- ---------- 1998 Net operating revenues Broadcasting $ 132,885 $ 159,643 $ 133,795 $ 167,103 Newspaper publishing 189,572 200,044 191,429 203,282 Interactive media 797 746 847 824 Other 2,383 2,338 2,457 3,558 ---------- --------- ---------- ---------- $ 325,637 $ 362,771 $ 328,528 $ 374,767 ---------- --------- ---------- ---------- Earnings (loss) from operations Broadcasting(d) $ 24,910 $ 49,259 $ 26,000 $ 43,582 Newspaper publishing(e) 38,231 43,355 34,940 21,763 Interactive media (312) (580) (831) (1,055) Other (1,098) (763) (1,115) (2,236) Corporate expenses (10,138) (8,682) (11,228) (10,917) ---------- --------- ---------- ---------- $ 51,593 $ 82,589 $ 47,766 $ 51,137 ---------- --------- ---------- ---------- Net earnings $ 13,635 $ 29,823 $ 9,707 $ 11,737 ---------- --------- ---------- ---------- Basic earnings per share $ .11 $ .24 $ .08 $ .10 Diluted earnings per share $ .11 $ .24 $ .08 $ .10 ---------- --------- ---------- ----------
(a) Beginning in the second quarter, broadcasting operating results reflect the exchange of KXTV (ABC) in Sacramento, California for KVUE (ABC) in Austin, Texas, effective June 1, 1999. Fourth quarter 1999 results reflect the sale of KASA (FOX) in Albuquerque, New Mexico and KHNL (NBC) in Honolulu, Hawaii on October 29, 1999 and the acquisition of KTVK (IND) in Phoenix, Arizona on November 1, 1999. (b) Beginning in third quarter 1999, newspaper publishing results include the operations of the Denton Record-Chronicle, which was acquired on June 30, 1999. (c) Net earnings and earnings per share in the second quarter of 1999 include a gain of $49,060 (41 cents) on the KXTV/KVUE exchange. Fourth quarter net earnings and earnings per share include a gain on the disposition of KASA and KHNL of $16,348 (14 cents) and a $28,489 (24 cents) gain on the sale of Belo's investment in Falcon Communications. (d) Broadcasting earnings from operations in fourth quarter 1998 include a $6,996 charge for early retirement costs and other employee reduction initiatives. (e) Newspaper publishing earnings from operations in fourth quarter 1998 include a non-cash charge for the write-down of a press at TDMN of $11,478 and a charge of $6,344 for certain early retirement costs. 31 33 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS The Management of Belo is responsible for the preparation of the consolidated financial statements, as well as for their integrity and objectivity. Those statements are prepared using generally accepted accounting principles, they include amounts that are based on our best estimates and judgments, and we believe they are not misstated due to material fraud or error. Management has also prepared the other information in the Annual Report and is responsible for its accuracy and its consistency with the financial statements. Management maintains a system of internal control that is designed to provide reasonable assurance of the integrity and reliability of the financial statements, the protection of assets from unauthorized use or disposition, and the prevention and detection of fraudulent financial reporting. This system of internal control provides for appropriate division of responsibility. Policies and procedures, as they relate to internal control, are updated as necessary and communicated to those employees having a significant role in the financial reporting process. Management continually monitors the system of internal control for compliance. Management believes that as of December 31, 1999, Belo's system of internal control is adequate to accomplish the objectives described above. Management recognizes, however, that no system of internal control can ensure the elimination of all errors and irregularities, and it recognizes that the cost of the internal controls should not exceed the value of the benefits derived. Finally, Management recognizes its responsibility for fostering a strong ethical climate within Belo according to the highest standards of personal and professional conduct, and this responsibility is delineated in Belo's written statement of business conduct. This statement of business conduct addresses, among other things, the necessity for due diligence and integrity, avoidance of potential conflicts of interest, compliance with all applicable laws and regulations, and the confidentiality of proprietary information. /s/ ROBERT W. DECHERD Robert W. Decherd Chairman of the Board, President & Chief Executive Officer /s/ DUNIA A. SHIVE Dunia A. Shive Senior Vice President/Chief Financial Officer 32 EX-21 18 SUBSIDIARIES OF THE COMPANY 1 EXHIBIT 21 SUBSIDIARIES OF THE COMPANY (AS OF DECEMBER 31, 1999)
STATE OF NAME OF CORPORATION INCORPORATION - --------------------------------- ------------- NEWSPAPER PUBLISHING: The Dallas Morning News, L.P. d/b/a The Dallas Morning News Delaware The Providence Journal Company d/b/a The Providence Journal Delaware Press-Enterprise Company d/b/a The Press-Enterprise California Owensboro Messenger-Inquirer, Inc. d/b/a Messenger-Inquirer Delaware Bryan-College Station Eagle, Inc. d/b/a The Eagle Delaware Henderson Gleaner, Inc. d/b/a The Gleaner Delaware DFW Printing Company, Inc. Delaware DFW Suburban Newspapers, Inc. Delaware Denton Publishing Company d/b/a Denton Record-Chronicle Texas TELEVISION BROADCASTING: KVUE Television, Inc. d/b/a KVUE, Channel 10 Delaware KHOU-TV, L.P. d/b/a KHOU, Channel 11 Delaware KOTV, Inc. d/b/a KOTV, Channel 6 Delaware WFAA-TV, L.P. d/b/a WFAA, Channel 8 Delaware WVEC Television, Inc. d/b/a WVEC, Channel 13 Delaware WWL-TV, Inc. d/b/a WWL, Channel 4 Delaware KENS-TV, Inc. d/b/a KENS, Channel 5 Delaware KMOV-TV, Inc. d/b/a KMOV, Channel 4 Delaware KMSB-TV, Inc. d/b/a KMSB, Channel 11 Arizona WCNC-TV, Inc. d/b/a WCNC, Channel 36 North Carolina Belo Kentucky, Inc. d/b/a WHAS, Channel 11 Kentucky King Broadcasting Company d/b/a KING, Channel 5 Washington d/b/a KREM, Channel 2 d/b/a KTVB, Channel 7 d/b/a KGW, Channel 8 KTVK, Inc. d/b/a KTVK, Channel 3 Delaware King News Corporation d/b/a Northwest Cable News Washington Texas Cable News, Inc. d/b/a TXCN Delaware Hill Tower, Inc. Texas Tulsa Tower Joint Venture Oklahoma Texas Tall Tower Texas Belo Interactive, Inc. Delaware
Except as noted below, all of the subsidiaries are wholly-owned subsidiaries of the Company. The Company through wholly-owned subsidiaries owns 50% of the outstanding common stock of Hill Tower, Inc, Tulsa Tower Joint Venture and Texas Tall Tower. EX-23 19 CONSENT OF ERNST & YOUNG LLP 1 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 33-30994, Form S-8 No. 33-32526, Form S-8 No. 33-18771, Form S-8 No. 33-61439 and Form S-3 No. 333-25579) pertaining to the Employee Savings and Investment Plan, Long-Term Incentive Plan, 1995 Executive Compensation Plan, and the registration of $1,500,000,000 of debt securities and warrants to purchase debt securities of A. H. Belo Corporation of our report dated January 31, 2000, with respect to the consolidated financial statements of Belo and subsidiaries included in the Annual Report (Form 10-K) for the year ended December 31, 1999. /s/ Ernst & Young LLP Dallas, Texas March 13, 2000 EX-27 20 FINANCIAL DATA SCHEDULE
5 1,000 YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 45,593 0 252,830 (6,881) 23,539 351,958 1,146,992 (491,990) 3,976,264 259,838 1,849,490 0 0 198,159 1,191,678 3,976,264 0 1,433,982 0 1,000,526 168,961 7,131 (110,608) 276,453 98,147 178,306 0 0 0 178,306 1.51 1.50
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