-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ZS5RZfKmMHUvcA/wb1VhnZ4U+qW8TrFEwtGzvBvMMvvGGD1eqlddfM9ZPgDmOpu7 CaH9aLrbMMmpNuKV/Up++w== 0000950134-94-000249.txt : 19940328 0000950134-94-000249.hdr.sgml : 19940328 ACCESSION NUMBER: 0000950134-94-000249 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 19 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940325 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BELO A H CORP CENTRAL INDEX KEY: 0000356080 STANDARD INDUSTRIAL CLASSIFICATION: 2711 IRS NUMBER: 750135890 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-08598 FILM NUMBER: 94518073 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 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, 1993 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: NAME OF EACH EXCHANGE TITLE OF EACH CLASS 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 registrant (1) has filed all reports required to be filed by Sections 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 28, 1994 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 $823,474,630.* Shares of Common Stock outstanding at February 28, 1994: 20,264,186 shares. (Consisting of 14,531,341 shares of Series A Common Stock and 5,732,845 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 sent to shareholders in regard to the Annual Meeting of Shareholders to be held May 4, 1994 are incorporated by reference into Part III (Items 10, 11, 12 and 13). 2 A. H. BELO CORPORATION FORM 10-K TABLE OF CONTENTS
PAGE PART I Item 1. Business 1 Item 2. Properties 5 Item 3. Legal Proceedings 6 Item 4. Submission of Matters to a Vote of Security Holders 6 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 7 Item 6. Selected Financial Data 7 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 8. Financial Statements and Supplementary Data (see Index to Financial Statements and Schedules below) 13 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 13 PART III Item 10. Directors and Executive Officers of the Registrant 13 Item 11. Executive Compensation 13 Item 12. Security Ownership of Certain Beneficial Owners and Management 13 Item 13. Certain Relationships and Related Transactions 13 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 13 Signatures 19 INDEX TO FINANCIAL STATEMENTS AND SCHEDULES Report of Independent Auditors 21 Consolidated Statements of Earnings for the years ended December 31, 1993, 1992 and 1991 22 Consolidated Balance Sheets as of December 31, 1993 and 1992 23 Consolidated Statements of Shareholders' Equity for the years ended December 31, 1993, 1992 and 1991 25 Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1992 and 1991 26 Notes to Consolidated Financial Statements 27 Management's Responsibility for Financial Statements 38 Financial Statement Schedules: Schedule V - Property, Plant and Equipment for the years ended December 31, 1993, 1992 and 1991 39 Schedule VI - Accumulated Depreciation of Property, Plant and Equipment for the years ended December 31, 1993, 1992 and 1991 40 Schedule VIII - Valuation and Qualifying Accounts for the years ended December 31, 1993, 1992 and 1991 41 Schedule X - Supplementary Earnings Statement Information for the years ended December 31, 1993, 1992 and 1991 42
(i) 3 PART I ITEM 1. BUSINESS A. H. Belo Corporation (the "Company" or "Belo") owns and operates newspapers and network-affiliated television stations in five U.S. cities. The Company traces its roots to The Galveston Daily News, which began publishing in 1842. Incorporated in Texas in 1926, the Company was reorganized as a Delaware corporation in 1987. (References herein to "Company" or "Belo" mean A. H. Belo Corporation and its wholly-owned subsidiaries unless the context otherwise specifies.) The Company's principal newspaper is The Dallas Morning News. In addition, the Company publishes eight community newspapers for certain suburbs in the Dallas-Fort Worth metropolitan area. The Company also owns and operates network-affiliated VHF television broadcast stations in Dallas-Fort Worth and Houston, Texas; Sacramento-Stockton-Modesto, California; Norfolk-Portsmouth-Newport News-Hampton, Virginia and Tulsa, Oklahoma. Note 11 to the Consolidated Financial Statements, included on page 35 of this document, contains information about the Company's industry segments for the years ended December 31, 1993, 1992 and 1991. NEWSPAPER PUBLISHING The Company's wholly-owned subsidiary, The Dallas Morning News, Inc., publishes the Company's principal newspaper, The Dallas Morning News, each morning, including Sunday. Published continuously since 1885, The Dallas Morning News provides coverage of local, state, national and international news. The Morning News is distributed throughout the Southwest, though its circulation is concentrated primarily in the twelve counties surrounding Dallas and Fort Worth: Collin, Dallas, Denton, Ellis, Henderson, Hood, Hunt, Johnson, Kaufman, Parker, Rockwall and Tarrant counties. The Dallas Morning News strives to serve the public interest by maintaining a strong and independent voice in matters of public concern. It is the policy of the Company to allocate such resources as may be necessary to maintain excellence in news reporting and editorial comment in The Dallas Morning News. The Dallas Morning News serves a large readership in its primary market. Average paid circulation for the six months ended September 30, 1993, according to the unaudited Publisher's Statement of the Audit Bureau of Circulations, an independent agency, was 527,387 daily and 814,404 on Sunday, an increase of 2.5 percent and .6 percent, respectively, over the six months ended September 30, 1992, which were 514,342 daily and 809,188 on Sunday. In December 1991, the Company's principal competitor, the Dallas Times Herald (owned by Times Herald Printing Company), ceased operations and sold substantially all of its assets to the Company for $55.7 million. The primary daily newspaper competing with The Dallas Morning News in its marketing area is the Fort Worth Star-Telegram, owned by Capital Cities/ABC, Inc.. The Dallas Morning News also competes for advertising with television and radio stations (including a television station owned and operated by the Company), magazines, direct mail, cable television, billboards and other newspapers (including the other newspapers owned and operated by the Company). The basic material used in publishing The Dallas Morning News is newsprint. The average unit price of newsprint consumed during 1993 was higher than that of the prior year due to a market-wide increase in newsprint prices. At present, newsprint is purchased from eight suppliers. During 1993, the Company's three largest providers of newsprint provided approximately 65 percent of the annual requirements, but the Company is not dependent on any one of these suppliers. Management believes its sources of newsprint, along with alternate sources that are available, are adequate for its current needs. 1 4 In January 1994, the Company restructured the operations of its wholly-owned subsidiary, Dallas-Fort Worth Suburban Newspapers, Inc.. As part of the restructuring, Dallas-Fort Worth Suburban Newspapers, Inc., was split into two wholly-owned subsidiaries, DFW Suburban Newspapers, Inc., and DFW Printing Company, Inc.. DFW Suburban Newspapers, Inc. will continue to publish its six paid circulation newspapers for suburban communities in the Dallas-Fort Worth metropolitan area. These publications are delivered one to two days a week. In addition, two free newspapers are published once a week. Each of the Company's community publications has its own sales, circulation, news and editorial personnel, and several of the publications currently maintain separate offices. All administrative functions, however, are centralized and all of the newspapers are printed at a plant in Arlington, Texas. This plant is owned and operated by DFW Printing Company, Inc., which in addition to printing the suburban newspapers, conducts the Company's commercial printing operations. TELEVISION BROADCASTING The following table lists relevant information about the Company's television broadcasting stations:
STATION, NUMBER OF CHANNEL, DMA TELEVISION MARKET AND NATIONAL EXPIRATION BROADCAST NETWORK TV HOMES MARKET DATE OF STATIONS IN AFFILIATION IN DMA (1) RANK (1) FCC LICENSE (2) MARKET (3) - -------------- ------------ ---------- ---------------- ---------- WFAA-TV, Ch. 8 1,816,700 8th August 1, 1993 6 VHF Dallas-Fort Worth, TX 9 UHF (ABC) KHOU-TV, Ch. 11 1,510,580 10th August 1, 1998 4 VHF Houston, TX 8 UHF (CBS) KXTV, Ch. 10 1,099,950 19th December 1, 1993 4 VHF Sacramento- 6 UHF Stockton-Modesto, CA (CBS) WVEC-TV, Ch. 13 612,880 39th October 1, 1996 3 VHF Norfolk-Portsmouth- 3 UHF Newport News-Hampton, VA (ABC) KOTV, Ch. 6 456,430 59th June 1, 1993 5 VHF Tulsa, OK 5 UHF (CBS)
_____________________________ (1) Designated Market Area ("DMA") is an exclusive geographic area consisting of all counties in which the local stations receive a preponderance of total viewing hours. DMA data, which is published by the A. C. Nielsen Company ("Nielsen"), is a significant factor in determining television advertising rates. All the information shown above is as of November 1993. (2) Applications for renewal of the licenses for certain stations are pending before the Federal Communications Commission, and the stations' licenses are by statute continued in effect pending action thereon. (3) The number of television broadcasting stations is as of November 1993 and is based on information published by Nielsen. In each of these markets, one of the VHF stations indicated is a non-commercial public broadcasting television station, except for Dallas-Fort Worth, where there are two VHF stations that are non-commercial public broadcasting stations, and Norfolk-Portsmouth-Newport News-Hampton, where there are no VHF non-commercial public broadcasting stations. In addition, there is one UHF non-commercial public broadcasting station in Norfolk- Portsmouth-Newport News-Hampton and one in Tulsa. 2 5 Affiliation with a television network can have a significant influence on the revenues of a television station because the audience share drawn by a network's programming can affect the rates at which a station can sell advertising time. The Federal Communications Commission ("FCC") regulates certain provisions of television station's network affiliation contracts. The television networks compete for affiliations with licensed television stations through program commitments and local marketing support. From time to time, local television stations also solicit network affiliations on the basis of their ability to provide a network better access to a particular market. 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 agency commissions, for that advertising. Rates are influenced both by the demand for advertising time and the popularity of the station's programming. Most advertising during network programs is sold by the networks, which pay their affiliated stations negotiated fees for broadcasting such programs and advertising. The Company's television broadcast properties compete for advertising revenues directly with other media such as newspapers (including those owned and operated by the Company), billboard advertising, magazines, direct mail advertising, radio, other television stations, cable television systems, and indirectly, with motion picture theaters and other news and entertainment media. The success of broadcast operations depends on a number of factors, including the general strength of the national and local economy, the ability to provide attractive programming, audience ratings, relative cost efficiency in reaching audiences as compared to other advertising media, technical capabilities and governmental regulations and policies. Each of the three major television networks is represented in each television market in which the Company has a television broadcast station. Each of the markets is served by at least two other commercial VHF television stations and at least two commercial UHF television stations. Competition for advertising sales and local viewers within each market is intense, particularly among the network-affiliated commercial VHF television stations. In the Dallas-Fort Worth market, the other commercial VHF stations are owned by Argyle Television Holdings, Inc., LIN Broadcasting Corporation and Gaylord Entertainment Company. In Houston, the other commercial VHF stations are owned by Capital Cities/ABC, Inc. and H & C Communications, Inc. (sale pending to The Washington Post Company). In the Sacramento-Stockton-Modesto market, Kelly Broadcasting Company and Continental Broadcasting Ltd. also own commercial VHF stations. The Norfolk-Portsmouth-Newport News- Hampton market is served by two other commercial VHF stations, one owned by LIN Broadcasting Corporation and the other by Narragansett Capital Associates, L. P.. In the Tulsa market, the two other commercial VHF stations are owned by Scripps Howard Inc. and Perpetual Corporations Communications (Allbritton Communications Company). Fox-affiliated stations also compete in each of Belo's markets for advertising sales and local viewers. The Fox-affiliated stations in Belo's broadcast markets are all commercial UHF television stations and are owned by the following companies: Fox Television Stations, Inc., in Dallas-Fort Worth; The Fox Network in Houston; Renaissance Communications in Sacramento-Stockton-Modesto; WTVZ, Inc. in Norfolk-Portsmouth-Newport News-Hampton; and Clear Channel Television in Tulsa. REGULATION OF TELEVISION BROADCASTING The Company's television broadcasting 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' 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 broadcast stations. The Act would prohibit the Company's subsidiaries from continuing as broadcast licensees if record ownership or power to vote more than one-fourth of the Company's stock were to be held by aliens or foreign governments or their representatives, or if an officer or more than one-fourth of the Company's directors were aliens. Under the Act, television broadcast licenses may be granted for maximum periods of five years and are renewable upon proper application for additional five-year terms. Renewal applications are granted without hearing if there are no competing applications or issues raised by petitioners to deny such applications that would cause the 3 6 FCC to order a hearing. A full comparative hearing is required if competing applications are filed. A federal court of appeals has affirmed an FCC decision that recognizes an incumbent licensee's "renewal expectancy" based on substantial service to its community. The precise parameters of licensees' renewal expectancies in comparative proceedings are ambiguous at the present time. This ambiguity may lead to new FCC rules or policies as the result of pending FCC rulemaking proceedings, or Congressional legislation reforming the comparative renewal process. Applications for renewal of broadcast licenses for three of the Company's stations are pending before the FCC. The stations' licenses are by statute continued pending action thereon. The current license expiration dates for each of the Company's television broadcast stations are set forth in the table under "Business-Television Broadcasting." FCC rules limit the total number of television broadcast 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 percentage of voting power. FCC rules also place certain limits on common ownership, operation and control of, or cognizable interests or voting power in, (a) broadcast stations serving the same area, (b) broadcast stations and daily newspapers serving the same area and (c) television broadcast stations and cable systems serving the same area. The Company's ownership of The Dallas Morning News and WFAA-TV, which are both located in the Dallas-Fort Worth area and serve the same market area, predate the adoption of the FCC's rules regarding cross-ownership, and the Company's ownership of The Dallas Morning News and WFAA has been "grandfathered" by the FCC. These FCC rules affect the number, type and location of newspaper, broadcast and cable television properties that the Company might acquire in the future. For example, under current rules, the Company could not acquire any daily newspaper, broadcast or cable television properties in a market in which it now owns or has an interest deemed attributable under Commission rules in a television station, except that the Commission's rules provide that waivers of their restrictions could be granted to permit the Company's acquisition of radio stations in the Dallas, Houston and Sacramento markets. Under current FCC regulations, and in light of the Company's current investments, the Company could acquire outright two more television stations (not including "satellite" television stations which rebroadcast all or most of a parent station's programming) in other markets without disposing of any stations (provided the number of television households in the sum of all Company-owned stations' Area of Dominant Influence ("ADI") did not exceed 25 percent of the total television households in the nation, counting only 50 percent of ADI households for UHF stations). The FCC has instituted rulemaking proceedings looking toward possible relaxation of certain of these rules regulating television station ownership. The Company recently announced that it has reached an agreement in principle to purchase WWL-TV in New Orleans, Louisiana. See Note 12 of Notes to Consolidated Financial Statements on page 36. If the purchase is consummated, the Company could acquire outright one more television station under the parameters described above. The FCC has significantly reduced its past regulation of broadcast stations, including elimination of formal ascertainment requirements and guidelines concerning 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, equal employment opportunity, application procedures and other areas affecting the business or operations of broadcast stations. The FCC has modified its rules which restrict network participation in program production and syndication, an action which is the subject of pending review proceedings. The Supreme Court has 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 FCC has adopted rules to implement the Children's Television Act of 1990, which, among other provisions, 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. 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 television systems and requiring mid-license term review of television stations' equal employment opportunity practices. Certain provisions of the 1992 Cable Act, including the provisions respecting cable systems' carriage of local television stations, are the subject of pending judicial review proceedings. The FCC has also modified its rules to enable local telephone companies to provide a "video dialtone" service that would be similar to the ordinary telephone dialtone and would provide access for 4 7 consumers to a wide variety of services including video programming. This decision is the subject of pending judicial review proceedings. Proposals for additional or revised regulations and requirements are pending before and are being considered by Congress and federal regulatory agencies from time to time. The FCC is at present considering modification or elimination of rules respecting territorial exclusivity in non-network program arrangements; rules relating to telephone company ownership of cable television systems; and policies with respect to high definition television. The Company cannot predict the effect of existing and proposed federal regulations and policies on its broadcast business. 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. Also, various of the foregoing matters are now, or may become, the subject of court litigation, and the Company cannot predict the outcome of any such litigation or the impact on its broadcast business. EMPLOYEE RELATIONS As of December 31, 1993, the Company had 2,863 full-time employees. There are 37 full-time and 17 part-time composing room employees of The Dallas Morning News represented by a union. The union contract covering these employees expires on June 19, 1994. There are 28 full-time and one part-time television broadcasting employees of WFAA-TV represented by a union under a contract that expires on September 11, 1994. ITEM 2. PROPERTIES The Company's corporate offices and certain departments of The Dallas Morning News are located in downtown Dallas in a portion of a 17-story office building owned by the Company. The Company owns and operates a newspaper printing facility in Plano, Texas (the "North Plant"), in which eight high-speed offset presses are housed to print The Dallas Morning News. Expansion of these facilities to accommodate increased circulation and provide greater publishing flexibility was completed during 1993. The remainder of The Dallas Morning News' operations are housed in a Company-owned five-story building in downtown Dallas. This facility is equipped with computerized input and photocomposition facilities and other equipment that is used in the production of both news and advertising copy. DFW Suburban Newspapers, Inc. and DFW Printing Company, Inc. operations are located at a Company-owned plant in Arlington, Texas. This facility is pledged as security for certain industrial revenue bonds issued in 1985. The studios and offices of WFAA-TV occupy Company-owned facilities in downtown Dallas. The Company also owns 50 percent of the outstanding capital stock of Hill Tower, Inc. ("Hill Tower"), owner of a 1,500-foot transmitting tower and antennas located in Cedar Hill, Texas. The remaining 50 percent of Hill Tower is owned by the CBS television affiliate in Dallas, a subsidiary of Argyle Television Holdings, Inc.. This equipment is used by both WFAA and the CBS television affiliate. KHOU-TV operates from Company-owned facilities located in Houston. The station's transmitter is located near DeWalt, Texas and includes a 2,000-foot tower. The facility is wholly-owned by the Company. KXTV operates from Company-owned facilities located in Sacramento, California. The station's 2,000-foot tower and transmitter system are located in Sacramento County, California. The tower and transmitter building are owned by a joint venture between the Company and a subsidiary of Anchor Media, Ltd., which owns and operates the ABC television affiliate in Stockton. KXTV leases the transmitter site from the joint venture. WVEC-TV operates from Company-owned facilities in Hampton and Norfolk, Virginia. The Company-owned transmitting facilities include a 980-foot tower and antenna in Driver, Virginia. WVEC also leases additional building space adjacent to the Company-owned facilities, which houses the marketing and business departments. 5 8 KOTV operates from Company-owned facilities located in Tulsa, Oklahoma. The station's transmitting system is located near Tulsa. The transmitter site and 1,839-foot tower are owned by a joint venture between the Company and Scripps Howard Inc., owner and operator of the NBC television affiliate in Tulsa. The balance of KOTV's transmitting equipment is owned by the station. All of the foregoing subsidiaries have additional leasehold interests that are used in their respective operations. The Company also owns certain land and a building located near downtown Dallas that were acquired from the Dallas Times Herald in December 1991. Sale of this property is expected to be completed in 1994. The Company believes its properties are in good condition and 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. In the opinion of management, liabilities, if any, arising from these actions are either covered by insurance or would not have a material adverse effect on the operations 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 security holders, through the solicitation of proxies or otherwise, during the fourth quarter of the fiscal year covered by this Form 10-K. 6 9 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's authorized common equity consists of 150 million shares of Common Stock, par value $1.67 per share. Currently, 50 million shares are designated as Series A Common Stock and 15 million shares are designated as Series B Common Stock. The Series A and Series B shares are identical in all respects except that Series B shares are entitled to ten 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; and Series B shares are convertible at any time on a one-for-one basis into Series A shares. Shares of the Company's Series A Common Stock are traded on the New York Stock Exchange (NYSE symbol: BLC). The following table lists the high and low closing prices and last sale prices for Series A Common Stock as reported by the New York Stock Exchange for the last two years.
------------------------------------------------------------------------------------------ DIVIDEND HIGH LOW CLOSE PAID ------------------------------------------------------------------------------------------ 1993 Fourth Quarter 53 44 1/4 53 .14 Third Quarter 49 5/8 45 1/4 46 3/8 .14 Second Quarter 48 3/4 39 3/4 46 3/4 .14 First Quarter 42 5/8 38 3/4 40 1/4 .14 ------------------------------------------------------------------------------------------ 1992 Fourth Quarter 46 39 1/4 42 .14 Third Quarter 46 3/4 41 1/4 42 3/4 .14 Second Quarter 44 1/4 34 3/8 44 .13 First Quarter 38 1/2 30 3/4 35 .13 ------------------------------------------------------------------------------------------
On February 28, 1994, the closing price for the Company's Series A Common Stock, as reported on the New York Stock Exchange, was $52 1/4 and the approximate number of shareholders of record of the Series A Common Stock at the close of business on such date was 720. There is no established public trading market for shares of Series B Common Stock, and such shares are subject to significant restrictions on transfer. Series B shares, however, are convertible at any time into Series A shares on a one-for-one basis. On February 28, 1994, there were approximately 589 holders of record of shares of Series B Common Stock. ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------------------------------------- Dollars in thousands, except per share amounts 1993 1992 1991 1990 1989 - --------------------------------------------------------------------------------------------------------------- Newspaper publishing revenues $335,642 $314,701 $249,737 $246,493 $237,921 Broadcasting revenues 209,193 201,241 181,848 192,567 179,187 - --------------------------------------------------------------------------------------------------------------- Net operating revenues $544,835 $515,942 $431,585 $439,060 $417,108 Net earnings (A) $ 51,077 $ 37,170 $ 12,392 $ 29,591 $ 23,394 Per share amounts: Net earnings per common and common equivalent share $ 2.53 $ 1.90 $ .65 $ 1.55 $ 1.16 Cash dividends declared $ .56 $ .54 $ .52 $ .48 $ .44 - --------------------------------------------------------------------------------------------------------------- Total assets (B) $796,156 $758,527 $746,384 $694,255 $701,250 Long-term debt $277,400 $302,151 $337,100 $280,054 $291,011 - ---------------------------------------------------------------------------------------------------------------
(A) Net earnings for 1993 includes an increase of $6,599,000 (33 cents per share) representing the cumulative effect of adopting Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", effective January 1, 1993. (B) In December 1991, the Company purchased substantially all of the operating assets of the Dallas Times Herald newspaper for $55,673,000. Also see accompanying Management's Discussion and Analysis of Financial Condition and Results of Operations and Notes to Consolidated Financial Statements. 7 10 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES During 1993, net cash provided by operations was $84,818,000, compared to $78,336,000 in 1992. Cash from operations continues to be Belo's primary source of liquidity. The $6,482,000 increase in net cash provided by operations from 1992 to 1993 resulted primarily from increased earnings and lower payments for taxes. In 1993, cash provided by operations was sufficient to fund capital expenditures and dividends on common stock and to make unscheduled repayments of long-term debt. An additional $17,242,000 was generated through the exercise of stock options in 1993, which was also used to pay down debt. At December 31, 1993, Belo had access to a $450,000,000 variable rate revolving credit agreement on which borrowings at that time were $250,000,000. Belo also uses short-term unsecured notes from time to time as a source of financing temporary cash requirements, when rates are favorable. At December 31, 1993, Belo had $21,000,000 of such short-term notes outstanding. On January 15, 1993, Belo retired its 9.45% Notes due in 1993 in the amount of $100,000,000 by borrowing under its revolving credit agreement and in December 1993, another $100,000,000 in 8 5/8% debt was redeemed, also with proceeds from the revolving credit agreement. During 1993, Belo entered into agreements that cap at 6 percent the interest on $75,000,000 of variable rate borrowings. These agreements expire in 1996. Capital expenditures in 1993 were $60,169,000 (excluding $1,961,000 of capitalized interest) compared to $26,750,000 (excluding $395,000 of capitalized interest) in 1992. Nearly 45 percent of these expenditures were for the expansion of The Dallas Morning News' North Plant production facility. The expansion project was substantially completed in the third quarter of 1993 and provides increased press capacity and greater publishing flexibility. Other significant capital additions for 1993 include the replacement of the news department computer system of The Dallas Morning News, expansion and renovation of certain Belo broadcast station facilities and completion of a new transmitter at the Virginia station. In addition, Belo purchased the building in which its corporate offices and several departments of The Dallas Morning News are located. The Company expects to finance future capital expenditures using net cash generated from operations and, when necessary, bank borrowings. Required future payments for capital expenditures in 1994 are $9,992,000 and total capital expenditures in 1994 are expected to be approximately $50,000,000. Dividends of $11,128,000 were paid in 1993 compared to $10,381,000 in 1992. These 1993 dividends represent a total of 56 cents per share of outstanding Series A and Series B Common Stock. Dividends of 54 cents per share were paid in 1992. On December 31, 1993, Belo's ratio of long-term debt to total capitalization was 44.5 percent, compared to 51.8 percent at the end of 1992. The improvement in 1993 is primarily due to earnings in excess of dividend payments, funds generated through the exercise of stock options, and a $25,000,000 reduction in long-term debt. In December 1993, the Board of Directors authorized purchases of up to 1,000,000 shares of the Company's Series A Common Stock from time to time. The Company has the authority to purchase approximately 357,000 shares remaining from a previous Board authorization. In addition, the Company has in place a repurchase program authorizing the purchase of up to $2,500,000 of Company stock annually. Belo believes that its present financial condition and credit relationships will enable it to adequately meet its current obligations and provide for future growth. 8 11 RESULTS OF OPERATIONS Belo recorded 1993 net earnings of $51,077,000 or $2.53 per share, compared to $37,170,000 ($1.90 per share) in 1992 and $12,392,000 (65 cents per share) in 1991. Earnings in 1993 were affected by certain nonrecurring items, including a $6,599,000 increase (33 cents per share) representing the cumulative effect of adopting Statement of Financial Accounting Standards ("SFAS") No. 109 in January 1993. This increase was partially offset in the third quarter when Belo recorded a $2,249,000 (11 cents per share) adjustment to deferred taxes following an increase in the federal income tax rate from 34 percent to 35 percent. Also included in 1993 earnings is a fourth quarter restructuring charge of $5,822,000 (19 cents per share), related primarily to the write-off of goodwill and a reduction in the carrying value of production assets associated with the newspaper operations of Dallas-Fort Worth Suburban Newspapers, Inc. ("DFWSN"), a wholly-owned subsidiary of Belo. The production assets adjusted include building and improvements and publishing equipment. The restructuring decision was made in an effort to streamline operations and reduce costs of DFWSN's newspaper publishing and commercial printing operations. The restructuring was substantially completed in January 1994. In the fourth quarter, Belo reversed certain music license fee accruals totaling $3,349,000 (10 cents per share). This action was in response to an agreement between the All Industry Television Music License Committee and the American Society of Composers, Authors and Publishers, defining the formula used to compute licensing fees for the use of certain music in television broadcasts from 1984 to 1994. The formula was approved by a New York Federal District Court Magistrate in the fourth quarter. Net earnings for 1993 excluding the above special items were $2.40 per share. In 1992, net earnings of $37,170,000 or $1.90 cents per share, included a $4,019,000 (16 cents per share) increase in earnings before taxes from a property damage settlement with the United States Navy. Excluding this one-time gain, 1992 earnings were $1.74 per share. Net earnings in 1991 were hampered by an overall weak economy, especially in Texas, where Belo's three largest subsidiaries operate. Earnings for 1991 were also affected by several items, including a favorable Internal Revenue Service ("IRS") settlement which increased net earnings by $6,787,000. Offsetting this amount, however, were a number of unusual one-time charges, including a $4,000,000 unfavorable judgment in a lawsuit against one of Belo's broadcast subsidiaries; a $4,000,000 reserve for a note receivable related to a previous asset sale; a $1,500,000 settlement of an antitrust lawsuit; a $1,384,000 provision for post-retirement benefits; a $1,259,000 write-down of certain broadcast film contract rights; and $1,241,000 in early retirement charges. The net effect on 1991 earnings of these unusual items was a decrease of 7 cents per share. Excluding these items, earnings for 1991 were 72 cents per share. Interest expense in 1993 was 37.8 percent less than 1992 interest expense. The most significant contributing factor to the current year savings was lower interest rates. In January 1993, Belo replaced $100,000,000 of 9.45 percent notes with proceeds from the revolving credit agreement, which had an average interest rate of 3.7 percent during 1993. A similar financing of debt took place in December 1993, when $100,000,000 of 8 5/8 percent notes were redeemed using proceeds from the revolving credit agreement. Also contributing to the decrease in 1993 interest expense was Belo's lower average debt outstanding and the capitalization of $1,961,000 of interest in 1993 versus 1992 capitalized interest of $395,000. Interest expense in 1992 was relatively unchanged when compared to 1991 interest expense. Other income and expense in 1993 includes a $986,000 gain on the sale of two parcels of non-operating real estate and several smaller, individually insignificant items. As noted earlier, 1992's other income and expense included a gain of $4,019,000 before taxes, related to a property damage settlement with the United States Navy. Other income and expense for 1991 included the $4,000,000 reserve for a note receivable and $1,500,000 for the settlement of an antitrust lawsuit. The Company's effective tax rate in 1993 was 41.1 percent, which compares to 39.6 percent in 1992 and 33.4 percent in 1991. The effective rate in 1993 was affected by an increase in the federal income tax rate, which resulted in an increase in current tax expense and a $2,249,000 increase in deferred tax expense to adjust deferred taxes to the 35 percent rate. The 1993 rate was favorably impacted by the reversal of certain tax accruals as a result of new tax legislation regarding amortization of intangibles. The effective rate in 1991 was favorably impacted by reversals of tax accruals related to IRS settlements. 9 12 NEWSPAPER PUBLISHING In 1993, newspaper publishing revenues represented 61.6 percent of consolidated revenues, compared to 61 percent in 1992 and 57.9 percent in 1991. The composition of revenues in each of these three years was essentially the same, with advertising accounting for approximately 87 percent, circulation 11 percent and other publishing revenues, primarily commercial printing, 2 percent. Newspaper advertising volume for The Dallas Morning News, Belo's principal newspaper, is measured in column inches. Volume for the last three years was comprised as follows:
---------------------------------------------------------------------------------------------------- In thousands 1993 1992 1991 ---------------------------------------------------------------------------------------------------- Full-run ROP inches: Classified 2,068.8 1,997.6 1,888.3 Retail 1,661.5 1,640.6 1,623.7 General 262.1 279.9 270.4 ---------------------------------------------------------------------------------------------------- Total 3,992.4 3,918.1 3,782.4 ----------------------------------------------------------------------------------------------------
Total publishing revenues in 1993 were $335,642,000, up 6.7 percent from revenues of $314,701,000 earned in 1992. Classified advertising revenues were nearly 11 percent better than last year due to both linage and rate increases. The increase in linage was primarily attributable to automotive and employment advertising. Retail and general advertising revenues also improved in 1993 relative to 1992, primarily due to increased rates. Circulation revenues increased 5.9 percent in 1993 primarily from a January 1, 1993 increase in the price of a Sunday single-copy and the weekend subscription rate. Revenues in 1992 of $314,701,000 improved 26 percent over 1991 revenues of $249,737,000. Higher advertising volumes, combined with rate increases, generated the 1992 advertising revenue improvement. Average circulation increased by approximately 25 percent daily and 30 percent Sunday after the December 1991 closure of the Dallas Times Herald. Based primarily on this increased circulation, the Company announced a 15 percent rate increase across substantially all advertising categories, effective on January 15, 1992. Additional rate increases ranging from 6.5 percent to 11.5 percent were announced in the third quarter of 1992. The Company also experienced volume gains in all advertising categories, with the most significant increases in general and classified advertising. The Company believes that its advertising rates continue to compare favorably with competing media and have not negatively affected advertising volumes. Future demand for advertising in the Dallas-Fort Worth area will continue to depend on general economic conditions of the Southwest region and the United States as a whole. Management further believes that increased circulation from the conversion of former Dallas Times Herald readers was substantially realized in 1992. Thus, the ability of the Company to generate continued growth in circulation and advertising revenues will likely depend on the ability of its newspapers to compete successfully in the highly competitive Dallas-Fort Worth media market, where numerous news and advertising alternatives are available. In addition, various market and demographic factors, such as circulation and readership trends, retail sales activity, inflation and population growth will also affect future revenues. Earnings from newspaper publishing operations in 1993 were $44,293,000 after a $5,822,000 restructuring charge related to DFWSN. Excluding the restructuring charge, earnings were $50,115,000, an increase of 16.6 percent from 1992. While total publishing revenues increased 6.7 percent, operating expenses (excluding the charge) increased only 5.1 percent, resulting in an operating margin of 14.9 percent versus 13.7 percent in 1992. Salaries, wages and employee benefits rose primarily as a result of merit increases and an increase in the number of full-time employees. Newsprint expense was up due to both increased consumption associated with the linage increase and a higher average cost per ton. Contributing to the increase in linage was the publishing of special sports sections in connection with the Dallas Cowboys' appearance in the Super Bowl. The volume variance accounted for approximately 60 percent of the overall increase in newsprint expense. In addition, expansion of delivery routes resulted in increased distribution expenses. Depreciation expense was higher in 1993 than in 1992 following the completion of The Dallas Morning News North Plant expansion project. Partially offsetting these increases were savings in outside services, bad debt expense and property taxes. 10 13 Earnings from publishing operations increased to $42,974,000 in 1992 from $21,417,000 in 1991, resulting in operating margins of 13.7 percent and 8.6 percent, respectively. Revenue increases outpaced higher operating costs, resulting in operating margin improvement. The 1992 increase in salaries, wages and employee benefits was from merit increases, more employees, higher benefit costs and incentive bonuses. Newsprint consumed, and consequently newsprint costs, were higher in 1992 compared to 1991 due to the increase in circulation mentioned before. However, a significant decline in the average price of newsprint in 1992 helped to mitigate the volume variance. Amortization of intangibles was included in 1992 earnings from newspaper publishing operations for the first time following the December 1991 purchase of an intangible asset from the Dallas Times Herald. BROADCASTING Belo's five television broadcast subsidiaries contributed 38.4 percent of total 1993 revenues compared to 39 percent in 1992 and 42.1 percent in 1991. Broadcast revenues for 1993 of $209,193,000 increased 4 percent over 1992 revenues of $201,241,000. In 1992, revenues improved 10.7 percent from the $181,848,000 of the previous year. Broadcast revenues for the last three years were derived as follows:
-------------------------------------------------------------------------------- 1993 1992 1991 -------------------------------------------------------------------------------- National advertising 48% 47% 48% Local advertising 42% 41% 41% Other revenue 10% 12% 11% --------------------------------------------------------------------------------
The broadcast revenue mix has been relatively stable over the last three years, with a slight variation in 1992 other revenue due to higher political advertising. Local and national advertising revenues in 1993 increased 6.2 percent and 6.6 percent, respectively, compared to 1992 revenues. Stations in Houston, Virginia and Tulsa combined for an overall revenue gain of $9,266,000 while Dallas station revenues were relatively flat and the California station experienced a slight revenue decline. In 1993, all of Belo's broadcast stations with the exception of the Dallas station experienced an increase in local advertising revenues. National advertising revenues increased at all but Belo's California station. Contributing factors to the 1993 improvements include strong ratings performances, healthier local economies and competitive pricing strategies. The industry categories contributing the most to advertising revenues were restaurants, automobiles, department stores and health care. Partially offsetting these revenue gains, however, were a significant decrease in political advertising compared to 1992, a weaker California economy and the effect of competitive forces. The favorable revenue performance in 1992 compared to 1991 was due to improved demand for both local and national advertising, combined with a higher than expected volume of political advertising for national, state and local elections. Political revenues in 1992 were $4,780,000 higher than in 1991, accounting for 25 percent of the overall year-to-year increase. National and local advertising increased by 9.8 percent and 9 percent, respectively, in 1992 from 1991. National advertising revenues were higher in 1992, due, in part, to broadcast of the Super Bowl and Winter Olympics by Belo's three CBS-affiliated stations. Broadcast earnings from operations for 1993 were $63,240,000, including a $3,349,000 increase related to the reversal of certain music license fee accruals. Excluding the music license fee adjustment, earnings from broadcast operations were $59,891,000 compared to $56,461,000 in 1992, an increase of 6.1 percent. In addition to the overall 4 percent increase in revenues, operating costs increased only 3.3 percent, excluding the music license fee adjustment. Contributing to the increase in 1993 expenses were higher salaries, wages and employee benefits due to merit increases, higher benefit costs and an increase in the number of employees in the broadcast division. Communications and travel expenses were higher in 1993 than in 1992 due to coverage of significant news stories, including the Dallas Cowboys' trip to the 1993 Super Bowl, the Presidential Inauguration, and the Branch Davidian story in Waco, Texas. These increases were partially offset by savings in 1993 programming expense. Earnings from broadcast operations were $56,461,000 in 1992, compared with $41,553,000 in 1991. The 1991 broadcast earnings were reduced by several one-time charges, including a $4,000,000 charge for an unfavorable judgment in an employment-related lawsuit, a $1,259,000 write-down of certain broadcast film contract rights and a $788,000 charge for early retirement costs. Excluding these items, comparable earnings increased by $8,861,000 in 1992 from 1991. The increase in broadcast earnings resulted from the $19,393,000 increase in revenues, partially offset by increases in salary and benefit costs due to merit increases, health care expenses and incentive compensation. 11 14 In recent years, the television broadcast industry has been affected by increased competition for viewing audiences. Belo continues to compete aggressively for advertisers and viewing audiences in markets that offer many alternative media outlets. Future earnings growth will likely depend on the ability to offer competitive audience delivery to advertisers and on general economic conditions. OTHER MATTERS On February 23, 1994, Belo announced an agreement in principle to purchase the assets of WWL-TV, the CBS affiliate in New Orleans, Louisiana for $110,000,000. Belo intends to borrow funds from its revolving credit agreement to complete the transaction. The transaction, which is subject to the signing of a definitive agreement, as well as customary closing conditions, including approval by appropriate government agencies, will be accounted for as a purchase. The Company expects that a definitive agreement will be entered into by early spring and that the transaction will be completed during the third quarter of 1994. At the end of 1993, Belo adjusted the discount rate used in computing the accumulated pension benefit obligation from 9 percent to 7.5 percent and changed the expected rate of return on plan assets from 11 percent to 10.25 percent. The effect of these changes is expected to increase 1994 pension costs by approximately $2,000,000. In 1993, the Financial Accounting Standards Board released SFAS No. 112, "Employers' Accounting for Postemployment Benefits." The requirements of the standard, which relate primarily to workers' compensation, disability, severance pay and other benefits provided after employment but before retirement, do not differ significantly from existing accounting practices employed by the Company. Therefore, planned adoption of the standard in January 1994 is not expected to significantly affect the Company's net earnings. In the Cable Television Consumer Protection and Competition Act of 1992, Congress gave commercial broadcast stations new rights with respect to cable television systems located in the television markets they serve. Under this new law, each commercial broadcast station has the right, at its election, either to demand that their signal be carried on local cable television systems or, alternatively, to require these cable systems to obtain the station's consent in order to retransmit the broadcast station's signal. The Company's broadcast stations have elected the retransmission consent right with respect to most local cable systems. The Company's broadcast stations have completed agreements granting retransmission consent in exchange for various forms of consideration with substantially all of the cable systems in the television markets in which such stations are located. While some of these agreements are short-term, expiring within the next few months, the Company anticipates that it will be able to replace these with longer-term agreements before their expiration. The net effect of inflation on Belo's operations and net income has not been material in the last few years because of a relatively low rate of inflation during this period and because of efforts to lessen the effect of rising costs through a strategy of improved productivity, cost control and, when warranted, increased prices. 12 15 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements, together with the report of independent auditors and financial statement schedules, are included on pages 21 through 42 of this document. Financial statement schedules other than those included have been omitted because the required information is contained in the consolidated financial statements or related notes, or such information is not applicable. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. 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 and Principal Shareholders," "Executive Officers of the Company" and "Election of Directors" contained in the definitive Proxy Statement for the Company's Annual Meeting of Shareholders to be held on May 4, 1994, is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information set forth under the heading "Executive Compensation and Other Matters" and "Election of Directors" contained in the definitive Proxy Statement for the Company's Annual Meeting of Shareholders to be held on May 4, 1994, is incorporated herein by reference. 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 and Principal Shareholders" in the definitive Proxy Statement for the Company's Annual Meeting of Shareholders to be held on May 4, 1994, is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information set forth under the headings "Executive Compensation and Other Matters" and "Election of Directors" contained in the definitive Proxy Statement for the Company's Annual Meeting of Shareholders to be held on May 4, 1994, is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) (1) The financial statements listed in the Index to Financial Statements and Schedules included in the Table of Contents are filed as part of this report. (2) The schedules listed in the Index to Financial Statements and Schedules included in the Table of Contents are filed as part of this report. (3) Exhibits Certain of the exhibits to this report are hereby incorporated by reference, as specified: 13 16 EXHIBIT NUMBER DESCRIPTION - ------- ----------- 3.1 Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K dated March 19, 1992 (the "1991 Form 10-K")) 3.2 Certificate of Correction to Certificate of Incorporation dated May 13, 1987 (incorporated by reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K dated March 18, 1993 (the "1992 Form 10-K")) 3.3 Certificate of Designation of Series A Junior Participating Preferred Stock of the Company dated April 16, 1987 (incorporated by reference to Exhibit 3.3 to the 1991 Form 10-K) 3.4 Certificate of Amendment of Certificate of Incorporation of the Company dated May 4, 1988 (incorporated by reference to Exhibit 3.4 to the 1992 Form 10-K) 3.5 Amended Certificate of Designation of Series A Junior Participating Preferred Stock of the Company dated May 4, 1988 (incorporated by reference to Exhibit 3.5 to the 1992 Form 10-K) 3.6 Certificate of Designation of Series B Common Stock of the Company dated May 4, 1988 (incorporated by reference to Exhibit 3.6 to the 1992 Form 10-K) 3.7 Bylaws of the Company, effective December 16, 1992 (incorporated by reference to Exhibit 3.7 to the 1992 Form 10-K) 4.1 Certain rights of the holders of the Company's Common Stock are set forth in Exhibits 3.1-3.6 above 4.2 Specimen Form of Certificate representing shares of the Company's Series A Common Stock (incorporated by reference to Exhibit 4.2 to the 1992 Form 10-K) 4.3 Specimen Form of Certificate representing shares of the Company's Series B Common Stock (incorporated by reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K dated March 20, 1989) 4.4 Form of Rights Agreement, dated March 10, 1986 between the Company and RepublicBank Dallas, National Association as Rights Agent, which includes as Exhibit B thereto the Form of Right Certificate (incorporated by reference to Exhibit 4.8 to the 1991 Form 10-K) 4.5 Supplement No. 1 to Rights Agreement (incorporated by reference to Exhibit 4.9 to the 1991 Form 10-K) 4.6 Supplement No. 2 to Rights Agreement (incorporated by reference to Exhibit 4.9 to the 1992 Form 10-K) 4.7 Supplement No. 3 to Rights Agreement (incorporated by reference to Exhibit 4.10 to the 1992 Form 10-K) 4.8 Supplement No. 4 to Rights Agreement dated December 12, 1988 substituting Manufacturers Hanover Trust Company as Rights Agent 4.9 Supplement No. 5 to Rights Agreement (incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1993) 10.1 Contracts relating to television broadcasting: (1) Contract for Affiliation between KOTV in Tulsa, Oklahoma and CBS, with Network Affiliation Consent (incorporated by reference to Exhibit 10.1(1) to the 1991 Form 10-K) (2) Contract for Affiliation between KHOU-TV in Houston, Texas and CBS, with Network Affiliation Consent (incorporated by reference to Exhibit 10.1(2) to the 1991 Form 10-K) 14 17 EXHIBIT NUMBER DESCRIPTION ------- ----------- (3) Letter Amendment, dated June 11, 1993, to Contract for Affiliation between KHOU-TV in Houston, Texas and CBS (4) Contract for Affiliation between KXTV in Sacramento, California and CBS (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1993 (the "First Quarter 1993 Form 10-Q")) (5) Contract for Affiliation between WFAA-TV in Dallas, Texas and ABC, with Network Affiliation Consent (incorporated by reference to Exhibit 10.1(4) to the Company's Annual Report on Form 10-K dated March 28, 1991 (the "1990 Form 10-K")) (6) Rider One to Contract for Affiliation between WFAA-TV in Dallas, Texas and ABC (incorporated by reference to Exhibit 10.1 to the First Quarter 1993 Form 10-Q) (7) Contract for Affiliation between WVEC-TV in Hampton-Norfolk, Virginia and ABC, with Network Affiliation Consent (incorporated by reference to Exhibit 10.1(5) to the 1991 Form 10-K) 10.2 Contracts relating to newspaper publication: (1) Founding agreement dated July 28, 1987 between the Company and Newsprint South, Inc. for newsprint supply (incorporated by reference to Exhibit 10.2(2) to the 1990 Form 10-K) (2) Amendment to the founding agreement dated June 30, 1990 between the Company and Newsprint South, Inc. for newsprint supply (incorporated by reference to Exhibit 10.2(3) to the 1990 Form 10-K) 10.3 (1) Management Security Plan (incorporated by reference to Exhibit 10.4(1) to the 1991 Form 10-K) (2) Stock Option Plan (incorporated by reference to Exhibit 10.4(2) to the 1991 Form 10-K) (3) Amendment to Stock Option Plan by the Compensation Committee of the Board of Directors (incorporated by reference to Exhibit 10.4(3) to the 1991 Form 10-K) (4) Amendments to Stock Option Plan (incorporated by reference to Exhibit 10.4(4) to the 1991 Form 10-K) (5) Amendment to Stock Option Plan dated December 19, 1986 (incorporated by reference to Exhibit 10.4(5) to the 1991 Form 10-K) (6) Amendment to Stock Option Plan dated February 22, 1989 (7) 1986 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.4(7) to the 1991 Form 10-K) (8) Amendment No. 1 to 1986 Long-Term Incentive Plan dated October 22, 1986 (incorporated by reference to Exhibit 10.4(8) to the 1991 Form 10-K) (9) Amendment No. 2 to 1986 Long-Term Incentive Plan effective January 1, 1987 (incorporated by reference to Exhibit 10.3(9) to the 1992 Form 10-K) (10) Amendment No. 3 to 1986 Long-Term Incentive Plan dated May 4, 1988 15 18 EXHIBIT NUMBER DESCRIPTION ------- ----------- (11) Amendment No. 4 to 1986 Long-Term Incentive Plan dated May 13, 1988 (12) Amendment No. 5 to 1986 Long-Term Incentive Plan dated February 22, 1989 (13) Amendment No. 6 to 1986 Long-Term Incentive Plan dated May 6, 1992 (incorporated by reference to Exhibit 10.3(13) to the 1992 Form 10-K) (14) The A. H. Belo Corporation Employee Savings and Investment Plan (incorporated by reference to Exhibit 10.4(13) to the Company's Annual Report on Form 10-K dated March 27, 1990 (the "1989 Form 10-K")) (15) First Amendment to the A. H. Belo Corporation Employee Savings and Investment Plan, dated January 29, 1992 (incorporated by reference to Exhibit 10.3(15) to the 1992 Form 10-K) (16) Second Amendment to the A. H. Belo Corporation Employee Savings and Investment Plan, dated October 22, 1992 (incorporated by reference to Exhibit 10.3(16) to the 1992 Form 10-K) (17) Third Amendment to the A. H. Belo Corporation Employee Savings and Investment Plan (incorporated by reference to Exhibit 10.2 to the First Quarter 1993 Form 10-Q) (18) Fourth Amendment to the A. H. Belo Corporation Employee Savings and Investment Plan (incorporated by reference to Exhibit 4.14 to Post-Effective Amendment No. 1 to Form S-8 (Registration No. 33-30994)) (19) Fifth Amendment to the A. H. Belo Corporation Employee Savings and Investment Plan (20) The G. B. Dealey Retirement Pension Plan (as amended and restated effective January 1, 1988) (21) First Amendment to the G. B. Dealey Retirement Pension Plan (22) Second Amendment to the G. B. Dealey Retirement Pension Plan (23) Third Amendment to the G. B. Dealey Retirement Pension Plan (24) Fourth Amendment to the G. B. Dealey Retirement Pension Plan (25) Fifth Amendment to the G. B. Dealey Retirement Pension Plan (26) Master Trust Agreement, effective as of July 1, 1992, between A. H. Belo Corporation and Mellon Bank, N. A. (27) A. H. Belo Corporation Supplemental Executive Retirement Plan (28) Trust Agreement dated February 28, 1994, between the Company and Mellon Bank, N. A. (29) Summary of A. H. Belo Corporation Executive Compensation Program (incorporated by reference to Exhibit 10.3(18) to the 1992 Form 10-K) (30) Employment and Consultation Agreement between A. H. Belo Corporation and James P. Sheehan (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1993) 10.4 (1) Credit Agreement dated October 27, 1988, between the Company and The First National Bank of Chicago as Managing Agent (incorporated by reference to Exhibit 10.4(1) to the 1992 Form 10-K) 16 19 EXHIBIT NUMBER DESCRIPTION ------- ----------- (2) Amendment No. 1 to 1988 Credit Agreement between the Company and The First National Bank of Chicago as Managing Agent dated November 8, 1989 (incorporated by reference to Exhibit 10.5(4) to the 1990 Form 10-K) (3) Amendment No. 2 to 1988 Credit Agreement between the Company and The First National Bank of Chicago as Managing Agent dated April 24, 1991 (incorporated by reference to Exhibit 10.5(5) to the 1991 Form 10-K) (4) Amendment Agreement dated May 14, 1992, between the Company and The First National Bank of Chicago as Managing Agent (incorporated by reference to Exhibit 10.4(4) to the 1992 Form 10-K) (5) Amendment Agreement dated November 6, 1992, between the Company and The First National Bank of Chicago as Managing Agent (incorporated by reference to Exhibit 10.4(5) to the 1992 Form 10-K) (6) Loan Agreement dated October 1, 1985, between City of Arlington Industrial Development Corporation and Dallas-Fort Worth Suburban Newspapers, Inc. (incorporated by reference to Exhibit 10.5(2) to the 1991 Form 10-K) (7) Letter of Credit and Reimbursement Agreement dated as of June 2, 1987, between Dallas-Fort Worth Suburban Newspapers, Inc. and The Sanwa Bank, Limited, Dallas Agency covering $6,400,000 City of Arlington Industrial Development Corporation Industrial Development Revenue Bonds (incorporated by reference to Exhibit 10.5(3) to the 1991 Form 10-K) (8) Amendment and Waiver Agreement dated as of December 30, 1992, by and between the Company and The Sanwa Bank, Limited, Dallas Agency (incorporated by reference to Exhibit 10.4(8) to the 1992 Form 10-K) 10.5 Joint Venture Agreement dated August 1, 1989, between the Company and Universal Press Syndicate (incorporated by reference to Exhibit 10.6 to the 1989 Form 10-K) 21 Subsidiaries of the Company 23 Consent of Ernst & Young Executive Compensation Plans and Arrangements: Management Security Plan--1991 Form 10-K, Exhibit 10.4(1) Stock Option Plan--1991 Form 10-K, Exhibit 10.4(2) Amendment to Stock Option Plan by the Compensation Committee of the Board of Directors--1991 Form 10-K, Exhibit 10.4(3) Amendments to Stock Option Plan--1991 Form 10-K, Exhibit 10.4(4) Amendment to Stock Option Plan dated December 19, 1986--1991 Form 10-K, Exhibit 10.4(5) Amendment to Stock Option Plan dated February 22, 1989--filed herewith as Exhibit 10.3(6) 1986 Long-Term Incentive Plan--1991 Form 10-K, Exhibit 10.4(7) 17 20 Amendment No. 1 to 1986 Long-Term Incentive Plan dated October 22, 1986-- 1991 Form 10-K, Exhibit 10.4(8) Amendment No. 2 to 1986 Long-Term Incentive Plan effective January 1, 1987-- 1992 Form 10-K, Exhibit 10.3(9) Amendment No. 3 to 1986 Long-Term Incentive Plan dated May 4, 1988--filed herewith as Exhibit 10.3(10) Amendment No. 4 to 1986 Long-Term Incentive Plan dated May 13, 1988--filed herewith as Exhibit 10.3(11) Amendment No. 5 to 1986 Long-Term Incentive Plan dated February 22, 1989 --filed herewith as Exhibit 10.3(12) Amendment No. 6 to 1986 Long-Term Incentive Plan dated May 6, 1992--1992 Form 10-K Exhibit 10.3(13) The A. H. Belo Corporation Employee Savings and Investment Plan--1989 Form 10-K, Exhibit 10.4(13) First Amendment to the A. H. Belo Corporation Employee Savings and Investment Plan, dated January 29, 1992--1992 Form 10-K, Exhibit 10.3(15) Second Amendment to the A. H. Belo Corporation Employee Savings and Investment Plan, dated October 22, 1992--1992 Form 10-K, Exhibit 10.3(16) Third Amendment to the A. H. Belo Corporation Employee Savings and Investment Plan--First Quarter 1993 Form 10-Q, Exhibit 10.2 Fourth Amendment to the A. H. Belo Corporation Employee Savings and Investment Plan--Post-Effective Amendment No. 1 to Form S-8, Exhibit 4.14 Fifth Amendment to the A. H. Belo Corporation Employee Savings and Investment Plan--filed herewith as Exhibit 10.3(19) The G. B. Dealey Retirement Pension Plan (as amended and restated effective January 1, 1988)--filed herewith as Exhibit 10.3(20) First Amendment to the G. B. Dealey Retirement Pension Plan--filed herewith as Exhibit 10.3(21) Second Amendment to the G. B. Dealey Retirement Pension Plan--filed herewith as Exhibit 10.3(22) Third Amendment to the G. B. Dealey Retirement Pension Plan--filed herewith as Exhibit 10.3(23) Fourth Amendment to the G. B. Dealey Retirement Pension Plan--filed herewith as Exhibit 10.3(24) Fifth Amendment to the G. B. Dealey Retirement Pension Plan--filed herewith as Exhibit 10.3(25) A. H. Belo Corporation Supplemental Executive Retirement Plan--filed herewith as Exhibit 10.3(27) Summary of A. H. Belo Corporation Executive Compensation Program--1992 Form 10-K, Exhibit 10.3(18) Employment and Consultation Agreement between A. H. Belo Corporation and James P. Sheehan--Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1993, Exhibit 10.1 (b) Reports on Form 8-K. No reports on Form 8-K were filed during the last quarter of the period covered by this report. 18 21 SIGNATURES Pursuant to the requirements of Sections 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 18, 1994 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 18, 1994 Robert W. Decherd & Chief Executive Officer /S/Ward L. Huey, Jr. Vice Chairman of the March 18, 1994 Ward L. Huey, Jr. Board and President of the Company's Broadcast Division /S/Burl Osborne Director, Publisher March 18, 1994 Burl Osborne and Editor of The Dallas Morning News, Inc. /S/John W. Bassett, Jr. Director March 18, 1994 John W. Bassett, Jr. /S/Judith L. Craven, M.D., M.P.H. Director March 18, 1994 Judith L. Craven, M.D., M.P.H. /S/Joe M. Dealey Director and Former March 18, 1994 Joe M. Dealey Chairman of the Board /S/Dealey D. Herndon Director March 18, 1994 Dealey D. Herndon /S/Lester A. Levy Director March 18, 1994 Lester A. Levy /S/Arturo Madrid, Ph.D. Director March 18, 1994 Arturo Madrid, Ph.D.
19 22
SIGNATURE TITLE DATE --------- ----- ---- /S/James M. Moroney, Jr. Director and Former March 18, 1994 James M. Moroney, Jr. Chairman of the Board /S/Reece A. Overcash, Jr. Director March 18, 1994 Reece A. Overcash, Jr. /S/Hugh G. Robinson Director March 18, 1994 Hugh G. Robinson /S/William H. Seay Director March 18, 1994 William H. Seay /S/William T. Solomon Director March 18, 1994 William T. Solomon /S/Thomas B. Walker, Jr. Director March 18, 1994 Thomas B. Walker, Jr. /S/J. McDonald Williams Director March 18, 1994 J. McDonald Williams /S/Michael D. Perry Senior Vice President and March 18, 1994 Michael D. Perry Chief Financial Officer /S/Dunia A. Shive Controller March 18, 1994 Dunia A. Shive
20 23 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders A. H. Belo Corporation We have audited the accompanying consolidated balance sheets of A. H. Belo Corporation and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of earnings, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1993. Our audit also included the financial statement schedules listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. 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 A. H. Belo Corporation and subsidiaries at December 31, 1993 and 1992, and the consolidated results of their operations and cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. As discussed in Note 5 to the consolidated financial statements, effective January 1, 1993, the Company changed its method of accounting for income taxes. /s/ERNST & YOUNG Dallas, Texas January 26, 1994, except for Note 12, as to which the date is February 23, 1994. 21 24 CONSOLIDATED STATEMENTS OF EARNINGS A. H. Belo Corporation and Subsidiaries
Years ended December 31, - ----------------------------------------------------------------------------------------------------------------------------- In thousands, except per share amounts 1993 1992 1991 - ----------------------------------------------------------------------------------------------------------------------------- NET OPERATING REVENUES Newspaper publishing $ 335,642 $314,701 $249,737 Broadcasting 209,193 201,241 181,848 - ----------------------------------------------------------------------------------------------------------------------------- Total net operating revenues 544,835 515,942 431,585 - ----------------------------------------------------------------------------------------------------------------------------- OPERATING COSTS AND EXPENSES Salaries, wages and employee benefits (Note 6) 161,170 149,139 125,515 Newsprint, ink and other supplies 105,395 97,498 86,427 Other production, distribution and operating costs (Note 8) 145,310 151,640 137,722 Depreciation 25,281 23,547 22,965 Amortization 12,383 12,492 11,099 Restructuring charge (Note 2) 5,822 - - - ----------------------------------------------------------------------------------------------------------------------------- Total operating costs and expenses 455,361 434,316 383,728 - ----------------------------------------------------------------------------------------------------------------------------- Earnings from operations 89,474 81,626 47,857 - ----------------------------------------------------------------------------------------------------------------------------- OTHER INCOME AND EXPENSE Interest expense (Note 4) (15,015) (24,159) (23,882) Other, net 1,119 4,106 (5,370) - ----------------------------------------------------------------------------------------------------------------------------- Total other income and expense (13,896) (20,053) (29,252) - ----------------------------------------------------------------------------------------------------------------------------- EARNINGS Earnings before income taxes and cumulative effect of change in accounting 75,578 61,573 18,605 Income taxes (Note 5) 31,100 24,403 6,213 - ----------------------------------------------------------------------------------------------------------------------------- Earnings before cumulative effect of change in accounting 44,478 37,170 12,392 Cumulative effect of change in accounting for income taxes (Note 5) 6,599 - - - ----------------------------------------------------------------------------------------------------------------------------- Net earnings $ 51,077 $ 37,170 $ 12,392 - ----------------------------------------------------------------------------------------------------------------------------- EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE Earnings before cumulative effect of change in accounting $ 2.20 $ 1.90 $ .65 Cumulative effect of change in accounting $ .33 $ - $ - Net earnings $ 2.53 $ 1.90 $ .65 - ----------------------------------------------------------------------------------------------------------------------------- Weighted average common and common equivalent shares outstanding 20,204 19,567 19,110 - -----------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements. 22 25 CONSOLIDATED BALANCE SHEETS A. H. Belo Corporation and Subsidiaries
ASSETS December 31, - ------------------------------------------------------------------------------------------------------------------------ In thousands 1993 1992 - ------------------------------------------------------------------------------------------------------------------------ Current assets: Cash and temporary cash investments $ 8,943 $ 2,683 Accounts receivable (net of allowance of $3,684 and $3,475 in 1993 and 1992, respectively) 80,023 75,021 Inventories 11,734 8,569 Deferred income taxes (Note 5) 6,053 7,377 Other current assets 10,632 8,778 - ------------------------------------------------------------------------------------------------------------------------ Total current assets 117,385 102,428 - ------------------------------------------------------------------------------------------------------------------------ Property, plant and equipment, at cost: Land 15,065 14,575 Buildings 116,466 89,350 Newspaper publishing equipment 183,211 139,632 Broadcast equipment 93,276 87,426 Other 35,610 34,667 Advance payments on plant and equipment expenditures (Note 8) 8,679 42,136 - ------------------------------------------------------------------------------------------------------------------------ Total property, plant and equipment 452,307 407,786 Less accumulated depreciation 182,295 170,409 - ------------------------------------------------------------------------------------------------------------------------ Property, plant and equipment, net 270,012 237,377 - ------------------------------------------------------------------------------------------------------------------------ Intangible assets, net: Excess cost over values assigned to tangible assets of purchased subsidiaries 333,880 346,648 Other intangibles 20,221 21,743 - ------------------------------------------------------------------------------------------------------------------------ Total intangible assets, net 354,101 368,391 - ------------------------------------------------------------------------------------------------------------------------ Other assets, at cost (Note 6) 54,658 50,331 - ------------------------------------------------------------------------------------------------------------------------ Total assets $ 796,156 $758,527 ========================================================================================================================
23 26 CONSOLIDATED BALANCE SHEETS (CONTINUED) A. H. Belo Corporation and Subsidiaries
LIABILITIES AND SHAREHOLDERS' EQUITY December 31, - ------------------------------------------------------------------------------------------------------------------- In thousands, except share data 1993 1992 - ------------------------------------------------------------------------------------------------------------------- Current liabilities: Accounts payable $ 16,555 $ 18,296 Accrued compensation and benefits 20,092 17,626 Other accrued expenses 12,895 18,087 Accrued interest payable 2,219 5,881 Advance subscription payments 6,913 6,508 Income taxes payable (Note 5) 1,057 3,318 - ------------------------------------------------------------------------------------------------------------------- Total current liabilities 59,731 69,716 - ------------------------------------------------------------------------------------------------------------------- Long-term debt (Note 4) 277,400 302,151 Deferred income taxes (Note 5) 107,308 101,707 Other liabilities (Note 6) 5,618 3,711 Commitments and contingent liabilities (Note 8) Shareholders' equity (Notes 7 and 9): Preferred stock, $1.00 par value. Authorized 5,000,000 shares; none issued. Common stock, $1.67 par value. Authorized 150,000,000 shares; Series A: Issued 14,467,182 and 13,433,969 shares in 1993 and 1992, respectively; 24,161 22,435 Series B: Issued 5,743,099 and 6,157,489 shares in 1993 and 1992, respectively. 9,591 10,283 Additional paid-in capital 116,451 94,005 Retained earnings 201,246 161,297 - ------------------------------------------------------------------------------------------------------------------- Total 351,449 288,020 Less deferred compensation - restricted shares 5,350 6,778 - ------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 346,099 281,242 - ------------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $ 796,156 $ 758,527 - -------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements. 24 27 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY A. H. Belo Corporation and Subsidiaries
Dollars in thousands, except share and per share amounts Three years ended December 31, 1993 - ---------------------------------------------------------------------------------------------------------------------------------- COMMON STOCK TREASURY STOCK Additional Shares Shares Paid-in Retained Shares Series A Series B Amount Capital Earnings Series A Amount - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE AT JAN. 1, 1991 14,314,857 6,781,517 $35,231 $77,773 $215,663 (2,369,644) $(97,433) Exercise of stock options 52,215 96,350 247 3,119 Shares received upon cancellation of restricted shares (22,869) (720) Shares received upon exercise of options (69,752) (2,136) Restricted shares awarded 72,160 122 2,019 Amortization of restricted shares Tax benefit from long-term incentive plan 440 Purchase of treasury stock (11,600) (355) Retirement of treasury stock (2,473,865) (4,132) (12,725) (83,787) 2,473,865 100,644 Net earnings 12,392 Cash dividends declared ($.52 per share) (9,760) Conversion of Series B to Series A 210,242 (210,242) - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE AT DEC. 31, 1991 12,175,609 6,667,625 $31,468 $70,626 $134,508 - - Exercise of stock options 513,696 183,698 1,165 16,100 Restricted shares awarded 50,830 85 2,871 Amortization of restricted shares Tax benefit from long-term incentive plan 4,408 Net earnings 37,170 Cash dividends declared ($.54 per share) (10,381) Conversion of Series B to Series A 693,834 (693,834) - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE AT DEC. 31, 1992 13,433,969 6,157,489 $32,718 $94,005 $161,297 - - Exercise of stock options 505,295 87,326 990 16,252 Restricted shares awarded 37,192 62 2,576 Amortization of restricted shares Forfeiture of restricted shares (10,990) (18) (450) Tax benefit from long-term incentive plan 4,068 Net earnings 51,077 Cash dividends declared ($.56 per share) (11,128) Conversion of Series B to Series A 501,716 (501,716) - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE AT DEC. 31, 1993 14,467,182 5,743,099 $33,752 $116,451 $201,246 - - - ----------------------------------------------------------------------------------------------------------------------------------
Deferred Compensation Restricted Shares Total - ------------------------------------------------------------- BALANCE AT JAN. 1, 1991 $(7,013) $224,221 Exercise of stock options 3,366 Shares received upon cancellation of restricted shares 720 - Shares received upon exercise of options (2,136) Restricted shares awarded (2,141) - Amortization of restricted shares 1,889 1,889 Tax benefit from long-term incentive plan 440 Purchase of treasury stock (355) Retirement of treasury stock - Net earnings 12,392 Cash dividends declared ($.52 per share) (9,760) Conversion of Series B to Series A - - ------------------------------------------------------------- BALANCE AT DEC. 31, 1991 $(6,545) $230,057 Exercise of stock options 17,265 Restricted shares awarded (2,956) - Amortization of restricted shares 2,723 2,723 Tax benefit from long-term incentive plan 4,408 Net earnings 37,170 Cash dividends declared ($.54 per share) (10,381) Conversion of Series B to Series A - - ------------------------------------------------------------- BALANCE AT DEC. 31, 1992 $(6,778) $281,242 Exercise of stock options 17,242 Restricted shares awarded (2,638) - Amortization of restricted shares 3,781 3,781 Forfeiture of restricted shares 285 (183) Tax benefit from long-term incentive plan 4,068 Net earnings 51,077 Cash dividends declared ($.56 per share) (11,128) Conversion of Series B to Series A - - ------------------------------------------------------------- BALANCE AT DEC. 31, 1993 $(5,350) $346,099 - -------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements. 25 28 CONSOLIDATED STATEMENTS OF CASH FLOWS A. H. Belo Corporation and Subsidiaries
CASH PROVIDED (USED) Years ended December 31, - ------------------------------------------------------------------------------------------------------------------- In thousands 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------------- OPERATIONS Net earnings $ 51,077 $ 37,170 $12,392 Adjustments to reconcile net earnings to net cash provided by operations: Depreciation and amortization 37,664 36,039 34,064 Deferred income taxes 10,969 6,511 (23,270) Non-cash adjustments and allowances 209 1,617 6,134 Cumulative effect of change in accounting (Note 5) (6,599) - - Restructuring charge (Note 2) 5,822 - - Other, net 1,262 2,492 (5,474) Net change in current assets and liabilities: Accounts receivable (5,211) (3,021) (4,495) Inventories and other current assets (6,685) (1,335) 620 Accounts payable (1,338) 2,318 (3,256) Accrued compensation and benefits 2,466 4,424 (2,819) Other accrued liabilities (5,518) 279 5,957 Accrued interest payable (3,662) (2,938) 3,579 Income taxes payable 4,362 (5,220) 10,032 - ------------------------------------------------------------------------------------------------------------------- Net cash provided by operations 84,818 78,336 33,464 - ------------------------------------------------------------------------------------------------------------------- INVESTMENTS Capital expenditures (62,130) (27,145) (19,741) Acquisition of Dallas Times Herald assets (Note 3) - - (55,673) Acquisition of other assets - (22,624) (8,898) Asset dispositions 2,458 848 824 - ------------------------------------------------------------------------------------------------------------------- Net cash used for investments (59,672) (48,921) (83,488) - ------------------------------------------------------------------------------------------------------------------- FINANCING Repayment of long-term debt (200,000) - - Net proceeds from (payments on) revolving debt 175,000 (35,000) 57,000 Payments of dividends on stock (11,128) (10,381) (9,760) Payments to repurchase stock - - (355) Net proceeds from exercise of stock options 17,242 17,265 1,230 - ------------------------------------------------------------------------------------------------------------------- Net cash provided by (used for) financing (18,886) (28,116) 48,115 - ------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and temporary cash investments 6,260 1,299 (1,909) - ------------------------------------------------------------------------------------------------------------------- Cash and temporary cash investments at beginning of year 2,683 1,384 3,293 Cash and temporary cash investments at end of year $ 8,943 $ 2,683 $ 1,384 - ------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURES (NOTE 10) - -------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements. 26 29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. Belo Corporation and Subsidiaries 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. Certain amounts for the prior years have been reclassified to conform to the current year presentation. B) STATEMENT OF CASH FLOWS For the purpose of the Consolidated Statements of Cash Flows, the Company considers all highly liquid debt instruments purchased with a remaining maturity of three months or less to be temporary cash investments. Such temporary cash investments are carried at cost which approximates fair value. C) 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. D) 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 5-20 years Newspaper publishing equipment 5-20 years Broadcast equipment 7-15 years Other 3-10 years
E) INTANGIBLE ASSETS, NET Intangible assets, net includes primarily the excess cost applicable to subsidiaries acquired since 1984 which is being amortized on a straight-line basis over 40 years. The carrying value of intangible assets is periodically reviewed to determine if impairment exists. In 1993, the Company determined that excess cost associated with its suburban newspaper operations was not recoverable (see Note 2). Also included in Intangible assets, net is the intangible asset acquired in 1991 (see Note 3) which is being amortized on a straight- line basis over its currently estimated useful life of 18 years. Accumulated amortization of intangible assets was $112,775,000 and $100,392,000 at December 31, 1993 and 1992, respectively. F) EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE Earnings per common and common equivalent share are based on the weighted average number of shares outstanding during the period, including common equivalent shares representing dilutive stock options. 27 30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. Belo Corporation and Subsidiaries NOTE 2: RESTRUCTURING CHARGE The Consolidated Statement of Earnings for 1993 includes a $5,822,000 charge related to Dallas-Fort Worth Suburban Newspapers, Inc. ("DFWSN"), that consists primarily of the write-off of goodwill and a reduction in the carrying value of production assets to their fair value. The production assets adjusted include building and improvements and publishing equipment. The charge was recognized in conjunction with the decision to restructure DFWSN upon the determination that the carrying value of these assets was not recoverable. Fair value of production assets was determined principally by market value. The restructuring was substantially completed in January 1994. NOTE 3: ACQUISITION In December 1991, the Company acquired substantially all of the operating assets of the Dallas Times Herald newspaper for $55,673,000, after the newspaper's owner, Times Herald Printing Company, ceased publication of the newspaper. The majority of the assets acquired consisted of newspaper presses and other operating equipment, land, buildings and intangible assets. Following the Company's purchase price allocation, $28,717,000 was included in property, plant and equipment and $23,135,000 was included in intangible assets, net. NOTE 4: LONG-TERM DEBT Long-term debt consists of the following:
---------------------------------------------------------------------------------- In thousands 1993 1992 ---------------------------------------------------------------------------------- Revolving credit agreement $250,000 $ 30,000 Short-term unsecured notes classified as long-term debt 21,000 66,000 9.45% Unsecured Notes due 1993 - 100,000 8 5/8% Unsecured Notes due 1996 - 99,751 Other 6,400 6,400 ---------------------------------------------------------------------------------- $277,400 $302,151 ==============================
At the end of 1993, the Company had access to $450,000,000 in revolving credit on which the borrowings were $250,000,000 and $30,000,000 at December 31, 1993 and 1992, respectively. Average interest rates were 3.7 percent and 4.2 percent in 1993 and 1992, respectively. Loans under the revolving credit agreement bear interest at a rate based, at the option of the Company, on the participating bank's prime rate, certificate of deposit rate or LIBOR. The agreement also provides for commitment fees ranging from 1/8 to 1/4 percent per annum depending on the amount of unused commitment. Each January 1 and July 1, until expiration of the commitment on July 1, 1998, the commitment is reduced. Available credit as of January 1, 1994 is $418,750,000. No mandatory repayment of amounts outstanding at December 31, 1993, including short-term borrowings classified as long-term, would be required to be made until January 1, 1996. The revolving credit agreement contains certain covenants, including the maintenance of cash flow in relation to both the Company's leverage and its fixed charges, and a limitation on repurchases of the Company's stock. The Company is in compliance with these covenants at December 31, 1993. During 1993, the Company continued to use various short-term unsecured notes as an additional source of financing. At both December 31, 1993 and 1992, the average interest rate on this debt was 3.7 percent. Due to the Company's intent to renew the short-term notes and its continued ability to refinance this debt on a long-term basis through its revolving credit agreement, $21,000,000 and $66,000,000 of short-term notes outstanding at December 31, 1993 and 1992, respectively, have been classified as long-term. 28 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. Belo Corporation and Subsidiaries The 9.45% Unsecured Notes matured on January 15, 1993 and were redeemed using proceeds from the revolving credit agreement. On December 16, 1993, the Company exercised an option to redeem its 8 5/8% Unsecured Notes due in 1996 at par plus accrued interest, also using proceeds from the revolving credit agreement. In 1993, 1992 and 1991, the Company incurred interest costs of $16,976,000, $24,554,000 and $24,254,000, respectively, of which $1,961,000, $395,000 and $372,000, respectively, were capitalized as components of construction cost. At December 31, 1993, the Company had outstanding letters of credit of $7,509,000 issued in the ordinary course of business. During 1993, the Company entered into agreements that cap at 6 percent the interest on $75,000,000 of variable rate borrowings. These agreements expire in 1996. Because substantially all of the Company's debt is due under the variable rate revolving credit agreement, no significant differences exist between the carrying value and fair value. NOTE 5: INCOME TAXES Effective January 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes" changing to 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. As permitted by SFAS No. 109, prior years' financial statements have not been restated to reflect the change. The cumulative effect of adopting SFAS No. 109 as of January 1, 1993 is to increase net earnings by $6,599,000 or 33 cents per share. Subsequent to the adoption of SFAS No. 109, the federal income tax rate was increased from 34 percent to 35 percent, retroactive to January 1, 1993. The Company's deferred taxes were adjusted to reflect the new tax rate, resulting in an increase in deferred tax expense of $2,249,000. Deferred tax expense also reflects a decrease of $1,000,000 for the reversal of certain tax accruals as a result of new tax legislation regarding the amortization of intangibles. Income tax expense (benefit) consists of the following:
---------------------------------------------------------------------------------------------------- In thousands 1993 1992 1991 ---------------------------------------------------------------------------------------------------- Current Federal $17,385 $15,585 $ 27,477 State 2,746 2,307 2,006 ---------------------------------------------------------------------------------------------------- Total current 20,131 17,892 29,483 ---------------------------------------------------------------------------------------------------- Deferred 10,969 6,511 (23,270) ---------------------------------------------------------------------------------------------------- Total $31,100 $24,403 $ 6,213 ---------------------------------------------------------------------------------------------------- Effective tax rate 41.1% 39.6% 33.4% ----------------------------------------------------------------------------------------------------
29 32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. Belo Corporation and Subsidiaries Income tax provisions for the years ended December 31, 1993, 1992 and 1991 differ from amounts computed by applying the applicable U.S. federal income tax rate as follows:
---------------------------------------------------------------------------------------------------- In thousands 1993 1992 1991 ---------------------------------------------------------------------------------------------------- Computed expected income tax expense $26,452 $20,935 $ 6,326 Amortization of excess cost 2,235 2,235 2,226 Effect of 1% rate increase on deferred taxes 2,249 - - Reduction for change in law regarding amortization of acquired intangible asset (1,000) - - State income taxes 2,601 2,001 1,324 Undistributed earnings in equity affiliate - (670) - IRS tax settlement - - (3,783) Other (1,437) (98) 120 ---------------------------------------------------------------------------------------------------- $31,100 $24,403 $ 6,213 ----------------------------------------------------------------------------------------------------
During 1992, the Company and one of its equity affiliates settled a claim against the United States Navy which resulted in an increase in equity in earnings of an equity affiliate of $1,901,000, on which no taxes were provided by the Company because such undistributed earnings are expected to remain invested in that affiliate. During December 1991, the Company reached a settlement with the Internal Revenue Service ("IRS") resolving all pending audit issues in connection with an IRS examination of the Company's tax returns for 1984 through 1988. The principal issue in the examination was the deductibility of the amortization of value of network affiliation agreements and FCC licenses of four of the Company's television stations acquired in 1984. The settlement resulted in a $6,787,000 increase in net earnings from the reversal of excess income taxes and interest accruals in connection with the IRS examination. Significant components of the Company's deferred tax liabilities and assets as of December 31, 1993, are as follows:
In thousands ------------------------------------------------------------------------- Deferred tax liabilities: Excess tax depreciation and amortization $102,297 Deferred gain on sale of assets 5,425 Expenses deductible for tax purposes in a year different than the year accrued 4,610 Other 4,829 ------------------------------------------------------------------------- Total deferred tax liabilities $117,161 ------------------------------------------------------------------------- Deferred tax assets: State taxes $ 4,448 Deferred compensation 3,048 Expenses deductible for tax purposes in a year different than the year accrued 4,950 Other 3,460 ------------------------------------------------------------------------- Total deferred tax assets $ 15,906 ------------------------------------------------------------------------- Net deferred tax liability $101,255 -------------------------------------------------------------------------
30 33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. Belo Corporation and Subsidiaries The sources of deferred income taxes and the tax effect of each for years prior to the adoption of SFAS No. 109 are as follows:
In thousands 1992 1991 ------------------------------------------------------------------------------------------------- Excess tax depreciation and amortization $3,220 $(19,037) Interest expense 337 2,800 Alternative Minimum Tax 3,965 (3,068) Other expenses deductible for tax purposes in a year different than the year accrued (3,034) (1,782) Other, net 2,023 (2,183) ------------------------------------------------------------------------------------------------- $6,511 $(23,270) -------------------------------------------------------------------------------------------------
NOTE 6: EMPLOYEE RETIREMENT PLANS The Company sponsors a noncontributory defined benefit pension plan covering substantially all employees. The benefits are based on years of service and the average of the employee's five years of highest annual compensation earned during the most recently completed ten 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, 1993 and 1992:
In thousands 1993 1992 -------------------------------------------------------------------------------------------------- Actuarial present value of benefit obligation: Vested benefit obligation $(65,824) $(51,553) Accumulated benefit obligation $(66,225) $(51,896) Projected benefit obligation for service rendered to date $(83,236) $(60,697) Plan assets at fair value, invested primarily in equity securities 74,754 65,186 -------------------------------------------------------------------------------------------------- Plan assets (less than) in excess of projected benefit obligation (8,482) 4,489 Unrecognized net loss 25,031 9,886 Unrecognized net transition asset being recognized over 12.3 years (5,302) (6,535) Unrecognized prior service cost 915 1,060 -------------------------------------------------------------------------------------------------- Prepaid pension cost $ 12,162 $ 8,900 --------------------------------------------------------------------------------------------------
The increase in unrecognized net loss is the result of the change in the discount rate from 9 percent to 7.5 percent. 31 34 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. Belo Corporation and Subsidiaries The net periodic pension cost (benefit) includes the following components:
In thousands 1993 1992 1991 ---------------------------------------------------------------------------------------------------- Service cost - benefits earned during the period $ 2,284 $ 1,858 $ 1,449 Interest cost on projected benefit obligation 5,782 5,109 4,381 Actual return on plan assets (9,294) (3,447) (8,021) Net amortization and deferral 1,784 (4,563) 407 ---------------------------------------------------------------------------------------------------- Net periodic pension cost (benefit) $ 556 $(1,043) $(1,784) ----------------------------------------------------------------------------------------------------
Assumptions used in the accounting for the defined benefit plan are:
1993 1992 1991 ---------------------------------------------------------------------------------------------------- Discount rate in determining benefit obligation 7.50% 9.00% 9.00% Discount rate in determining net periodic pension cost (benefit) 9.00% 9.00% 9.50% Expected long-term rate of return on assets 10.25% 11.00% 10.00% Rate of increase in future compensation 5.00% 5.00% 6.00% ----------------------------------------------------------------------------------------------------
The Company sponsors a defined contribution plan that covers substantially all of its employees. Subject to certain dollar limits, employees may contribute a percentage of their salaries to this plan, and the Company will match a portion of the employee's contributions. The Company's contributions totaled $1,895,000, $1,135,000 and $799,000 in 1993, 1992 and 1991, respectively. Contributions were higher in 1993 following a change in the Company's matching percentage from 35 percent to 50 percent. The Company also sponsors unfunded non-qualified retirement and death benefit plans for key employees. The Company had recorded a liability for these plans of $3,994,000 and $2,174,000 at December 31, 1993 and 1992, respectively, most of which is classified as long-term in other liabilities on the Consolidated Balance Sheets. Expense recognized in 1993, 1992 and 1991 was $1,412,000, $908,000 and $405,000, respectively. NOTE 7: LONG-TERM INCENTIVE PLAN The Company's current long-term incentive plan has been in place since 1986. There are, however, stock options awarded under a prior plan, which will remain outstanding until they are exercised, canceled or expire. The following table presents the status of the stock options awarded under the prior plan. At December 31, 1993, all of these options were exercisable.
PRIOR STOCK OPTION PLAN ---------------------------------------------------------------------------------------------------- SHARES SHARES OPTION PRICE SERIES A SERIES B PER SHARE ---------------------------------------------------------------------------------------------------- Options outstanding at January 1, 1991 236,964 237,874 $ 9-26 Exercised (32,275) (66,915) 9-26 ---------------------------------------------------------------------------------------------------- Options outstanding at December 31, 1991 204,689 170,959 $ 9-26 Exercised (181,899) (117,819) 9-26 ---------------------------------------------------------------------------------------------------- Options outstanding at December 31, 1992 22,790 53,140 $ 20-26 Exercised (20,925) (50,195) 20-26 ---------------------------------------------------------------------------------------------------- Options outstanding at December 31, 1993 1,865 2,945 $ 22-26 ----------------------------------------------------------------------------------------------------
32 35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. Belo Corporation and Subsidiaries Awards under the 1986 long-term incentive plan 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 the long-term performance of the Company. 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. The plan was amended in 1988 to provide for a one-time grant of non-qualified options to purchase 2,500 shares of Series A Common Stock to non-employee directors and to eliminate the previous limit on the number of restricted shares that may be issued. The plan was also amended in 1992 to provide for automatic annual grants through 1997 of non-qualified options to non-employee directors serving after the 1992 Annual Meeting of Shareholders and an additional one-time grant of options to purchase 10,000 shares of Series A Common Stock to those directors subsequently elected. The amendment also increased the number of shares for which awards could be made under the plan. The maximum aggregate number of shares of common stock that may be granted in relation to options, restricted shares and rights, and limited rights issued without accompanying options is 3,600,000 less the number of performance units granted under the plan. The maximum number of performance units that may be granted under the plan is 3,600,000 less the number of options, restricted shares and rights, and limited rights issued without accompanying options granted. Grants made under the 1986 long-term incentive plan during 1993, 1992 and 1991 are summarized below: 1986 LONG-TERM INCENTIVE PLAN
NON-QUALIFIED STOCK OPTIONS RESTRICTED SHARES OPTION SHARES SHARES PRICE SHARES SHARES PRICE SERIES A SERIES B PER SHARE SERIES A SERIES B PER SHARE - ------------------------------------------------------------------------------------------------------------------- Outstanding at Jan. 1, 1991 1,163,104 187,850 $24-37 296,170 50,000 $24-38 Granted 502,720 - 29-30 72,160 - 29-32 Exercised (19,940) (29,435) 24-26 - - - Vested - - - (32,988) (29,750) 24-38 Canceled (17,800) - 24-37 (22,869) - 32 - ------------------------------------------------------------------------------------------------------------------- Outstanding at Dec. 31, 1991 1,628,084 158,415 $24-37 312,473 20,250 $24-38 Granted 314,580 - 40 50,830 - 40-42 Exercised (331,797) (65,879) 24-37 - - - Vested - - - (71,488) (20,250) 24-42 Canceled (15,140) (240) 25-37 - - - - ------------------------------------------------------------------------------------------------------------------- Outstanding at Dec. 31, 1992 1,595,727 92,296 $24-40 291,815 - $29-42 Granted 317,955 - 40-49 37,192 - 49-53 Exercised (484,370) (37,131) 24-40 - - 29-53 Vested - - - (106,225) - - Canceled (61,285) - 29-40 (10,990) - 29-49 - ------------------------------------------------------------------------------------------------------------------- Outstanding at Dec. 31, 1993 1,368,027 55,165 $24-49 211,792 - $29-53 - -------------------------------------------------------------------------------------------------------------------
The non-qualified options granted under the Company's long-term incentive plan become exercisable in cumulative installments over a period of three years. On December 31, 1993, of the 1,423,192 options outstanding, 821,659 were exercisable. Performance units and shares of Series A Common Stock reserved for grants under the plan were 613,874 and 896,746 at December 31, 1993 and 1992, respectively. A provision for the restricted shares is made ratably over the restriction period. Expense recognized under the plan for restricted shares was $3,598,000, $2,723,000 and $1,889,000 in 1993, 1992 and 1991, respectively. 33 36 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. Belo Corporation and Subsidiaries NOTE 8: COMMITMENTS AND CONTINGENT LIABILITIES The Company 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 are either covered by insurance or would not have a material adverse effect on the consolidated financial statements of the Company. In 1991, the Company recorded a $4,000,000 accrual for a judgment resulting from an unfavorable verdict in an employment-related lawsuit. Commitments for the purchase of first-run broadcast film contract rights totaled approximately $60,635,000 at December 31, 1993. Advance payments on plant and equipment expenditures at December 31, 1993 primarily relate to renovations of existing facilities owned by certain Belo broadcasting stations. Required future payments for capital expenditures are $9,992,000 and $882,000 in 1994 and 1995, respectively. In December 1993, the Company purchased the building in which it had been leasing office space. The building had been constructed by a partnership in which the Company was a limited partner prior to 1992. Lease expense for the building in 1991 was $2,807,000. Total lease expense for property and equipment, including the office space through November 1993, was $5,447,000, $6,130,000 and $5,780,000 in 1993, 1992 and 1991, respectively. Future minimum rental payments for operating lease agreements are as follows:
In thousands --------------------------------------------- 1994 $2,018 1995 989 1996 315 1997 81 1998 67 1999 and beyond 31 --------------------------------------------- $3,501 ---------------------------------------------
NOTE 9: COMMON AND PREFERRED STOCK The Company has two series of common stock authorized, issued and outstanding, Series A and Series B. The shares are identical except that Series B shares are entitled to ten 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. Each outstanding share of common stock is accompanied by one preferred share purchase right which entitles shareholders to purchase 1/100th 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 the Company's common stock or makes a tender offer for at least 30 percent of its common stock. The rights expire in 1996. If the Company is acquired in a merger or business combination, each right has an initial exercise price of $175 (subject to adjustment) and can be used to purchase the common stock of the surviving company having a market value of twice the exercise price of each right. The number of shares of Series A Junior Participating Preferred Stock reserved for possible conversion of these rights is equivalent to one one-hundredth of the number of shares of common stock issued and outstanding plus the number of shares reserved for grant under the 1986 Long-Term Incentive Plan and Stock Option Plan. 34 37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. Belo Corporation and Subsidiaries NOTE 10: SUPPLEMENTAL CASH FLOW INFORMATION Net cash provided by operations reflects cash payments for interest and income taxes as follows:
In thousands 1993 1992 1991 --------------------------------------------------------------------------------- Interest paid, net of amounts capitalized $18,677 $27,097 $29,192 Income taxes paid, net of refunds $15,679 $23,112 $20,338 ---------------------------------------------------------------------------------
NOTE 11: INDUSTRY SEGMENT INFORMATION The Company operates in two industries: newspaper publishing and television broadcasting. 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. Operations in the broadcast industry involve the sale of air time for advertising and the broadcast of entertainment, news and other programming for both local markets and syndication. Net operating revenues by industry segment include sales to unaffiliated customers and intersegment revenues, which before their elimination, are accounted for on the same basis as revenues from unaffiliated customers. Selected segment data is as follows:
In thousands 1993 1992 1991 ----------------------------------------------------------------------------------------------------- NET OPERATING REVENUES Newspaper publishing $335,651 $314,718 $249,755 Broadcasting 209,457 201,241 181,847 Intersegment revenues (273) (17) (17) ----------------------------------------------------------------------------------------------------- $544,835 $515,942 $431,585 ----------------------------------------------------------------------------------------------------- EARNINGS FROM OPERATIONS Newspaper publishing $ 44,293(A) $ 42,974 $ 21,417 Broadcasting 63,240(B) 56,461 41,553 (C) Corporate expenses (18,059) (17,809) (15,113)(D) ----------------------------------------------------------------------------------------------------- $ 89,474 $ 81,626 $ 47,857 ----------------------------------------------------------------------------------------------------- IDENTIFIABLE ASSETS Newspaper publishing $263,855 $245,589 $246,772 Broadcasting 446,175 444,237 456,008 Other 86,126 68,701 43,604 ----------------------------------------------------------------------------------------------------- $796,156 $758,527 $746,384 ----------------------------------------------------------------------------------------------------- DEPRECIATION AND AMORTIZATION Newspaper publishing $ 17,374 $ 16,247 $ 14,640 Broadcasting 20,039 19,460 19,057 Other 251 332 367 ------------------------------------------------------------------------------------------------------ $ 37,664 $ 36,039 $ 34,064 ----------------------------------------------------------------------------------------------------- CAPITAL EXPENDITURES Newspaper publishing $ 36,765 $ 17,381 $ 6,224 Broadcasting 16,996 9,666 13,309 Other 8,369 98 208 ----------------------------------------------------------------------------------------------------- $ 62,130 $ 27,145 $ 19,741 -----------------------------------------------------------------------------------------------------
(A) Included in Newspaper publishing earnings from operations in 1993 is a $5,822,000 restructuring charge consisting primarily of the write-off of goodwill and a reduction in the carrying value of production assets related to the restructuring of DFWSN (see Note 2). (B) Included in Broadcasting earnings from operations in 1993 is a $3,349,000 reversal of certain music license fee accruals. (C) Included in Broadcasting earnings from operations in 1991 is a $788,000 provision for early retirement costs, a $1,259,000 write-down of certain broadcast film contract rights and a $4,000,000 accrual for an adverse judgement in an employment-related lawsuit. (D) Included in corporate expenses in 1991 is a $1,500,000 settlement of an antitrust lawsuit as part of the agreement to acquire the Dallas Times Herald assets (see Note 3). 35 38 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. Belo Corporation and Subsidiaries NOTE 12: SUBSEQUENT EVENT On February 23, 1994, the Company announced an agreement in principle to purchase the assets of a television broadcast station in New Orleans, Louisiana for $110,000,000. The Company anticipates that the acquisition will be financed using borrowings from its revolving credit agreement. The transaction, which is subject to the signing of a definitive agreement, as well as customary closing conditions, including approval by appropriate government agencies, will be accounted for as a purchase. The Company expects that a definitive agreement will be entered into by early spring and that the transaction will be completed during the third quarter of 1994. 36 39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. H. Belo Corporation and Subsidiaries NOTE 13: QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) Following is a summary of the Unaudited Quarterly Results of Operations for 1993 and 1992:
In thousands, except per share amounts 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER - ------------------------------------------------------------------------------------------------------------------- 1993 Net operating revenues Newspaper publishing $ 78,780 $ 84,747 $ 83,309 $ 88,815 Broadcasting 44,122 59,154 49,314 56,867 Intersegment revenues (62) (97) (84) (30) - ------------------------------------------------------------------------------------------------------------------- $122,840 $ 143,804 $132,539 $ 145,652 - ------------------------------------------------------------------------------------------------------------------- Earnings from operations Newspaper publishing $ 11,010 $ 13,160 $ 10,887 $ 9,236(D) Broadcasting 8,283 22,042 12,187 20,728(E) Corporate expenses (3,737) (4,985) (3,686) (5,651) - ------------------------------------------------------------------------------------------------------------------- $ 15,556 $ 30,217 $ 19,388 $ 24,313 - ------------------------------------------------------------------------------------------------------------------- Earnings before cumulative effect of change in accounting $ 7,271 $ 16,143 $ 7,934 $ 13,130 Cumulative effect of change in accounting 6,599(A) - - - - ------------------------------------------------------------------------------------------------------------------- Net earnings $ 13,870 $ 16,143 $ 7,934(C) $ 13,130 - ------------------------------------------------------------------------------------------------------------------- Earnings per common and common equivalent share: Before cumulative effect of change in accounting $ .37 $ .80 $ .39 $ .64 Cumulative effect of change in accounting $ .33 $ - $ - $ - Net earnings $ .70 $ .80 $ .39 $ .64 - ------------------------------------------------------------------------------------------------------------------- 1992 Net operating revenues Newspaper publishing $ 71,176 $ 80,943 $ 78,916 $ 83,683 Broadcasting 43,533 53,221 48,887 55,600 Intersegment revenues (1) (14) (1) (1) - ------------------------------------------------------------------------------------------------------------------- $114,708 $ 134,150 $127,802 $ 139,282 - ------------------------------------------------------------------------------------------------------------------- Earnings from operations Newspaper publishing $ 7,703 $ 14,117 $ 11,157 $ 9,997 Broadcasting 8,780 17,102 12,544 18,035 Corporate expenses (3,697) (4,522) (4,615) (4,975) - ------------------------------------------------------------------------------------------------------------------- $ 12,786 $ 26,697 $ 19,086 $ 23,057 - ------------------------------------------------------------------------------------------------------------------- Net earnings $ 6,453(B) $ 12,452 $ 7,117 $ 11,148(F) - ------------------------------------------------------------------------------------------------------------------- Net earnings per common and common equivalent share $ .33 $ .63 $ .36 $ .56 - -------------------------------------------------------------------------------------------------------------------
(A) Amount represents the cumulative effect of adopting SFAS No. 109, "Accounting for Income Taxes" (see Note 5). (B) A settlement of a claim against the United States Navy was reached in which the Company and one of its equity affiliates were among the plaintiffs. The Company's portion of the settlement and its equity in earnings of the affiliate increased earnings before income taxes by $4,019,000 and net earnings by $3,235,000 or 16 cents per share. The $4,019,000 gain is included in Other, net on the Consolidated Statements of Earnings. The equity in earnings amounted to $1,901,000, on which no taxes are provided by the Company because such undistributed earnings are expected to remain invested in that affiliate. (C) Belo's income tax provision in the third quarter reflects a $2,249,000 charge representing an adjustment to deferred taxes following an increase in the federal income tax rate from 34 percent to 35 percent (see Note 5). (D) Included in Newspaper publishing earnings from operations for the fourth quarter of 1993 is a $5,822,000 restructuring charge consisting primarily of the write-off of goodwill and a reduction in the carrying value of production assets related to the restructuring of DFWSN (see Note 2). (E) Included in Broadcasting earnings from operations for the fourth quarter of 1993 is a $3,349,000 reversal of certain music license fee accruals. (F) Belo's income tax provision in the fourth quarter of 1992 reflects a $1,101,000 benefit resulting from the favorable resolution of a franchise tax issue. 37 40 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS The Management of A. H. Belo Corporation is responsible for the preparation of the Company's 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. That system of internal control provides for appropriate division of responsibility, and is documented in written policies and procedures. These policies and procedures 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, 1993, the Company'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 the Company according to the highest standards of personal and professional conduct, and this responsibility is delineated in the Company's written statement of business conduct. That 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/ Michael D. Perry Michael D. Perry Senior Vice President & Chief Financial Officer 38 41 SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT A. H. Belo Corporation and Subsidiaries
In thousands - ------------------------------------------------------------------------------------------------------------------- BALANCE AT RETIREMENTS BALANCE BEGINNING ADDITIONS, OTHER AND OTHER AT END CLASSIFICATION OF PERIOD AT COST ADDITIONS(1) ADJUSTMENTS(2) OF PERIOD - ------------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 1993 Land $ 14,575 $ 915 $ - $ (425) $ 15,065 Buildings 89,350 9,670 - 17,446 116,466 Newspaper publishing equipment 139,632 3,061 - 40,518 183,211 Broadcast equipment 87,426 8,948 - (3,098) 93,276 Other 34,667 1,889 - (946) 35,610 Advance payments on plant and equipment expenditures 42,136 37,647 - (71,104) 8,679 - ------------------------------------------------------------------------------------------------------------------- $407,786 $62,130 $ - $(17,609) $452,307 - ------------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 1992 Land $ 13,626 $ 949 $ - $ - $ 14,575 Buildings 87,613 1,862 - (125) 89,350 Newspaper publishing equipment 137,860 1,567 2,370 (2,165) 139,632 Broadcast equipment 77,195 12,622 - (2,391) 87,426 Other 33,520 3,699 1,092 (3,644) 34,667 Advance payments on plant and equipment expenditures 10,435 6,446 25,255 - 42,136 - ------------------------------------------------------------------------------------------------------------------- $360,249 $27,145 $ 28,717 $ (8,325) $407,786 - ------------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 1991 Land $ 13,434 $ 10 $ - $ 182 $ 13,626 Buildings 85,775 2,244 - (406) 87,613 Newspaper publishing equipment 136,132 2,039 - (311) 137,860 Broadcast equipment 77,358 6,487 - (6,650) 77,195 Other 33,910 3,715 - (4,105) 33,520 Advance payments on plant and equipment expenditures 5,189 5,246 - - 10,435 - ------------------------------------------------------------------------------------------------------------------- $351,798 $19,741 $ - $(11,290) $360,249 - -------------------------------------------------------------------------------------------------------------------
(1) Amounts represent allocation of purchase price for assets acquired from the Dallas Times Herald in December 1991. (2) In 1993, retirements and other adjustments includes the reclassification of advance payments related to completion of the expansion of The Dallas Morning News' North Plant production facility, and the reduction of the carrying value of certain assets of DFWSN. 39 42 SCHEDULE VI - ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT A. H. Belo Corporation and Subsidiaries
In thousands - ------------------------------------------------------------------------------------------------------------------------ BALANCE AT RETIREMENTS BALANCE BEGINNING AND OTHER AT END CLASSIFICATION OF PERIOD ADDITIONS ADJUSTMENTS(1) OF PERIOD - ------------------------------------------------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, 1993 Buildings $ 40,093 $ 4,336 $ (1,815) $ 42,614 Newspaper publishing equipment 50,578 10,238 (3,995) 56,821 Broadcast equipment 56,513 6,476 (3,954) 59,035 Other 23,225 4,231 (3,631) 23,825 - ------------------------------------------------------------------------------------------------------------------------ $ 170,409 $ 25,281 $ (13,395) $182,295 - ------------------------------------------------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, 1992 Buildings $ 35,763 $ 3,946 $ 384 $ 40,093 Newspaper publishing equipment 43,918 9,285 (2,625) 50,578 Broadcast equipment 52,465 6,304 (2,256) 56,513 Other 22,193 4,012 (2,980) 23,225 - ------------------------------------------------------------------------------------------------------------------------ $ 154,339 $ 23,547 $ (7,477) $170,409 - ------------------------------------------------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, 1991 Buildings $ 31,723 $ 4,164 $ (124) $ 35,763 Newspaper publishing equipment 35,552 8,753 (387) 43,918 Broadcast equipment 53,250 6,244 (7,029) 52,465 Other 21,438 3,804 (3,049) 22,193 - ------------------------------------------------------------------------------------------------------------------------ $ 141,963 $ 22,965 $ (10,589) $154,339 - ------------------------------------------------------------------------------------------------------------------------
(1) In 1993, retirements and other adjustments includes the reduction of the carrying value of certain assets of DFWSN. 40 43 SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS A. H. Belo Corporation and Subsidiaries
In thousands - ------------------------------------------------------------------------------------------------------------------------ ADDITIONS BALANCE AT CHARGED CHARGED BALANCE BEGINNING TO COSTS & TO OTHER AT END DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS(1) OF PERIOD - ------------------------------------------------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, 1993 Deducted from asset accounts: Allowance for doubtful accounts $ 3,475 $ 4,617 - $(4,408) $3,684 - ------------------------------------------------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, 1992 Deducted from asset accounts: Allowance for doubtful accounts $ 6,952 $ 3,758 - $(7,235) $3,475 - ------------------------------------------------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, 1991 Deducted from asset accounts: Allowance for doubtful accounts and note $ 2,877 $ 8,715 - $(4,640) $6,952 - ------------------------------------------------------------------------------------------------------------------------
(1) Uncollectible accounts written off, net of recoveries and other miscellaneous adjustments. 41 44 SCHEDULE X - SUPPLEMENTARY EARNINGS STATEMENT INFORMATION A. H. Belo Corporation and Subsidiaries
In thousands Years ended December 31, - ---------------------------------------------------------------------------------------------------------------------------------- Description 1993 1992 1991 - ---------------------------------------------------------------------------------------------------------------------------------- Maintenance and repairs $ 5,986 $ 5,658 $ 4,087 Advertising costs (unaffiliated) $ 9,146 $ 9,357 $ 7,276
42 45
EXHIBIT SEQ. NUMBER DESCRIPTION PAGE NO. - ------ ----------- -------- 3.1 Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K dated March 19, 1992 (the "1991 Form 10-K")) N/A 3.2 Certificate of Correction to Certificate of Incorporation dated May 13, 1987 (incorporated by reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K dated March 18, 1993 (the "1992 Form 10-K")) N/A 3.3 Certificate of Designation of Series A Junior Participating Preferred Stock of the Company dated April 16, 1987 (incorporated by reference to Exhibit 3.3 to the 1991 Form 10-K) N/A 3.4 Certificate of Amendment of Certificate of Incorporation of the Company dated May 4, 1988 (incorporated by reference to Exhibit 3.4 to the 1992 Form 10-K) N/A 3.5 Amended Certificate of Designation of Series A Junior Participating Preferred Stock of the Company dated May 4, 1988 (incorporated by reference to Exhibit 3.5 to the 1992 Form 10-K) N/A 3.6 Certificate of Designation of Series B Common Stock of the Company dated May 4, 1988 (incorporated by reference to Exhibit 3.6 to the 1992 Form 10-K) N/A 3.7 Bylaws of the Company, effective December 16, 1992 (incorporated by reference to Exhibit 3.7 to the 1992 Form 10-K) N/A 4.1 Certain rights of the holders of the Company's Common Stock are set forth in Exhibits 3.1-3.6 above N/A 4.2 Specimen Form of Certificate representing shares of the Company's Series A Common Stock (incorporated by reference to Exhibit 4.2 to the 1992 Form 10-K) N/A 4.3 Specimen Form of Certificate representing shares of the Company's Series B Common Stock (incorporated by reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K dated March 20, 1989) N/A 4.4 Form of Rights Agreement, dated March 10, 1986 between the Company and RepublicBank Dallas, National Association as Rights Agent, which includes as Exhibit B thereto the Form of Right Certificate (incorporated by reference to Exhibit 4.8 to the 1991 Form 10-K) N/A 4.5 Supplement No. 1 to Rights Agreement (incorporated by reference to Exhibit 4.9 to the 1991 Form 10-K) N/A
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EXHIBIT NUMBER DESCRIPTION - ------ ----------- 4.6 Supplement No. 2 to Rights Agreement (incorporated by reference to Exhibit 4.9 to the 1992 Form 10-K) N/A 4.7 Supplement No. 3 to Rights Agreement (incorporated by reference to Exhibit 4.10 to the 1992 Form 10-K) N/A 4.8 Supplement No. 4 to Rights Agreement dated December 12, 1988 substituting Manufacturers Hanover Trust Company as Rights Agent ----- 4.9 Supplement No. 5 to Rights Agreement (incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1993) N/A 10.1 Contracts relating to television broadcasting: (1) Contract for Affiliation between KOTV in Tulsa, Oklahoma and CBS, with Network Affiliation Consent (incorporated by reference to Exhibit 10.1(1) to the 1991 Form 10-K) N/A (2) Contract for Affiliation between KHOU-TV in Houston, Texas and CBS, with Network Affiliation Consent (incorporated by reference to Exhibit 10.1(2) to the 1991 Form 10-K) N/A (3) Letter Amendment, dated June 11, 1993, to Contract for Affiliation between KHOU-TV in Houston, Texas and CBS ---- (4) Contract for Affiliation between KXTV in Sacramento, California and CBS (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1993 (the "First Quarter 1993 Form 10-Q")) N/A (5) Contract for Affiliation between WFAA-TV in Dallas, Texas and ABC, with Network Affiliation Consent (incorporated by reference to Exhibit 10.1(4) to the Company's Annual Report on Form 10-K dated March 28, 1991 (the "1990 Form 10-K")) N/A (6) Rider One to Contract for Affiliation between WFAA-TV in Dallas, Texas and ABC (incorporated by reference to Exhibit 10.1 to the First Quarter 1993 Form 10-Q) N/A (7) Contract for Affiliation between WVEC-TV in Hampton-Norfolk, Virginia and ABC, with Network Affiliation Consent (incorporated by reference to Exhibit 10.1(5) to the 1991 Form 10-K) N/A
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EXHIBIT SEQ. NUMBER DESCRIPTION PAGE NO. - ------ ----------- -------- 10.2 Contracts relating to newspaper publication: (1) Founding agreement dated July 28, 1987 between the Company and Newsprint South, Inc. for newsprint supply (incorporated by reference to Exhibit 10.2(2) to the 1990 Form 10-K) N/A (2) Amendment to the founding agreement dated June 30, 1990 between the Company and Newsprint South, Inc. for newsprint supply (incorporated by reference to Exhibit 10.2(3) to the 1990 Form 10-K) N/A 10.3 (1) Management Security Plan (incorporated by reference to Exhibit 10.4(1) to the 1991 Form 10-K) N/A (2) Stock Option Plan (incorporated by reference to Exhibit 10.4(2) to the 1991 Form 10-K) N/A (3) Amendment to Stock Option Plan by the Compensation Committee of the Board of Directors (incorporated by reference to Exhibit 10.4(3) to the 1991 Form 10-K) N/A (4) Amendments to Stock Option Plan (incorporated by reference to Exhibit 10.4(4) to the 1991 Form 10-K) N/A (5) Amendment to Stock Option Plan dated December 19, 1986 (incorporated by reference to Exhibit 10.4(5) to the 1991 Form 10-K) N/A (6) Amendment to Stock Option Plan dated February 22, 1989 ---- (7) 1986 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.4(7) to the 1991 Form 10-K) N/A (8) Amendment No. 1 to 1986 Long-Term Incentive Plan dated October 22, 1986 (incorporated by reference to Exhibit 10.4(8) to the 1991 Form 10-K) N/A (9) Amendment No. 2 to 1986 Long-Term Incentive Plan effective January 1, 1987 (incorporated by reference to Exhibit 10.3(9) to the 1992 Form 10-K) N/A (10) Amendment No. 3 to 1986 Long-Term Incentive Plan dated May 4, 1988 ----
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EXHIBIT NUMBER DESCRIPTION - ------ ----------- (11) Amendment No. 4 to 1986 Long-Term Incentive Plan dated May 13, 1988 ---- (12) Amendment No. 5 to 1986 Long-Term Incentive Plan dated February 22, 1989 ---- (13) Amendment No. 6 to 1986 Long-Term Incentive Plan dated May 6, 1992 (incorporated by reference to Exhibit 10.3(13) to the 1992 Form 10-K) N/A (14) The A. H. Belo Corporation Employee Savings and Investment Plan (incorporated by reference to Exhibit 10.4(13) to the Company's Annual Report on Form 10-K dated March 27, 1990 (the "1989 Form 10-K")) N/A (15) First Amendment to the A. H. Belo Corporation Employee Savings and Investment Plan, dated January 29, 1992 (incorporated by reference to Exhibit 10.3(15) to the 1992 Form 10-K) N/A (16) Second Amendment to the A. H. Belo Corporation Employee Savings and Investment Plan, dated October 22, 1992 (incorporated by reference to Exhibit 10.3(16) to the 1992 Form 10-K) N/A (17) Third Amendment to the A. H. Belo Corporation Employee Savings and Investment Plan (incorporated by reference to Exhibit 10.2 to the First Quarter 1993 Form 10-Q) N/A (18) Fourth Amendment to the A. H. Belo Corporation Employee Savings and Investment Plan (incorporated by reference to Exhibit 4.14 to Post-Effective Amendment No. 1 to Form S-8 (Registration No. 33-30994)) N/A (19) Fifth Amendment to the A. H. Belo Corporation Employee Savings and Investment Plan ---- (20) The G. B. Dealey Retirement Pension Plan (as amended and restated effective January 1, 1988) ---- (21) First Amendment to the G. B. Dealey Retirement Pension Plan ---- (22) Second Amendment to the G. B. Dealey Retirement Pension Plan ---- (23) Third Amendment to the G. B. Dealey Retirement Pension Plan ----
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EXHIBIT SEQ. NUMBER DESCRIPTION PAGE NO. - ------ ----------- -------- (24) Fourth Amendment to the G. B. Dealey Retirement Pension Plan ---- (25) Fifth Amendment to the G. B. Dealey Retirement Pension Plan ---- (26) Master Trust Agreement, effective as of July 1, 1992, between A. H. Belo Corporation and Mellon Bank, N. A. ---- (27) A. H. Belo Corporation Supplemental Executive Retirement Plan ---- (28) Trust Agreement dated February 28, 1994, between the Company and Mellon Bank, N. A. ---- (29) Summary of A. H. Belo Corporation Executive Compensation Program (incorporated by reference to Exhibit 10.3(18) to the 1992 Form 10-K) N/A (30) Employment and Consultation Agreement between A. H. Belo Corporation and James P. Sheehan (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1993) N/A 10.4 (1) Credit Agreement dated October 27, 1988, between the Company and The First National Bank of Chicago as Managing Agent (incorporated by reference to Exhibit 10.4(1) to the 1992 Form 10-K) N/A (2) Amendment No. 1 to 1988 Credit Agreement between the Company and The First National Bank of Chicago as Managing Agent dated November 8, 1989 (incorporated by reference to Exhibit 10.5(4) to the 1990 Form 10-K) N/A (3) Amendment No. 2 to 1988 Credit Agreement between the Company and The First National Bank of Chicago as Managing Agent dated April 24, 1991 (incorporated by reference to Exhibit 10.5(5) to the 1991 Form 10-K) N/A (4) Amendment Agreement dated May 14, 1992, between the Company and The First National Bank of Chicago as Managing Agent (incorporated by reference to Exhibit 10.4(4) to the 1992 Form 10-K) N/A (5) Amendment Agreement dated November 6, 1992, between the Company and The First National Bank of Chicago as Managing Agent (incorporated by reference to Exhibit 10.4(5) to the 1992 Form 10-K) N/A
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EXHIBIT SEQ. NUMBER DESCRIPTION PAGE NO. - ------ ----------- -------- (6) Loan Agreement dated October 1, 1985, between City of Arlington Industrial Development Corporation and Dallas-Fort Worth Suburban Newspapers, Inc. (incorporated by reference to Exhibit 10.5(2) to the 1991 Form 10-K) N/A (7) Letter of Credit and Reimbursement Agreement dated as of June 2, 1987, between Dallas-Fort Worth Suburban Newspapers, Inc. and The Sanwa Bank, Limited, Dallas Agency covering $6,400,000 City of Arlington Industrial Development Corporation Industrial Development Revenue Bonds (incorporated by reference to Exhibit 10.5(3) to the 1991 Form 10-K) N/A (8) Amendment and Waiver Agreement dated as of December 30, 1992, by and between the Company and The Sanwa Bank, Limited, Dallas Agency (incorporated by reference to Exhibit 10.4(8) to the 1992 Form 10-K) N/A 10.5 Joint Venture Agreement dated August 1, 1989, between the Company and Universal Press Syndicate (incorporated by reference to Exhibit 10.6 to the 1989 Form 10-K) N/A 21 Subsidiaries of the Company ---- 23 Consent of Ernst & Young ----
E-6 EX-4.8 2 SUPPLEMENTAL NO. 4 TO RIGHTS AGREEMENT 1 EXHIBIT 4.8 SUPPLEMENT NO. 4 TO RIGHTS AGREEMENT This Supplement No. 4 to the Rights Agreement (the "Rights Agreement") dated as of December 12, 1988, as amended by Supplement No. 1 dated April 9, 1987, Supplement No. 2 dated May 6, 1987, and Supplement No. 3 dated May 19, 1988, between A. H. Belo Corporation ("Belo") and First RepublicBank Dallas, National Association ("FirstRepublic"), is made and entered into by and among Belo, NCNB Texas National Bank ("NCNB-Texas"), the successor to FirstRepublic as Rights Agent pursuant to the provisions of Section 19 of the Rights Agreement, and Manufacturers Hanover Trust Company ("Manufacturers Hanover"). Pursuant to the provisions of Section 21 of the Rights Agreement, Manufacturers Hanover is hereby appointed Rights Agent under the Rights Agreement, replacing NCNB-Texas, and is vested with the same powers, rights, duties, and responsibilities as if it had been originally named as Rights Agent. Section 30 of the Rights Agreement is hereby amended by adding at the end of such Section the following: "except that the rights, duties and obligations of Manufacturers Hanover Trust Company under this Agreement shall be governed by the laws of the State of New York." IN WITNESS WHEREOF, the parties hereto have caused this Supplement No. 4 to be duly executed and attested as of the 12th day of December, 1988. 2 A. H. BELO CORPORATION Attest: By: /s/ MICHAEL D. PERRY ---------------------------- By: /s/ VICKY C. TEHERANI Title: SR. VICE PRESIDENT AND -------------------------------- CHIEF FINANCIAL OFFICER ------------------------- Title: MANAGER/TREASURY OPERATIONS ----------------------------- NCNB TEXAS NATIONAL BANK Attest: By: /s/ --------------------------- By: /s/ Title: -------------------------------- ------------------------ Title: ----------------------------- MANUFACTURERS HANOVER TRUST COMPANY Attest: By: /s/ --------------------------- By: /s/ Title: -------------------------------- ------------------------ Title: ----------------------------- EX-10.1.3 3 LETTER AMENDMENT TO CONTRACT FOR AFFILIATION 1 EXHIBIT 10.1(3) KHOU-TV INC. Houston, Texas Gentlemen: June 11, 1993 Reference is made to the CBS Television Network Affiliation Agreement ("the Agreement") between you and us relating to broadcast station KHOU- TV at Houston, Texas. You and we agree that the Agreement shall be amended as follows: 1. Paragraph 4 of the Agreement shall be amended to read: "4. Use of Network Programs. (a) General. Broadcaster shall not broadcast any Network Program over Affiliated Station unless such Network Program has first been offered by CBS to Broadcaster for broadcasting over Affiliated Station and has been accepted by Broadcaster in accordance with this Agreement. Except with the prior written consent of CBS, Broadcaster shall neither sell any Network Program, in whole or in part, or any time therein, for sponsorship, nor otherwise use Network Programs except as specifically authorized in this Agreement. Affiliated Station shall not broadcast any commercial announcement or announcements during any interval, within a Network Program, which is designated by CBS to Affiliated Station as being for the sole purpose of making a station identification announcement. Broadcaster shall, with respect to each Network Program broadcast over Affiliated Station, broadcast such Network Program in its entirety (including but not limited to commercial announcements, billboards, credits, public service announcements, promotional announcements and network identification), without interruption, alteration, compression, deletion or addition of any kind, from the beginning of the Network Program to the final system cue at the conclusion of the Network Program. Nothing herein shall be construed as preventing Broadcaster's deletion of (i) part of a Network Program in order to broadcast an emergency announcement or news bulletin; (ii) a promotional announcement for a Network Program not to be broadcast over Affiliated Stations (provided that Affiliated Station shall broadcast an alternative promotional announcement for CBS network 2 programming in place of the deleted promotional announcement); (iii) such words, phrases or scenes as Broadcaster, in the reasonable exercise of its judgment, determines it would not be in the public interest to broadcast over Affiliated Station; provided, however, that Broadcaster shall not substitute for any material deleted pursuant to this clause (iii) any commercial or promotional announcement of any kind whatsoever; and provided further that Broadcaster shall notify CBS of every such deletion within 72 hours thereof. Broadcaster shall not, without CBS's prior written consent, authorize or permit any Network Program, recording, or other material furnished by CBS to Broadcaster or Affiliated Station hereunder to be recorded, duplicated, rebroadcast, retransmitted or otherwise used for any purpose whatsoever other than broadcasting by Affiliated Station as provided herein; except that Broadcaster may assert a right to carriage of Affiliated Station's signal by a cable system pursuant to the provisions of Section 4 of the Cable Consumer Protection and Competition Act of 1992 ("the 1992 Cable Act") and may, to the extent permitted by paragraph 4(b) hereof, grant consent to the retransmission of such signal by a cable system or other multichannel video programming distributor, as defined by said Act, pursuant to the provisions of Section 6 thereof. (b) Retransmission Consent. Broadcaster may grant consent to the retransmission of Affiliated Station's signal by a cable system or other multichannel video programming distributor pursuant to the provisions of Section 6 of the 1992 Cable Act (hereafter "retransmission consent"), provided that one of the following conditions applies at the time retransmission consent is granted: (i) the cable system or other multichannel program service on which Affiliated Station's signal is to be retransmitted serves television homes within Affiliated Station's television market; (ii) the majority of television homes served by the cable system or other multichannel program service on which Affiliated Station's signal is to be retransmitted are within a county or community in which Affiliated Station's signal is, and has been since October 5, 1992, "significantly viewed" as defined in Section 76.54 of the FCC's rules; or (iii) the cable system or other multichannel program service on which Affiliated Station's signal is to be retransmitted carried such signal on October 5, 1992, and does not receive such signal by satellite delivery. Notwithstanding anything to the contrary in the foregoing, in no case shall retransmission consent be granted to a television receive- only satellite service, or a direct broadcast satellite service, if Affiliated Station's signal is to be retransmitted 3 by such service to television homes outside of Affiliated Station's television market other than "unserved household(s)," as that term is defined in Section 119(d) of Title 17, United States Code, as in effect on October 5, 1992. For purposes of this paragraph, a station's "television market" shall be defined in the same manner as set forth in Sections 76.55(e) and 76.59 of the FCC's rules." 2. Paragraph 9 of the Agreement shall be amended to read as follows, and as so amended is hereby reiterated and reconfirmed: "9. Non-Duplication of Network Programs. (a) For purposes of this paragraph, a television station's "Network Exclusivity Zone" shall mean the zone within thirty-five (35) miles of the station's reference points, or, in the case of a "small market television station," as defined in Section 76.92 of the FCC rules, the zone within 55 miles of said reference points; provided, however, that in no case shall the "Network Exclusivity Zone" include an area within the Area of Dominant Influence (ADI), as determined by Arbitron and published in the then-current edition of its Television ADI Market Guide, of another CBS Television Network Affiliate. A station's "reference points" for purposes of this paragraph shall be as defined in Section 73.658(m) of the FCC rules, and shall be deemed to include, with respect to a station in a hyphenated market, the reference points of each name community in that market. (b) Broadcaster shall be entitled to exercise, within Affiliated Station's Network Exclusivity Zone, the protection against duplication of network programming, as provided by Sections 76.92 through 76.97 of the FCC rules, with respect to a Network Program during the period beginning one (1) day before and ending seven (7) days after the delivery of such Network Program by CBS to Broadcaster; provided, however, that such right shall apply only to Network Programs broadcast in the live time period as offered or on no more than a one day delay as accepted by CBS; and provided further that nothing herein shall be deemed to preclude CBS from granting to any other broadcast television station licensed to any other community similar network non-duplication rights within that station's Network Exclusivity Zone, and Broadcaster's aforesaid right of network non-duplication shall not apply with respect to the transmission of the programs of another CBS affiliate (current or future) by a "community unit," as that term is defined by the rules of the FCC, located (wholly or partially) within the area in which Broadcaster's Network Exclusivity Zone overlaps the Network Exclusivity Zone of that other CBS affiliate. (c) Broadcaster's network non-duplication rights under this paragraph shall be subject to cancellation by CBS on six (6) months written notice to Broadcaster. Any such cancellation by CBS shall not affect any of the other rights and obligations of the parties under this Agreement." 4 All other terms of the Agreement remain in full force and effect. Please signify your agreement to the foregoing by signing in the space indicated below and returning two copies of the signed amendment. ACCEPTED AND AGREED: Very truly yours, KHOU-TV INC. CBS Affiliate Relations A Division of CBS Inc. By: /s/ ALLEN HOWARD By: /s/ Date: 12/9/93 Date: June 11, 1993 EX-10.3.6 4 AMENDMENT TO STOCK OPTION PLAN 1 AMENDMENT TO Exhibit 10.3 (6) THE A. H. BELO CORPORATION STOCK OPTION PLAN WHEREAS, A. H. Belo Corporation (the "Company" ) has heretofore adopted The A. H. BELO CORPORATION STOCK OPTION PLAN (the "1982 Plan"); and WHEREAS, pursuant to the provisions of Paragraph 14 of the 1982 Plan, the Board of Directors of the Company desires herein to amend the 1982 Plan; NOW, THEREFORE the 1982 Plan is hereby amended as follows: 1. Paragraph 7 (a) is hereby amended and restated in its entirety as follows: "If the optionee ceases to be an employee of the Company or a subsidiary by reason of the fact that he is discharged for cause, as determined solely and exclusively by the Board, or by reason of his resignation, all rights of the optionee to exercise an option shall terminate, lapse and be forfeited at the time of the optionee's termination of employment; provided however that if any termination of employment is due to early, normal or disability retirement (determined pursuant to the G. B. Dealey Retirement Pension Plan as in effect at that time), the optionee shall have the right to exercise his option at any time within 3 years after such retirement; provided further, that in case the optionee shall die within 3 years of such retirement, the personal representatives, heirs, legatees, or distributees of the optionee, as appropriate, shall have the right up to 12 months from such date of death to exercise any such option to the extent that the option was exercisable prior to death and had not been so exercised. Notwithstanding the foregoing, in no case may options be exercised later than the date on which the option terminates. 2. The following shall be added at the end of the third sentence of Paragraph 9: "An Optionee may also make payment at the time of exercise of an option by delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker approved by the Company that upon such broker's sale of Shares with respect to which such option is exercised, it is to deliver promptly to the Company the amount of sale proceeds necessary to satisfy the option exercise price and any withholding taxes." 2 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 22nd day of February, 1989. A. H. BELO CORPORATION By: /s/ ROBERT W. DECHERD --------------------------- Title: Chief Executive Officer ------------------------ ATTEST: /s/ MICHAEL J. MCCARTHY - ----------------------- Secretary EX-10.3.10 5 AMEND. NO. 3 TO 1986 LONG-TERM INCENTIVE PLAN 1 EXHIBIT 10.3 (10) AMMENDMENT NO.3 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 "Plan"); and WHEREAS, the Board of Directors of the Company desires herein to amend the Plan and to submit such amendment for stockholder approval, with the amendment to be effective on the date of stockholder approval; NOW, THEREFORE, the Plan is hereby amended as follows: 1. Paragraph 1 of the Plan is hereby amended in its entirety to read as follows: "1. Purpose The A.H. Belo Corporation (the 'Corporation') desires to attract and retain the best available talent and encourage the highest level of performance by directors and employees in order to serve the best interests of the Corporation and its shareholders. By affording directors and eligible employees the opportunity to acquire proprietary interests in the Corporation and by providing them incentives to put forth maximum efforts for the success of the Corporation's business the A. H. Belo Corporation 1986 Long Term Incentive Plan (the '1986 Plan') is expected to contribute to the attainment of those objectives." 2. The fifth sentence of paragraph 2 of the Plan ("No more than 50,000 of such 600,000 shares (subject to adjustment as described in paragraph 16) shall be issued in the form of restricted shares.") is hereby deleted from the Plan. 3. The first sentence of the first paragraph of paragraph 4 of the Plan is hereby amended to read as follows: "Except for options awarded to nonemployee directors pursuant to the terms of this paragraph 4, awards shall be granted only to persons who are regular full-time employees of the Corporation or one or more of its present or future subsidiaries (as defined below) and either are officers of, or in the opinion of the Committee hold key positions in or for, the Corporation or one or more of its subsidiaries." 4. The fourth sentence of the first paragraph of paragraph 4 of the Plan ("A director of the Corporation who is not also a regular full-time employee shall not be eligible to receive an award.") is hereby deleted from the Plan. 5. Paragraph 4 of the Plan is hereby amended by the addition of the following paragraphs: "Each director of the Corporation who is not also regular full-time employee ('nonemployee director') on the date Amendment No. 3 to the 1986 Plan is approved by the Board of Directors (the 'effective date') shall be granted an option to purchase 5,000 shares of Common Stock on the effective date. Each individual who first becomes a nonemployee director after the effective date shall be granted an option to purchase 5,000 shares of Common Stock on the date such individual becomes a nonemployee director. Only non-qualified options may be granted to nonemployee directors. Options granted to nonemployee directors shall not be accompanied by rights or limited rights. A nonemployee director who has been granted an option to purchase Common Stock pursuant to this paragraph shall not be eligible to receive another option upon re-election to the Board of Directors. The exercise price per share of Common Stock of each option granted to a nonemployee director shall be the Fair Market Value per Share of Common Stock (as such term is defined in paragraph 5) on the date the option is A-1 2 granted and the other terms and conditions of each such option shall be determined under paragraphs 6 and 7. "Unless a different meaning is indicated or required by the context, the term 'regular full-time employee' or 'employee' as used in the 1986 Plan shall include a nonemployee director of the Corporation, and the term 'employed' or 'employment' shall include service by a nonemployee director." IN WITNESS WHEREOF, the Company has caused this instrument to be executed in its name and on its behalf by the officers thereunto duly authorized this 4th day of May, 1988, effective as of May 4, 1988, the date such amendment was approved by stockholders. A.H. BELO CORPORATION By: /s/ ROBERT W. DECHERD ------------------------------ Title: Chairman of the Board and Chief Executive Officer --------------------------- ATTEST: /s/ MICHAEL J. McCARTHY - ------------------------- Secretary STATE OF TEXAS } } SS: COUNTY OF DALLAS } This instrument was acknowledged before me on May 4, 1988, by Robert W. Decherd, Chairman and Chief Executive Officer, of A. H. BELO CORPORATION, a Delaware corporation, on behalf of said corporation. /S/ DEAN H. BLYTHE ------------------------------ Notary Public in and for the State of Texas My Commission Expires: Print Name of Notary: 3-12-90 Dean H. Blythe - ------------------------------ ------------------------------ A-2 EX-10.3.11 6 AMEND. NO. 4 TO 1986 LONG-TERM INCENTIVE PLAN 1 EXHIBIT 10.3 (11) AMENDMENT NO. 4 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, the Company has amended its Certificate of Incorporation to permit the issuance of its Common Stock in series and has effected a distribution of Series B Common Stock; and WHEREAS, pursuant to the provisions of paragraphs 16 and 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 2 of the 1986 Plan is hereby amended by substituting the number "1,200,000" at each place the number "600,000" currently appears. 2. Paragraph 2 of the 1986 Plan is hereby further amended by the addition of the following paragraphs: "Provided that shares of Series B Common Stock are issued and outstanding, (i) each option to purchase shares of Common Stock granted after the effective date of Amendment No. 4 to the 1986 Plan shall be an option to purchase shares of Series B Common Stock and (ii) each award of restricted shares after the effective date of Amendment No. 4 to the 1986 Plan shall be an award of restricted shares of Series B Common Stock (each event in clauses (i) and (ii) subject to adjustment as described in paragraph 16). In the event that all issued and outstanding shares of Series B Common Stock are converted into shares of Series A Common Stock, (i) each option to purchase shares of Series B Common Stock will automatically convert into an option to purchase a like amount of shares of Series A Common Stock or Common Stock, as the case may be, and (ii) each restricted share of Series B Common Stock will automatically convert into a restricted share of Series A Common Stock or Common Stock, as the case may be." "So long as the Common Stock of the Company shall be issued in series, for purposes of this 1986 Plan the term "Common Stock" shall mean (a) in the case of shares of Common Stock issued prior to the effective date of Amendment No. 4 to the 1986 Plan (or after the conversion of all issued and outstanding shares of Series B Common Stock into shares of Series A Common Stock) Series A Common Stock or Common 2 Stock, as the case may be, and (b) in the case of shares of Common Stock issued after the effective date of Amendment No. 4 to the 1986 Plan (provided shares of Series B Common Stock remain outstanding) Series B Common Stock." 3. The last sentence of Paragraph 7(a) of the 1986 Plan is hereby amended to read as follows: "A 'Change in Control' is deemed to occur at the time when any group (within the meaning of Rule 12b-2 promulgated under the Exchange Act), entity or person (other than the Corporation, any subsidiary, or any savings, pension or other benefit plan for the benefit of employees of the Corporation or its subsidiaries) that theretofore beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) less than 30% of the total number of outstanding shares of common stock (including common stock and, if issued and outstanding, Series A Common Stock and Series B Common Stock, hereafter for purposes of this Paragraph 7(a), 'Common Stock'), acquires shares of Common Stock in a transaction or series of transactions that results in such group, entity or person directly or indirectly owning beneficially more than 30% of the total number of outstanding shares of Common Stock." 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 this 13th day of May, 1988. A.H. BELO CORPORATION By: /s/ ROBERT W. DECHERD ------------------------------- Title: Chairman of the Board and Chief Executive Officer ---------------------------- ATTEST: /s/ MICHAEL J. MCCARTHY - ----------------------- Secretary 3 STATE OF TEXAS } } COUNTY OF DALLAS } This instrument acknowledged before me on May 13, 1988 by Robert W. Decherd, Chairman of the Board of A. H. Belo Corporation, a Delaware corporation, on behalf of said corporation. /s/ DEAN H. BLYTHE ---------------------------- Notary Public in and for the State of Texas My Commission Expires: Print Name of Notary: 3-12-90 Dean H. Blythe - ---------------------- --------------------- EX-10.3.12 7 AMEND. NO. 5 TO 1986 LONG-TERM INCENTIVE PLAN 1 Exhibit 10.3 (12) AMENDMENT NO. 5 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. Subject to the approval of the holders of a majority of the voting power of shares present in person or by proxy at the 1989 Annual Meeting of Shareholders of the Company to be held on May 3 1989, or any adjournment thereof, Paragraph 2 of the 1986 Plan is hereby amended by substituting the number "2,400,000" at each place the number "1,200,000" currently appears. 2. The first additional paragraph added to Paragraph 2 of the 1986 Plan by Amendment No. 4 to the 1986 Plan is hereby amended and restated in its entirety to read as follows: "Provided that shares of Series B Common Stock are issued and outstanding, (i) each option to purchase shares of Common Stock granted after May 13, 1988 shall be an option to purchase shares of Series B Common Stock and (ii) each award of restricted shares after May 13, 1988 shall be an award of restricted shares of Series B Common Stock (each event in clauses (i) and (ii) subject to adjustment as described in Paragraph 16). Notwithstanding the foregoing, in the event such a grant or award with respect to Series B Common Stock would cause the Series A Common Stock to be excluded from trading on the New York Stock Exchange, the American Stock Exchange, or other national securities exchanges, or to be excluded from quotation on the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or any other national quotation system then in use, in the discretion of the Committee such grants of options to purchase shares and awards of restricted shares after May 13, 1988 shall be with respect to Series A Common Stock. In the event that all issued and outstanding shares of Series B Common Stock are converted into shares of Series A Common Stock, (i) each option to purchase shares of Series B Common Stock will automatically convert into an option to purchase a like amount of shares of Series A Common Stock or Common Stock, as the case may be, and (ii) each restricted 2 share of Series B Common Stock will automatically convert into a restricted share of Series A Common Stock or Common Stock, as the case may be." 3. As an adjustment for the distribution of shares of Series B Common Stock on May 19, 1988, the additional paragraphs added to Paragraph 4 by Amendment No. 3 to the 1986 Plan are hereby amended by substituting the number "10,000" at each place the number "5,000" currently appears. 4. The following shall be added at the end of Paragraph 7 (c): "An option holder may also make payment at the time of exercise of an option by delivering to the Corporation a properly executed exercise notice together with irrevocable instructions to a broker approved by the Corporation that upon such broker's sale of shares with respect to which such option is exercised, it is to deliver promptly to the Corporation the amount of sale proceeds necessary to satisfy the option exercise price and any required withholding taxes." 5. Paragraph 14(a) is hereby amended and restated in its entirety as follows: "In the event that the employment of an employee to whom an option, right or limited right has been granted under the 1986 Plan shall be terminated (except as set forth in paragraph 15 ), such option, right or limited right may, subject to the provisions of the 1986 Plan, be exercised (to the extent that the employee was entitled to do so at the termination of his employment) at any time within 3 months after such termination, or, in the case of an employee whose termination results from retirement from active employment at or after the earliest permissible retirement date (the "Early Retirement Age" ) specified in the G. B. Dealey Retirement Pension Plan, or any successor qualified retirement plan of the Corporation, one of its subsidiaries or a parent covering such employee (the "Pension Plan"), within 3 years after such termination, but in no case later than the date on which the option, right or limited right terminates; provided, however, that any option, right or limited right held by an employee whose employment is terminated for cause (as determined by the Board of Directors of the Corporation in its sole discretion) or an employee who leaves the employe of the Corporation voluntarily (other than after an Acceleration Date) shall, to the extent not theretofore exercised, forthwith terminate." 3 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 22nd day of February, 1989. A. H. BELO CORPORATION By: /s/ ROBERT W. DECHERD --------------------------- Title: Chief Executive Officer ------------------------ ATTEST: /s/ MICHAEL J. MCCARTHY - -------------------------- Secretary EX-10.3.19 8 FIFTH AMEND.TO A.H.BELO EMPLOYEE SAVINGS&INV. PLAN 1 EXHIBIT 10.3(19) FIFTH AMENDMENT TO THE A. H. BELO CORPORATION EMPLOYEE SAVINGS AND INVESTMENT PLAN A. H. Belo Corporation, a Delaware corporation, pursuant to authorization of its Board of Directors, adopts the following amendments to the A. H. Belo Corporation Employee Savings and Investment Plan (the "Plan"). 1. Section 3.2 of the Plan is amended by redesignating subsection (d) as subsection (e), and by adding the following new subsection (d): "(d) Participants Ineligible for Matching Contributions. Notwithstanding the foregoing provisions of this Section, no matching contributions will be made with respect to any Employee who is employed by DFW Suburban Newspapers, Inc." 2. Section 4.2 of the Plan is amended by adding the following sentence at the end thereof: "Notwithstanding the foregoing, no Participating Employer matching contributions will be allocated to the Matching Contribution Account of any Participant who is ineligible for matching contributions pursuant to Section 3.2(d), and any Deferral Contributions made on behalf of such ineligible Participant will be disregarded for purposes of allocating matching contributions to other Participants." The foregoing amendments are effective with respect to contributions made to the Plan for payroll periods beginning on and after April 1, 1994. Executed at Dallas, Texas, this 1st day of March, 1994. A. H. BELO CORPORATION By /s/ ROBERT W. DECHERD EX-10.3.20 9 G.B. DEALEY RETIREMENT PENSION PLAN 1 EXHIBIT 10.3(20) THE G. B. DEALEY RETIREMENT PENSION PLAN (As Amended and Restated Effective January 1, 1988) 2 THE G. B. DEALEY RETIREMENT PENSION PLAN A. H. Belo Corporation, a Delaware corporation, amends and completely restates The G. B. Dealey Retirement Pension Plan effective as of January 1, 1988. The Plan is a defined benefit pension plan intended to qualify under Code section 401(a), and the trust previously established pursuant to the Plan is an employees' trust intended to constitute a tax-exempt organization under Code section 501(a). The provisions of the Plan as amended and restated herein will apply to each Employee who completes an Hour of Service after December 31, 1987; provided, however, that an Employee's benefit which is protected from being decreased or eliminated in any respect under Code section 411(d)(6), and the Employee's vested interest in such benefit, will not be less under the terms of the Plan set forth below than under the terms of the Plan as in effect on December 31, 1987. Words and phrases with initial capital letters used throughout the Plan are defined in Article 1. -i- 3 TABLE OF CONTENTS Page ---- Article 1 Definitions . . . . . . . . . . . . . . . . . . . . 1 Article 2 Participation . . . . . . . . . . . . . . . . . . . . 10 Article 3 Contributions . . . . . . . . . . . . . . . . . . . . 12 Article 4 Vesting . . . . . . . . . . . . . . . . . . . . . . . 13 Article 5 Retirement Benefits . . . . . . . . . . . . . . . . . 15 Article 6 Special Provisions Affecting Certain Participants . . . . . . . . . . . . . . . . 19 Article 7 Forms of Retirement Benefits . . . . . . . . . . . . 25 Article 8 Death Benefits . . . . . . . . . . . . . . . . . . . 29 Article 9 Administration of the Plan and Trust Agreement . . . . . . . . . . . . . . . . . . . 32 Article 10 Limitations on Benefits . . . . . . . . . . . . . . . 37 Article 11 Restrictions on Distributions to Participants and Beneficiaries . . . . . . . . . . . 45 Article 12 Top-Heavy Provisions . . . . . . . . . . . . . . . . 48 Article 13 Adoption of the Plan by the Controlled Group Members . . . . . . . . . . . . . . 54 Article 14 Amendment of the Plan . . . . . . . . . . . . . . . . 55 Article 15 Termination and Partial Termination . . . . . . . . . 56 Article 16 Miscellaneous . . . . . . . . . . . . . . . . . . . . 61 Appendix A Participating Employers . . . . . . . . . . . . . . . A-1 Appendix B Actuarial Factors for Determining Certain Early Retirement Benefits . . . . . . . . . . B-1 -ii- 4 ARTICLE 1 DEFINITIONS 1.1 "Accrued Benefit" means a Participant's Normal Retirement Benefit which he has earned as of any date using the greater of the Participant's years of Credited Service or the years of Credited Service the Participant would earn if he remained an Employee until attaining age 65, multiplied by a fraction (not to exceed 1.0) the numerator of which is the Participant's years of Credited Service and the denominator of which is the years of Credited Service the Participant would earn if he remained an Employee until age 65. 1.2 "Actuarial Equivalent" or "Actuarially Equivalent" means a form of benefit under which the aggregate payments expected to be received under one form of benefit are equal in value to the aggregate payments expected to be received under a different form of benefit using the interest rate and mortality factors set forth below. (a) Interest rate. The interest rate used for purposes of computing optional forms of benefit payments (other than a single sum payment), and for purposes of computing any adjustments for benefits commencing on a date other than a Participant's Normal Retirement Date when such adjustment is not otherwise provided for in the Plan, for benefits that become payable before January 1, 1989, will be based on the interest rate used by the Pension Benefit Guaranty Corporation in the valuation of immediate annuities. As of January 1, 1983, and as of the beginning of each third calendar year before January 1, 1989, thereafter, the interest rate will be the average of the Pension Benefit Guaranty Corporation immediate annuity rates in effect on the first day of each month for the five-year period prior to such January 1, rounded to the nearest 0.5%, provided that no change will be made unless it increases or decreases the previous interest rate by at least one percentage point. The interest rate used for purposes of computing optional forms of benefit payments (other than a single sum payment), and for purposes of computing any adjustments for benefits commencing on a date other than a Participant's Normal Retirement Date when such adjustment is not otherwise provided for in the Plan, for benefits that become payable after December 31, 1988, will be the Pension Benefit Guaranty Corporation immediate annuity rate in effect on the first day of the Plan Year; provided, however, that the amount 5 of the Participant's Accrued Benefit determined using such interest rate will not be less than the amount of the Participant's Accrued Benefit as of December 31, 1988, using the interest rate determined under the preceding paragraph. (b) Mortality. The mortality assumption used for purposes of computing optional forms of benefit payments, and for purposes of computing any adjustments for benefits commencing on a date other than a Participant's Normal Retirement Date when such adjustment is not otherwise provided for in the Plan, will be a unisex rate that is 50% male, 50% female, taken from the 1971 Group Annuity Mortality Table, Projected by Scale D to 1975. Notwithstanding the foregoing, in calculating the present value of a Participant's benefit for purposes of the immediate distribution of a small benefit under Section 7.1(e), actuarial equivalence will be determined by using the Applicable Interest Rate. The foregoing actuarial assumptions may be changed from time to time by amendment to the Plan. No Participant or Beneficiary will be deemed to have any right, vested or nonvested, to have his benefit computed under previously adopted actuarial assumptions, except to the extent required by Code section 411(d)(6) to prevent the reduction of a Participant's Accrued Benefit. 1.3 "Applicable Interest Rate" means the interest rate or rates that would be used by the Pension Benefit Guaranty Corporation, as of the first day of the Plan Year in which a distribution is made, for purposes of determining the present value of the Participant's benefit under the Plan if the Plan had terminated on the first day of such Plan Year with insufficient assets to provide benefits guaranteed by the Pension Benefit Guaranty Corporation on that date. 1.4 "Beneficiary" means the one or more persons or entities entitled to receive distribution of a benefit under the Plan in the event of a Participant's death. 1.5 "Benefit Commencement Date" means the date upon which payment of a Participant's benefit commences. 1.6 "Board of Directors" or "Board" means the Board of Directors of the Company. 1.7 "Break in Service Year" means a Period of Absence of at least twelve consecutive months. A Break in Service Year -2- 6 will commence on the first day of an Employee's Period of Severance and will end on the day on which the Employee again performs an Hour of Service for a Controlled Group Member. If any Employee who is absent from work with a Controlled Group Member because of (i) the Employee's pregnancy, (ii) the birth of the Employee's child, (iii) the placement of a child with the Employee in connection with the Employee's adoption of the child, or (iv) caring for such child immediately following such birth or placement, will be absent for such reason beyond the first anniversary of the first date of absence, his Period of Absence, solely for purposes of preventing a Break in Service Year, will commence on the second anniversary of the first day of absence from work. The period of absence from work between the first and second anniversaries of the first date of absence from work will not be counted as a Period of Absence or a period of Credited Service. The provisions of this paragraph will not apply to an Employee unless the Employee furnishes to the Committee such timely information that the Committee may reasonably require to establish (i) that the absence from work is for one of the reasons specified in this paragraph and (ii) the number of days for which there was such an absence. 1.8 "Code" means the Internal Revenue Code of 1986, as amended from time to time. 1.9 "Committee" or "Administrative Committee" means the committee appointed under Article 9. 1.10 "Company" means A. H. Belo Corporation, a Delaware corporation. The term "Company" will also include any successor employer, if the successor employer expressly agrees in writing as of the effective date of succession to continue the Plan and become a party to the Trust Agreement. 1.11 "Compensation" means the earnings paid to an Employee by the Participating Employers which are subject to reporting on Internal Revenue Service Form W-2, excluding, however, (i) amounts includible in the Employee's income under Code section 83 with respect to restricted stock, (ii) amounts includible in the Employee's income by reason of the grant or exercise of a stock option, (iii) any other amounts includible in the Employee's income by reason of an award under the Company's 1986 Long Term Incentive Plan, as amended from time to time, (iv) moving expense reimbursements and (v) except as provided in the next sentence, contributions to or amounts paid to the Employee from this Plan or any other Qualified Plan. In addition, Compensation includes any contributions made by the -3- 7 Participating Employers on behalf of an Employee pursuant to a deferral election under an employee benefit plan containing a cash or deferred arrangement under Code section 401(k) or any amounts that would have been received as cash but for an election to receive benefits under a cafeteria plan meeting the requirements of Code section 125. Effective as of the first Plan Year beginning after December 31, 1988, the annual Compensation of an Employee taken into account for any purpose for any Plan Year will not exceed $200,000, as adjusted by the Secretary of the Treasury. 1.12 "Controlled Group" means the Company and all other corporations, trades and businesses, the employees of which, together with employees of the Company, are required by the first sentence of subsection (b), by subsection (c), by subsection (m) or by subsection (o) of Code section 414 to be treated as if they were employed by a single employer. 1.13 "Controlled Group Member" means each corporation or unincorporated trade or business that is or was a member of a Controlled Group, but only during such period as it is or was such a member. 1.14 "Credited Service" means the period of time beginning on the date an Employee is first credited with an Hour of Service (or is again credited with an Hour of Service following his reemployment) and ending on the Employee's Termination Date. An Employee's Credited Service will also include each Period of Absence of less than 12 months and any periods during which he is in the service of the armed forces of the United States and his reemployment rights are guaranteed by law, provided he returns to employment with a Controlled Group Member within the time such rights are guaranteed. A "year of Credited Service" means each period of 365 days in an Employee's period of Credited Service, determined by aggregating periods of Credited Service that are not consecutive. If an Employee's aggregate Credited Service exceeds his whole years of Credited Service, he will receive credit for a fractional year of Credited Service determined by dividing the number of days of Credited Service that exceed his whole years of Credited Service by 365. For purposes of determining the amount of an Employee's Accrued Benefit (but not for purposes of determining his vested interest in his Accrued Benefit), Credited Service earned by the Employee (i) while employed by a Controlled Group Member that was not a Participating Employer will be taken into account unless the Employee was eligible to participate in another Qualified Plan by reason of such employment and (ii) during any period prior to January 1, 1982, during which the Employee was eligible to participate in the Plan but elected not to participate will be disregarded. -4- 8 1.15 "Disability" or "Disabled" means disability for purposes of an Employee's eligibility to receive disability benefits under the Company's long-term disability plan. An Employee who for any reason is not eligible to receive disability benefits under the Company's long-term disability plan will not be Disabled for purposes of the Plan. 1.16 "Early Retirement Age" means the earlier of (i) the date on which a Participant has attained age 55 and has completed at least (A) for Participants who terminate employment before January 1, 1989, and who do not complete an Hour of Service thereafter, ten years of Credited Service and (B) for all other Participants, five years of Credited Service and (ii) the date on which a Participant has attained age 62. 1.17 "Effective Date" means January 1, 1988. 1.18 "Employee" means any person who (i) is employed by a Controlled Group Member if the relationship between a Controlled Group Member and such person would, for federal income tax purposes, constitute the legal relationship of employer and employee, or (ii) is a "leased employee" of a Controlled Group Member within the meaning of Code section 414(n)(2) but only for purposes of the requirements of Code section 414(n)(3). 1.19 "Enrolled Actuary" means the enrolled actuary as defined by Section 103(a)(4)(A) of ERISA, engaged by the Committee or the Company as the Plan's enrolled actuary. 1.20 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 1.21 "Final Monthly Compensation" means the average monthly compensation of a Participant during the ten full calendar years of employment with a Controlled Group Member immediately preceding his termination of employment or during all of his full calendar years of employment, if less than ten full calendar years. 1.22 "Hour of Service" means each hour credited in accordance with the following rules: (a) Credit for Services Performed. An Employee will be credited with one Hour of Service for each hour for which he is paid, or entitled to payment, by one or more Controlled Group Members for the performance of duties. -5- 9 (b) Credit for Periods in Which No Services Are Performed. An Employee will be credited with one Hour of Service for each hour for which he is paid, or entitled to payment, by one or more Controlled Group Members on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated); except that (i) no more than 501 Hours of Service will be credited under this subsection (b) to an Employee on account of any single continuous period during which he performs no duties (whether or not such period occurs in a single Plan Year), (ii) an hour for which an Employee is directly or indirectly paid, or entitled to payment, on account of a period during which no duties are performed will not be credited to the Employee if the payment is made or due under a plan maintained solely for the purpose of complying with applicable workers' compensation or unemployment compensation or disability insurance laws, and (iii) Hours of Service will not be credited for a payment which solely reimburses an Employee for medical or medically related expenses incurred by the Employee. For purposes of this subsection (b), an Employee will be credited with Hours of Service on the basis of his regularly scheduled working hours per week (or per day if he is paid on a daily basis) or, in the case of an Employee without a regular work schedule, on the basis of 40 Hours of Service per week (or 8 Hours of Service per day if he is paid on a daily basis) for each week (or day) during the period of time during which no duties are performed; except that an Employee will not be credited with a greater number of Hours of Service for a period during which no duties are performed than the number of hours for which he is regularly scheduled for the performance of duties during the period or, in the case of an Employee without a regular work schedule, on the basis of 40 Hours of Service per week (or 8 Hours of Service per day if he is paid on a daily basis). (c) Credit for Back Pay. An Employee will be credited with one Hour of Service for each hour for which back pay, irrespective of mitigation of damages, has been either awarded or agreed to by one or more Controlled Group Members; except that an hour will not be credited under both subsection (a) or (b), as the case may be, and this subsection (c), and Hours of Service credited under this subsection (c) with respect to periods described in subsection (b) will be subject to the limitations and provisions under subsection (b). (d) Credit for Certain Absences. If an Employee is absent from work on or after the Effective Date for any period by reason of the pregnancy of the Employee, by reason of the birth of a child of the Employee, by reason of the -6- 10 placement of a child with the Employee, or for purposes of caring for a child for a period beginning immediately following the birth or placement of that child, the Employee will be credited with Hours of Service (solely for the purpose of determining whether he has a One Year Break in Service under the Plan) equal to (i) the number of Hours of Service which otherwise would normally have been credited to him but for his absence, or (ii) if the number of Hours of Service under clause (i) is not determinable, 8 Hours of Service per normal workday of the absence, provided, however, that the total number of Hours of Service credited to an Employee under this subsection (d) by reason of any pregnancy, birth or placement will not exceed 501 Hours of Service. Hours of Service will not be credited to an Employee under this subsection (d) unless the Employee furnishes to the Committee such timely information as the Committee may reasonably require to establish that the Employee's absence from work is for a reason specified in this subsection (d) and the number of days for which there was such an absence. (e) Manner of Counting Hours. No hour will be counted more than once or be counted as more than one Hour of Service even though the Employee may receive more than straight-time pay for it. With respect to Employees whose compensation is not determined on the basis of certain amounts for each hour worked during a given period and for whom hours are not required to be counted and recorded by any federal law (other than ERISA), Hours of Service will be credited on the basis of 10 Hours of Service daily, 45 Hours of Service weekly, 95 Hours of Service semi-monthly, or 190 Hours of Service monthly, if the Employee's compensation is determined on a daily, weekly, semi-monthly or monthly basis, respectively, for each period in which the Employee would be credited with at least one Hour of Service under this section. Except as otherwise provided in subsection (d), Hours of Service will be credited to Eligibility Computation Periods and Plan Years in accordance with the provisions of 29 C.F.R. Section 2530.200b-2, which provisions are incorporated in this Plan by reference. 1.23 "Normal Retirement Benefit" means the retirement benefit payable as of the Normal Retirement Date to a Participant who terminates employment at age 65, determined in accordance with Section 5.1. 1.24 "Normal Retirement Date" means the first day of the month coincident with or immediately following a Participant's attainment of age 65. -7- 11 1.25 "Participant" means an Employee or former Employee who has met the applicable participation requirements of Article 2 (or the participation requirements of the Plan as in effect on December 31, 1987) and who has not yet received a distribution of the entire amount of his vested benefit under the Plan. 1.26 "Participating Employer" means each Controlled Group Member set forth on Appendix A and any other Controlled Group Member or organizational unit of the Company or a Controlled Group Member which is designated as a Participating Employer under the Plan by the Board of Directors. 1.27 "Period of Absence" means the period of time beginning on an Employee's Termination Date and ending on the date he again performs an Hour of Service. 1.28 "Plan" means the defined benefit pension plan set forth herein, as amended from time to time. 1.29 "Plan Year" means the period with respect to which the records of the Plan are maintained, which is the 12-month period beginning on January 1 and ending on December 31, and includes such periods prior to the Effective Date. 1.30 "Primary Social Security Benefit" means the amount of monthly benefits which an Employee would be entitled to receive as his "primary insurance amount" determined on the assumption that (i) he has made or will make appropriate application for such benefits, (ii) no event occurs to delay or forfeit any part of such benefits, and (iii) if he terminates employment before age 65, he will continue to receive until age 65 remuneration (which would be treated as taxable wages for purposes of the Social Security Act) at the same rate as at the time of his termination of employment. In the case of an Employee who, from the later of January 1, 1951 or the date on which he attained 22 years of age, was continuously employed by one or more Controlled Group Members, his Primary Social Security Benefit will be computed as if, prior to the date of his termination of employment, he received no wages other than those paid by the Controlled Group Members. As used in this Section 1.30, the term "primary insurance amount" will have the same meaning as under the Social Security Act as amended and in effect on an Employee's termination of employment. 1.31 "Qualified Joint and Survivor Annuity" means a monthly annuity for the life of a Participant and, after his death, a monthly survivor annuity for the life of the -8- 12 Participant's spouse which will be equal to 50% of the amount of the monthly annuity payable during the joint lives of the Participant and his spouse, which will be the Actuarial Equivalent of the normal form of benefit provided to an unmarried Participant. 1.32 "Qualified Plan" means an employee benefit plan that is qualified under Code section 401(a). 1.33 "Qualified Preretirement Survivor Annuity" means a monthly annuity for the life of the surviving spouse of a deceased Participant that is the Actuarial Equivalent of the Participant's Accrued Benefit determined as of the date of his death. 1.34 "Termination Date" means the earlier of the date on which an Employee quits, retires, is discharged or dies, or the first anniversary of the date on which the Employee is absent from service with a Controlled Group Member for any other reason, such as vacation, holiday, sickness, disability, leave of absence or layoff. The phrases "terminates employment" and "termination of employment" when used with respect to an Employee will refer to an event that causes the date on which the event occurs to constitute the Employee's Termination Date. 1.35 "Trust Agreement" means the agreement or agreements executed by the Company and the Trustee which establish a trust fund to provide for the investment, reinvestment, administration and distribution of contributions made under the Plan and the earnings thereon, as amended from time to time. 1.36 "Trust Fund" means the assets of the Plan held by the Trustee pursuant to the Trust Agreement. 1.37 "Trustee" means the one or more individuals or organizations who have entered into the Trust Agreement as Trustee(s), and any duly appointed successor. -9- 13 ARTICLE 2 PARTICIPATION 2.1 Eligibility to Participate. Each Employee who was a Participant on December 31, 1987, will continue to participate in the Plan on the Effective Date. Each Employee who was not a Participant as of the Effective Date will become a Participant on the January 1 or July 1 next following the date on which he has both attained age 21 and completed a year of Credited Service, if he is then employed by a Participating Employer. 2.2 Exclusions from Participation. (a) Ineligible Employees. An Employee who is otherwise eligible to participate in the Plan will not become or continue as an active Participant if (i) except as otherwise provided in this subsection (a), he is covered by a collective bargaining agreement that does not expressly provide for participation in the Plan, provided that the representative of the Employees with whom the collective bargaining agreement is executed has had an opportunity to bargain concerning retirement benefits for those Employees; (ii) he is a nonresident alien who receives no earned income (within the meaning of Code section 911(d)(2)) from a Participating Employer which constitutes income from sources within the United States (within the meaning of Code section 861(a)(3)); (iii) he is a leased employee required to be treated as an Employee under Code section 414(n); (iv) he is employed by a Controlled Group Member or an organizational unit thereof that has not been designated as a Participating Employer by the Board; or (v) he is then on an approved leave of absence without pay or in the service of the armed forces of the United States. The exclusion provided in clause (i) of this subsection (a) will not apply to an Employee of The Dallas Morning News Company who is or becomes a member of the bargaining unit represented by the Dallas Typographical Union, Local No. 103, or to an Employee of WFAA Television, Inc. who is or becomes a member of the bargaining unit represented by the International Brotherhood of Electrical Workers. (b) Exclusion after Participation. A Participant who becomes ineligible under subsection (a) will continue to earn Credited Service for purposes of determining his vested interest in his Accrued Benefit, but during the period of ineligibility the Participant's Credited Service will not be taken into account for purposes of determining the amount of his Accrued Benefit. -10- 14 (c) Participation after Exclusion. An Employee or Participant who is excluded from active participation will be eligible to participate in the Plan on the first day he is no longer described in subsection (a) and is credited with one or more Hours of Service by a Participating Employer, provided that he has otherwise met the requirements of Section 2.1. This subsection will apply to an Employee who returns from an approved leave of absence or from military leave and who would otherwise be treated as a new Employee under Section 2.3 only if he returns to employment with a Controlled Group Member immediately following the expiration of the leave of absence or, in the case of an Employee on military leave, during the period in which reemployment rights are guaranteed by law. 2.3 Reemployment Provisions. All Credited Service is taken into account in determining eligibility to participate, except as otherwise provided in this Section. (a) Termination of Employment before Participation. If an Employee terminates employment before becoming a Participant and is reemployed by a Controlled Group Member before incurring five consecutive Break in Service Years, he will become a Participant on the later of the date initially determined under Section 2.1, or the date he is credited with one or more Hours of Service by a Participating Employer after reemployment; but if he is reemployed by a Controlled Group Member after incurring five consecutive Break in Service Years, he will be treated as a new Employee for purposes of the Plan and his Credited Service completed before his reemployment will be disregarded in determining when he will become a Participant. (b) Termination of Employment after Participation. A Participant who has a vested and nonforfeitable right to all or a portion of his Accrued Benefit at the time of his termination of employment will again become an active Participant immediately upon his reemployment by a Participating Employer. If any other Participant terminates employment and is reemployed by a Controlled Group Member before incurring a number of consecutive Break in Service Years equal to the greater of five or his years of Credited Service, he will again become an active Participant on the date he is credited with one or more Hours of Service by a Participating Employer; but if he is reemployed by a Controlled Group Member after incurring a number of consecutive Break in Service Years equal to the greater of five or his years of Credited Service, he will be treated as a new Employee and his Credited Service completed before his reemployment will be disregarded for purposes of determining when he will again become a Participant. -11- 15 ARTICLE 3 CONTRIBUTIONS 3.1 Employer Contributions. Each Participating Employer will pay to the Trustee as a contribution for a Plan Year the amount, if any, determined by the Enrolled Actuary to be necessary to provide the benefits under Article 5 and, if applicable, Article 12, subject, however, to the Company's right to amend or terminate the Plan. 3.2 Time of Payment. The contributions for a Plan Year to be made by each Participating Employer pursuant to this Article 3 will be paid to the Trustee not later than the date permitted under Section 412 of the Code and regulations thereunder for purposes of determining credits to the funding standard account for such Plan Year, unless a waiver of the minimum funding standard for such Plan Year has been obtained by the Participating Employers from the Internal Revenue Service. 3.3 Participant Contributions Prohibited. A Participant may not make contributions to the Plan. -12- 16 ARTICLE 4 VESTING 4.1 Determination of Vested Interest. (a) Years of Credited Service. A Participant who terminates employment before January 1, 1989, and is not thereafter credited with an Hour of Service by a Controlled Group Member will earn a 100% vested and nonforfeitable interest in his Accrued Benefit upon his completion of ten years of Credited Service. The interest of each other Participant in his Accrued Benefit will become 100% vested and nonforfeitable upon his completion of five years of Credited Service. Prior to becoming 100% vested, a Participant will have no vested interest in his Accrued Benefit. (b) Accelerated Vesting. A Participant's interest in his Accrued Benefit will become 100% vested and nonforfeitable without regard to his years of Credited Service (i) on his attainment of Early Retirement Age while he is an Employee, (ii) on his death while he is an Employee, or (iii) in the event of a Change in Control (as defined in Section 5.7(b)) while he is an Employee. 4.2 Unclaimed Distribution. If the Committee cannot locate a person entitled to receive a benefit under the Plan within a reasonable period (as determined by the Committee in its discretion), the amount of the benefit will be treated as a forfeiture during the Plan Year in which the period ends. If, before final distributions are made from the Trust Fund following termination of the Plan, a person who was entitled to a benefit which has been forfeited under this Section makes a claim to the Committee or the Trustee for his benefit, the amount of his benefit that was previously forfeited will be restored and paid to him in accordance with the terms of the Plan. 4.3 Reemployment Provisions. If a Participant who has a vested and nonforfeitable interest in his Accrued Benefit terminates employment and again becomes an Employee, his years of Credited Service completed before his reemployment will be included in determining his vested and nonforfeitable interest after he again becomes an Employee. If any other Employee or Participant terminates employment and again becomes an Employee before incurring a number of consecutive Break in Service Years equal to the greater of five or his years of Credited Service, his years of Credited Service completed before his reemployment -13- 17 will be included in determining his vested and nonforfeitable interest after he again becomes an Employee; but if he is reemployed after incurring a number of consecutive Break in Service Years equal to the greater of five or his years of Credited Service, his years of Credited Service completed before his reemployment will be disregarded for purposes of determining his vested and nonforfeitable interest after he again becomes an Employee. 4.4 Application of Forfeited Benefits. The amount of a Participant's benefit that is forfeited pursuant to this Article will not be applied to increase the benefits of Participants at any time but will be applied to reduce Participating Employer contributions to the Plan. 4.5 Special Provisions Applicable to Certain Participants. Article 6 contains special vesting provisions applicable to certain Participants. -14- 18 ARTICLE 5 RETIREMENT BENEFITS 5.1 Normal Retirement Benefit. A Participant who terminates employment at age 65 will receive a monthly retirement benefit beginning on his Normal Retirement Date in an amount equal to the difference between (i) 1.75% of the Participant's Final Monthly Compensation multiplied by his years of Credited Service and (ii) 1.50% of his Primary Social Security Benefit multiplied by his years of Credited Service up to 40 such years; provided, however, that a Participant who was an Employee on January 1, 1978, and who was an active Participant in the Plan on December 31, 1977, will receive a minimum monthly benefit beginning on his Normal Retirement Date equal to 1% of his Final Monthly Compensation multiplied by his years of Credited Service. 5.2 Early Retirement Benefit. A Participant who terminates employment for any reason other than death or total and permanent disability at or after his Early Retirement Age and before age 65 will be entitled to receive a monthly retirement benefit beginning on his Normal Retirement Date in an amount equal to his Accrued Benefit determined as of the date he terminated employment. If the Participant elects to receive his early retirement benefit as of the first day of any month before his Normal Retirement Date, his Accrued Benefit will be reduced by 1/180th for each of the first 60 months and by 1/360th for each of the next 60 months by which his Benefit Commencement Date is earlier than his Normal Retirement Date. 5.3 Late Retirement Benefit. A Participant who remains or again becomes an Employee after attaining age 65 will receive a monthly retirement benefit beginning on the first day of the month immediately following his termination of employment. The amount of the Participant's late retirement benefit will be determined under the benefit formula set forth in Section 5.1 by taking into account the Participant's Compensation and years of Credited Service after age 65 and will be reduced (but not below zero) to the extent permitted under Code section 411(b)(1)(H) and the regulations thereunder by the Actuarial Equivalent of any in-service distributions made to the Participant under the Plan after age 65 and by the amount of any adjustments made under the Plan as in effect on December 31, 1987, to the Participant's retirement benefit attributable to the delay in the payment of benefits after attainment of age 65 and prior to January 1, 1989. In no event, however, will the Participant's late retirement benefit -15- 19 be less than his Accrued Benefit determined at age 65. For purposes of this Section, a Participant who attains age 65 will be considered to have terminated employment on the first day of any month he is not employed in Section 203(a)(3)(B) service within the meaning of the Department of Labor regulations (29 C.F.R. Section 2530.203-3(c)). 5.4 Deferred Vested Benefit. A Participant who has a vested interest in his Accrued Benefit and who terminates employment before attaining age 55 for any reason other than death or total and permanent disability will be entitled to receive a monthly retirement benefit beginning on his Normal Retirement Date in an amount equal to his Accrued Benefit determined as of the date he terminated employment. If the Participant elects to begin receiving his retirement benefit as of the first day of any month after attaining age 55 and before his Normal Retirement Date, his Accrued Benefit will be reduced by the factors set forth in Section 5.2 for each month that his Benefit Commencement Date is earlier than his Normal Retirement Date. Article 6 contains special provisions relating to the payment of deferred vested benefits for certain Participants. 5.5 Disability Benefit. A Participant who has a Disability prior to attaining age 65 will continue to accrue a benefit during the entire period of his Disability only if he returns to permanent, full-time employment with a Participating Employer immediately following the termination of his Disability. For purposes of determining the amount of the benefit accrued during Disability, the Participant's Compensation will be deemed to be his annualized rate of Compensation as of the date of his Disability, and the Participant will earn Credited Service during the period in which he receives Disability benefits. A Participant who becomes totally and permanently disabled (as hereafter defined) before attaining age 65 and is not eligible for benefits under the Company's long-term disability plan will be fully vested in his Accrued Benefit without regard to his years of Credited Service and will be entitled to receive a monthly benefit beginning on the first day of the month immediately following the date of his disability in an amount equal to his Accrued Benefit determined as of such date. The amount of such disability benefit will not be actuarially reduced to reflect the fact that it is being paid prior to the Participant's Normal Retirement Date. A Participant will be totally and permanently disabled for -16- 20 purposes of this paragraph only if he is eligible to receive disability benefits under the Social Security Act. A Participant who is eligible to receive a monthly benefit under this paragraph will continue to receive such benefit only if he submits evidence to the Committee, in such form and at such times as the Committee may reasonably request, that he continues to qualify for disability benefits under the Social Security Act. 5.6 Reemployment Provisions. (a) Determination of Credited Service. If a Participant terminates employment and again becomes an Employee, his years of Credited Service completed before his reemployment will be taken into account for purposes of determining the amount of his Accrued Benefit only to the extent such years of Credited Service are included under Section 4.3 in determining his vested and nonforfeitable interest in his Accrued Benefit after he again becomes an Employee. (b) Adjustment to Accrued Benefit. If a Participant receives a benefit payment after terminating employment and again becomes an Employee, the amount of his Accrued Benefit that becomes payable upon his subsequent termination of employment will be reduced by the Actuarial Equivalent of the payments previously made to him. 5.7 Benefits Payable Following a Change in Control. (a) Increase in Benefits. Upon a Change in Control (as defined in subsection (b) below), provided the Board has not adopted a resolution prior thereto causing this Section to become inoperative, (i) the Accrued Benefits of all Participants who are Employees on the date a Change in Control occurs will be fully vested and nonforfeitable and (ii) the excess (if any) (hereinafter, the "Excess") of Plan assets over the present value of accrued benefits (as determined in accordance with Section 4044 of ERISA) will be applied to provide such Participants with an additional vested benefit equivalent to the benefit such Participants would have received under the regulations of the Pension Benefit Guaranty Corporation providing for the allocation of residual assets of plans that do not provide for a reversion (29 C.F.R. Section 2618.32(a)), with the provisions of such regulations applied solely to Participants who are Employees on the date a Change in Control occurs, if the Plan had terminated on the date of Change in Control, so that, immediately after such increase, the Excess over the present value of vested accrued benefits is -17- 21 zero. If, however, the allocation method provided under this subsection (a) is not acceptable to the Internal Revenue Service or the Pension Benefit Guaranty Corporation, the Excess will be allocated on a pro rata basis according to the product of the Final Monthly Compensation of each Participant multiplied by the Participant's years of Credited Service; and if that method of allocation is still not acceptable to the Internal Revenue Service or the Pension Benefit Guaranty Corporation, the Excess will be allocated on any reasonable basis acceptable to the Internal Revenue Service and the Pension Benefit Guaranty Corporation. (b) Change in Control Defined. For purposes of this Section, the term "Change in Control" means (i) an event or series of events by which any group (within the meaning of Rule 12b-2 promulgated under the Securities Exchange Act of 1934), entity or person (other than the Company, any subsidiary, or any savings, pension or other benefit plan for the benefit of employees of the Company or its subsidiaries) that theretofore beneficially owned (within the meaning of Rule 13d-3 promulgated under such Act) less than 30% of the total number of outstanding shares of common stock of the Company (including common stock and, if issued and outstanding, Series A Common Stock and Series B Common Stock, hereafter "Common Stock"), acquires shares of Common Stock in a transaction or series of transactions that results in such group or person directly or indirectly owning beneficially more than 30% of the total number of outstanding shares of Common Stock, (ii) approval by the Company's shareholders (or, if such approval is not required, consummation) of a merger in which the Company does not survive as an independent, publicly-owned company, a consolidation, or a sale, exchange or other disposition of all or substantially all the Company's assets, or (iii) a change in the composition of the Board of Directors during any period of two consecutive years such that the individuals who at the beginning of such period were members of the Board of Directors cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Company's shareholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period. 5.8 Special Benefit Provisions. Article 6 sets forth special provisions affecting the calculation of benefits for certain Participants. 5.9 Limitation on Benefits. Article 10 sets forth certain rules under Code section 415 that limit the amount of a Participant's retirement benefits under the Plan. -18- 22 ARTICLE 6 SPECIAL PROVISIONS AFFECTING CERTAIN PARTICIPANTS 6.1 Priority Over Other Provisions. The provisions set forth in this Article will supersede any conflicting provisions of Articles 4, 5 and 8. The provisions of Sections 6.2 through 6.8 apply to any Employee who (i) immediately prior to January 30, 1984, was employed by a D&B Affiliate (as defined below), (ii) effective January 30, 1984, became employed by a Controlled Group Member that was a Participating Employer on such date, and (iii) prior to March 30, 1984, did not return to employment with The Dun & Bradstreet Corporation or any of its affiliates. The remaining Sections of this Article apply to certain former Employees who ceased to be active Participants as a result of the sale or other disposition of a business by a Controlled Group Member. 6.2 Definitions Used in this Article. The following words and phrases, when used with initial capital letters, will have the meanings set forth below. (a) "Accrued Social Security Benefit" means the amount of monthly benefit which an Employee would be entitled to receive as his primary insurance amount at age 65 under the Social Security Act in effect at the earlier of the Employee's Normal Retirement Date or termination of employment assuming (i) that he has made or will make appropriate application for such benefits, (ii) that no event occurs to delay or forfeit any part of such benefit, (iii) that wages cease upon the earlier of Normal Retirement Date or termination of employment, and (iv) that the Employee had no wages prior to his date of employment with The Dun & Bradstreet Corporation, or prior to the later of his date of employment with a D&B Affiliate and either April 1, 1980, in the case of employment with WVEC Television, Inc., or January 1, 1972, in the case of employment with any other D&B Affiliate. (b) "Average Final Compensation" means the average of the Employee's monthly Compensation (excluding, however, amounts received prior to January 1, 1984, as severance pay, payments dependent upon any contingency after the period of Credited Service and any other special -19- 23 remuneration) during the five consecutive calendar years in the last ten calendar years of his Credited Service (or during the total number of calendar years of Credited Service if fewer than five) producing the highest average monthly Compensation. For purposes of determining an Employee's Compensation for periods prior to January 30, 1984, (i) service with a nonparticipating affiliated company under the D&B Plan will be deemed Credited Service and (ii) in the event an Employee completed at least 1,000 but less than 1,800 hours of service in any prior calendar year, his earnings will be annualized for such prior year. Compensation for periods after December 31, 1983, will be determined under Section 1.11. (c) "Belo Factor" means the factor determined in accordance with the table set forth in Part II of Appendix B. (d) "Belo Service" means an Employee's total Credited Service taken into account for purposes of determining his Accrued Benefit less his D&B Service. An Employee's total Credited Service for this purpose will be determined by aggregating (i) his years of Credited Service under the D&B Plan as of December 30, 1983, (ii) for the period January 1, 1984, through December 31, 1984, the greater of his Credited Service under the D&B Plan through January 30, 1984, and his Credited Service determined under Section 1.14 during such entire period, provided that no Credited Service will be granted for the period January 1, 1984 to January 30, 1984, unless the Employee was a participant in the D&B Plan, and (iii) his Credited Service determined under Section 1.14 beginning on January 1, 1985. Notwithstanding the foregoing, an Employee's Credited Service under (i) above will not include any period of service prior to April 1, 1980, with respect to an Employee who immediately prior to January 30, 1984, was employed by WVEC Television, Inc., or prior to January 1, 1972, with respect to any other Employee. (e) "D&B Affiliate" means the following Delaware corporations: (i) Great Western Broadcasting Corporation, (ii) Gulf Television Corporation, (iii) KOTV, Inc. and (iv) WVEC Television, Inc. (f) "D&B Factor" means the factor determined in accordance with the applicable table set forth in Part I of Appendix B. (g) "D&B Plan" means the Master Retirement Plan of The Dun & Bradstreet Corporation as in effect immediately prior to January 30, 1984. -20- 24 (h) "D&B Service" means the years of service credited to an Employee under the D&B Plan as of January 30, 1984, for benefit accrual purposes. (i) "Final Monthly Compensation" means the amount determined under Section 1.21, subject to the following adjustments: (i) Compensation received during the period prior to January 1, 1984, will exclude severance pay, payments dependent upon any contingency after the period of Credited Service and any other special remuneration; and (ii) if during any calendar year prior to January 1, 1984, an Employee completed at least 1,000 but less than 1,800 hours of service, Compensation for such calendar year will be annualized. 6.3 Vesting Credit. An Employee's Credited Service for purposes of determining his vested interest in his Accrued Benefit under Article 4 will be determined by aggregating (i) his years of service for vesting purposes under the D&B Plan as of December 31, 1983, (ii) for the period from January 1, 1984, through December 31, 1984, the greater of his service for vesting purposes under the D&B Plan through January 30, 1984, and his Credited Service determined under Section 1.14 during such entire period and (iii) his Credited Service determined under Section 1.14 for the period beginning on January 1, 1985. 6.4 Normal Retirement Benefit. An Employee's Normal Retirement Benefit will be equal to the sum of the benefits described in subsections (a) and (b) below. (a) D&B Benefit. The benefit under this subsection will be (i) 1.7% of the Employee's Average Final Compensation multiplied by his years of D&B Service, but in no event more than 25 such years, plus (ii) 1.0% of his Average Final Compensation multiplied by his years of D&B Service in excess of 25 years, minus (iii) 1.7% of his Accrued Social Security Benefit multiplied by his years of D&B Service, but in no event more than 25 years, minus (iv) 0.5% of his Accrued Social Security Benefit multiplied by his years of D&B Service in excess of 25 years; provided, however, that the total offset in clauses (iii) and (iv) will not exceed 50% of his Primary Social Security Benefit. (b) Belo Benefit. The benefit under this subsection will be (i) 1.75% of the Employee's Final Monthly Compensation multiplied by his years of Belo Service, minus the lesser of (ii) 1.5% of his Primary Social Security Benefit multiplied by the years of Belo Service he would have accrued if he had remained an Employee to his Normal Retirement Date -21- 25 not in excess of 40 such years, multiplied by a fraction, the numerator of which is his years of Belo Service and the denominator of which is the years of Belo Service he would have accrued if he had remained an Employee to his Normal Retirement Date, or (iii) 60% of his Primary Social Security Benefit multiplied by a fraction, the numerator of which is the sum of his years of D&B Service and his years of Belo Service and the denominator of which is the sum of the numerator plus his years of Credited Service determined as if he had remained an Employee to his Normal Retirement Date, less 1.7% of his Accrued Social Security Benefit multiplied by his years of D&B Service not in excess of 25 such years, less 0.5% of his Accrued Social Security Benefit multiplied by his years of D&B Service in excess of 25 years, but with no more than 15 years of such additional D&B Service to be taken into account. (c) Minimum D&B Benefit. In no event will the benefit determined under subsection (a) be less than the sum of (i) any prior benefits maintained or frozen for the Employee under the D&B Plan and (ii) $100.00 multiplied by his years of D&B Service and divided by 12. (d) Limitation on D&B Benefit. An Employee will not be entitled to any benefit computed under subsection (a) if he is entitled to receive from the D&B Plan benefits accrued for periods of employment prior to January 30, 1984. 6.5 Early Retirement Benefit. The monthly retirement benefit for an Employee who had attained age 55 and completed at least ten years of service for vesting purposes under the D&B Plan as of January 30, 1984, and who elects to receive his retirement benefit before his Normal Retirement Date will be the sum of the benefits described in subsections (a) and (b) below. (a) D&B Benefit. The early retirement benefit under this subsection will be the greater of the benefit described in Section 6.4(a) multiplied by the D&B Factor or the benefit described in Section 6.4(c) multiplied by the D&B Factor. The early retirement benefit under this subsection will be subject to the same limitation described in Section 6.4(d). (b) Belo Benefit. The early retirement benefit under this subsection will be the benefit described in Section 6.4(b)(i) multiplied by the Belo Factor minus the lesser of the offset described in Section 6.4(b)(ii) multiplied by the Belo Factor or the offset described in Section 6.4(b)(iii) multiplied by the D&B Factor. -22- 26 6.6 Late Retirement Benefit. If an Employee had attained age 65 on or before January 30, 1984, his late retirement benefit determined under Section 5.3 will be determined by taking into account the actuarial present value of the Employee's retirement benefit determined under Section 6.4(a) at January 30, 1984, (calculated by using the interest and mortality assumptions used under the Plan for purposes of determining actuarial equivalence) and the interest credited to such benefit under the Plan as in effect on December 31, 1987 for periods before January 1, 1989. 6.7 Death Benefits. For purposes of the death benefit payable under Section 8.1 to an Employee who had attained age 55 and had completed at least ten years of service for vesting purposes under the D&B Plan as of January 30, 1984, Actuarial Equivalence will be determined by applying the factors set forth on Appendix B. 6.8 Reemployment Provisions. If an Employee terminated employment and was rehired prior to January 30, 1984, and as a result of such termination his prior service was disregarded under the D&B Plan, such prior service will be reinstated if the Employee either completes five consecutive years of Credited Service following his reemployment or remains an Employee until he attains age 65. 6.9 Former Employees at KFDM-TV. The Accrued Benefit (determined under the terms of the Plan in effect on December 31, 1987) of each Employee of Belo Broadcasting Corporation who was employed at KFDM-TV at Beaumont, Texas, on January 4, 1984, and who was an active Participant in the Plan on that date is 100% vested and nonforfeitable. Benefit payments will be made to each such Participant in accordance with the terms of the Plan no earlier than the date on which such Participant is both no longer employed by Federated Newspapers, Inc. and no longer employed at KFDM-TV. 6.10 Former Employees at KRQX (AM) and KZEW (FM). The Accrued Benefit (determined under the terms of the Plan in effect on December 31, 1987) of each Employee of Dallas Radio, Inc. who was employed at KRQX (AM) or KZEW (FM) on December 31, 1986, and who was an active Participant in the Plan on that date is 100% vested and nonforfeitable. Benefit payments will be made to each such Participant in accordance with the terms of the Plan no earlier than the date on which such Participant is both no longer employed by Anchor Media, Ltd. and no longer employed at KRQX (AM) or KZEW (FM). -23- 27 6.11 Former Employees at KOA (AM) and KOAQ (FM). The Accrued Benefit (determined under the terms of the Plan in effect on December 31, 1987) of each Employee of Belo Radio, Inc. who was employed at KOA (AM) or KOAQ (FM) on August 12, 1987, and who was an active Participant in the Plan on that date is 100% vested and nonforfeitable. Benefit payments will be made to each such Participant in accordance with the terms of the Plan no earlier than the date on which such Participant is both no longer employed by Jacor Communications, Inc. and no longer employed at KOA (AM) or KOAQ (FM). -24- 28 ARTICLE 7 FORMS OF RETIREMENT BENEFITS 7.1 Forms of Retirement Benefit. (a) Unmarried Participant. The normal form of payment of retirement benefits for a Participant who is not married on his Benefit Commencement Date will be a ten-year certain and continuous annuity, consisting of equal monthly payments during the Participant's lifetime beginning on his Benefit Commencement Date, and if the Participant dies before he has received 120 monthly payments, monthly payments in the same amount will be continued to his Beneficiary until the Participant and his Beneficiary have received a total of 120 monthly payments. In the event that an unmarried Participant has a former spouse who pursuant to Section 7.2(b) is treated as a spouse or surviving spouse, the Participant will be deemed to be a married Participant hereunder to the extent required by Section 7.2(b). (b) Married Participant. The normal form of payment of benefits for a Participant who is married on his Benefit Commencement Date will be a Qualified Joint and Survivor Annuity, unless an optional form of benefit is elected pursuant to a Qualified Election as defined in Section 7.2(a) within the 90-day period prior to his Benefit Commencement Date. (c) Optional Forms of Retirement Benefit. The optional forms of retirement benefit under the Plan, each of which will be the Actuarial Equivalent of the ten-year certain and continuous annuity described in subsection (a) above, will be (i) a straight-life annuity, consisting of equal monthly payments beginning on a Participant's Benefit Commencement Date and ending with the monthly payment due immediately prior to his death; (ii) a contingent annuitant annuity, consisting of equal monthly payments beginning on the Participant's Benefit Commencement Date and, following his death, continued monthly payments to his Beneficiary in an amount equal to not less than 50% nor more than 100% (as the Participant will elect) of the monthly benefit payments made to the Participant, provided, however, that if the Beneficiary dies after the Benefit Commencement Date, the amount of monthly benefit payments to the Participant will not be increased and will cease with the monthly benefit payment due immediately prior to his death; and (iii) for a married Participant, a ten-year certain and continuous annuity, described in subsection (a). -25- 29 (d) Election of Optional Form. Subject to Section 7.2, a Participant may elect in writing, on a form provided by the Committee, to have his monthly retirement benefit paid in one of the optional forms. An election will be effective only if the Participant is alive on his Benefit Commencement Date. The period for making the election will be for at least 90 days following the furnishing of all applicable information to the Participant by the Committee and ending not earlier than 90 days before the Participant's Benefit Commencement Date. (e) Exception for Small Benefits. If the present value of a Participant's vested Accrued Benefit does not exceed $3,500 and payment of benefits has not commenced, the Committee will distribute the benefit as an immediate single-sum payment notwithstanding any other provision of the Plan. For purposes of determining whether the present value of a Participant's vested Accrued Benefit exceeds $3,500, the present value of such benefit will be calculated by using the Applicable Interest Rate. 7.2 Special Annuity Provisions. (a) Qualified Election. For purposes of Section 7.1(b), "Qualified Election" means a waiver of a Qualified Joint and Survivor Annuity which meets the requirements of this subsection. The waiver must be in writing and must be consented to by the Participant's spouse. The spouse's consent to a waiver must be witnessed by a notary public. If, however, the Participant establishes to the satisfaction of the Committee that such written consent may not be obtained because there is no spouse or the spouse cannot be located, the Participant's waiver will be deemed a Qualified Election. Any consent required under the Plan will be valid only with respect to the spouse who signs the consent, or in the event of a deemed Qualified Election, the designated spouse. A revocation of a prior waiver may be made by a Participant without the consent of the spouse at any time before the Participant's Benefit Commencement Date. However, a Participant whose spouse has consented to a Qualified Election may not change the optional form of benefits or elect an optional form following his revocation of the Qualified Election without spousal consent unless the Qualified Election expressly permits the Participant to elect optional forms of benefit without any further consent of the spouse. Notwithstanding the foregoing or any other provision of the Plan to the contrary, a Participant may elect to receive his retirement benefit in the form of a contingent annuitant annuity under Section 7.1(c) without the consent of his spouse, provided his spouse is -26- 30 designated as the Beneficiary under such optional form of benefit. (b) Certain Spouses. A former spouse will be treated as the spouse or surviving spouse of a Participant to the extent provided under a qualified domestic relations order as described in Code section 414(p). (c) Information Requirements. In the case of a Participant whose normal form of benefit is a Qualified Joint and Survivor Annuity, the Committee will provide the Participant within a reasonable period prior to the commencement of benefits a written explanation of (i) the terms and conditions of a Qualified Joint and Survivor Annuity, (ii) the Participant's right to make and the effect of an election to waive the Qualified Joint and Survivor Annuity form of benefit, (iii) the rights of a Participant's spouse, and (iv) the right to make, and the effect of, a revocation of a previous election to waive the Qualified Joint and Survivor Annuity. 7.3 Information Regarding Beneficiaries. A Participant entitled to receive benefits in the form of a Qualified Joint and Survivor Annuity or any other option providing benefits or contingent benefits to his spouse or other Beneficiary will certify to the Committee such information as it may reasonably request respecting his spouse or Beneficiary, including (but not limited to) information as to name, address, age, sex, and date of marriage. The Committee will be entitled to rely upon any certification of a Participant's marital status and will not be obligated to make inquiry into the legal effect of any actual or purported marriage, marital dissolution, or common-law relationship. 7.4 Consent to Certain Distributions. Notwithstanding any other provision of the Plan, if the present value of a Participant's vested accrued benefit exceeds $3,500, the Committee will not permit benefit payments to be made to him before he attains age 65 unless the Participant and his spouse consent (in the manner described in Section 7.2(a)) to the commencement of such payments or the Participant consents to such payments and payments are made in the form of a Qualified Joint and Survivor Annuity. 7.5 Suspension of Benefits. (a) General Rule. If a Participant who is receiving periodic retirement benefits from the Plan again becomes an Employee of a Participating Employer, his retirement benefits will be suspended for each calendar month during which -27- 31 the Employee is employed in Section 203(a)(3)(B) Service (as hereafter defined). In addition, if a Participant's Normal Retirement Date occurs in a Plan Year beginning after December 31, 1988, and the Participant remains an Employee of a Participating Employer after his Normal Retirement Date, his retirement benefits will also be suspended for each calendar month during which he is employed in Section 203(a)(3)(B) Service. (b) Resumption of Payment. If benefit payments have been suspended, payments will resume no later than the first day of the third calendar month after the calendar month in which the Employee ceases to be employed in Section 203(a)(3)(B) Service. The initial payment upon resumption will include the payment scheduled to occur in the calendar month when payments resume and any amounts withheld during the period between the cessation of Section 203(a)(3)(B) Service and the resumption of payments. (c) Notification. No payment will be withheld by the Plan pursuant to this Section unless the Committee notifies the Employee by personal delivery or first class mail during the first calendar month or payroll period in which the Plan withholds payments that his benefits are suspended. Such notification will contain a description of the specific reasons why benefit payments are being suspended, a description of the Plan provision relating to the suspension of payments, a copy of such provisions, and a statement to the effect that applicable Department of Labor Regulations may be found in Section 2530.203-3 of the Code of Federal Regulations. In addition, the notice will inform the Employee of the Plan's procedures for affording a review of the suspension benefits. Requests for such reviews may be considered in accordance with the claims procedure set forth in Section 9.10. (d) Top-Heavy Plan Minimum Benefit. This Section does not apply to the Minimum Benefit to which the Participant is entitled under the top-heavy provisions of Article 12. (e) Section 203(a)(3)(B) Service. The definition of "Section 203(a)(3)(B) Service" is set forth in the Department of Labor Regulations (29 C.F.R. Section 2530.203-3(c)(1)). 7.6 Restrictions on Distributions. Article 11 sets forth certain rules under various provisions of the Code relating to restrictions on distributions to Participants. -28- 32 ARTICLE 8 DEATH BENEFITS 8.1 Death Benefit Payable Before Benefit Commencement Date. The Beneficiary of a Participant who has a vested interest in his Accrued Benefit and who dies prior to his Benefit Commencement Date will receive a death benefit in the amount of the Participant's Accrued Benefit determined as of the date of his death. 8.2 Form of Death Benefit. (a) Surviving Spouse. If the Participant's Beneficiary is his surviving spouse, the death benefit will be paid in the form of a Qualified Preretirement Survivor Annuity. (b) Other Beneficiaries. If the Participant's Beneficiary is a person other than his surviving spouse, the death benefit will be paid in the form of a ten-year certain and continuous annuity as described in Section 7.1(c). 8.3 Commencement of Death Benefit. The Beneficiary will begin to receive payments as of the first day of the month immediately following the Participant's death unless the Beneficiary elects to have payments commence on the first day of any subsequent month prior to the Participant's Normal Retirement Date. All death benefit payments will be made or will begin as soon as administratively feasible and will be equal to the Actuarially Equivalent present value of the Participant's Accrued Benefit payable at his Normal Retirement Date. 8.4 Designation of Beneficiary. The Beneficiary of a Participant who is married on the date of his death will be the Participant's spouse unless the Participant has designated a different Beneficiary pursuant to a Qualified Designation described in Section 8.5. A Participant will designate a Beneficiary in writing and will submit his written designation to the Committee. If a Participant has not designated a Beneficiary or is not survived by a designated Beneficiary, the death benefit under the Plan will be payable, to his surviving spouse, if any, otherwise equally among his surviving children, if any, and if the Participant is not survived by a spouse or children, to his estate. 8.5 Qualified Designation. For purposes of Section 8.4, a "Qualified Designation" means a Participant's -29- 33 designation of any Beneficiary other than his spouse which meets the requirements of this Section. Such designation must be in writing and will be effective only if it is made on or after the first day of the Plan Year in which the Participant attains age 35 and it is consented to by the Participant's spouse. The spouse's consent will be witnessed by a notary public and will acknowledge the effect on the spouse of the Participant's election of another Beneficiary. Notwithstanding this consent requirement, if the Participant establishes to the satisfaction of a Plan representative that such written consent may not be obtained because there is no spouse or the spouse cannot be located, a Beneficiary designation will be deemed to be a Qualified Designation. Any consent necessary under this provision will be valid only with respect to the spouse who signs the consent, or in the event of a deemed Qualified Designation, the designated spouse. A revocation of a prior beneficiary designation under this Section may be made by a Participant without the consent of the spouse at any time before the commencement of benefits. However, a Participant whose spouse has consented to a Qualified Designation may not change the Beneficiary or designate a Beneficiary other than his spouse following his revocation of a Qualified Designation without spousal consent unless the Qualified Designation expressly permits the Participant to change Beneficiaries without any further consent of the spouse. 8.6 Certain Spouses. A former spouse will be treated as the spouse or surviving spouse of a Participant to the extent provided under a qualified domestic relations order as described in Code section 414(p). 8.7 Minimum Death Benefit. The value of a death benefit payable to a Beneficiary under Section 8.1 will not be less than the value of the death benefit that would have been paid had the Participant died on December 31, 1976, computed on the basis of the factors and assumptions which were used to value the Plan's liabilities on December 31, 1976. In addition, the value of a death benefit payable under Section 8.1 will not be less than the value of the same death benefit that would have been paid had the Participant died on December 31, 1982, computed on the basis of the actuarial assumptions which were used under the Plan on December 31, 1982. 8.8 Cost of Coverage. The Participant's benefit under the Plan will not be reduced by the cost of providing the death benefits described in this Article 8. 8.9 Death Benefits Payable After Benefit Commencement Date. If a Participant dies after his Benefit Commencement -30- 34 Date, the death benefit, if any, payable to his Beneficiary will be determined by the form of the Participant's retirement benefit under Article 7. -31- 35 ARTICLE 9 ADMINISTRATION OF THE PLAN AND TRUST AGREEMENT 9.1 Appointment of Committee Members. The Board will appoint an Administrative Committee consisting of at least three or more members, to hold office at the pleasure of the Board. Members of the Committee are not required to be Employees or Participants. Any member may resign by giving notice, in writing, filed with the Board. 9.2 Officers and Employees of the Committee. The Committee will choose from its members a Chairman and a Secretary. The Secretary will keep a record of the Committee's proceedings and all dates, records and documents pertaining to the Committee's administration of the Plan. The Committee may employ and suitably compensate such persons or organizations to render advice with respect to the duties of the Committee under the Plan as the Committee determines to be necessary or desirable. 9.3 Action of the Committee. Action of the Committee may be taken with or without a meeting of Committee members, provided that action will be taken only upon the vote or other affirmative expression of a majority of the Committee's members qualified to vote with respect to such action. The Chairman or the Secretary of the Committee may execute any certificate or other written direction on behalf of the Committee. In the event the Committee members qualified to vote on any question are unable to determine such question by a majority vote or other affirmative expression of a majority of the Committee members qualified to vote on such question, such question will be determined by the Board. A member of the Committee who is a Participant may not vote on any question relating specifically to himself unless he is the sole member of the Committee. 9.4 Expenses and Compensation. The expenses of the Committee properly incurred in the performance of its duties under the Plan will be paid from the Trust Fund, unless the Participating Employers in their discretion pay such expenses. The members of the Committee will not be compensated for their services as Committee members. 9.5 General Powers and Duties of the Committee. The Committee will have the full power and responsibility to administer the Plan and the Trust Agreement and to construe and apply their provisions. For purposes of ERISA, the Committee will be the named fiduciary with respect to the operation and -32- 36 administration of the Plan and the Trust Agreement. In addition, the Committee will have the powers and duties granted by the terms of the Trust Agreement. The Committee, and all other persons with discretionary control respecting the operation, administration, control, and/or management of the Plan, the Trust Agreement, and/or the Trust Fund, will perform their duties under the Plan and the Trust Agreement solely in the interests of Participants and their Beneficiaries. 9.6 Specific Powers and Duties of the Committee. The Committee will administer the Plan and have all powers necessary to accomplish that purpose, including the following: (i) resolving all questions relating to the eligibility of Employees to become Participants, (ii) determining the amount of benefits payable to Participants or their Beneficiaries, and determining the time and manner in which such benefits are to be paid, (iii) authorizing and directing all disbursements by the Trustee from the Trust Fund, (iv) engaging any administrative, legal, medical, accounting, clerical, or other services it deems appropriate in administering the Plan or the Trust Agreement, (v) construing and interpreting the Plan and the Trust Agreement and adopting rules for administration of the Plan and the Trust Agreement which are not inconsistent with the terms of such documents, (vi) compiling and maintaining all records it determines to be necessary, appropriate or convenient in connection with the administration of the Plan and the Trust Agreement, (vii) determining the disposition of assets in the Trust Fund in the event the Plan is terminated, and (viii) reviewing the performance of the Trustee with respect to the Trustee's administrative duties, responsibilities and obligations under the Plan and the Trust Agreement, reporting to the Board regarding such administrative performance of the Trustee, and recommending to the Board, if necessary, the removal of the Trustee and the appointment of a successor Trustee. 9.7 Allocation of Fiduciary Responsibility. The Committee from time to time may allocate to one or more of its members and may delegate to any other persons or organizations any of its rights, powers, duties and responsibilities with respect to the operation and administration of the Plan and the Trust Agreement that are permitted to be delegated under ERISA. Any such allocation or delegation will be made in writing, will be reviewed periodically by the Committee, and will be terminable upon such notice as the Committee in its discretion deems reasonable and proper under the circumstances. Whenever a person or organization has the power and authority under the Plan or the Trust Agreement to delegate discretionary authority respecting the administration of the -33- 37 Plan or the Trust Fund to another person or organization, the delegating party's responsibility with respect to such delegation is limited to the selection of the person to whom authority is delegated and the periodic review of such person's performance and compliance with applicable law and regulations. Any breach of fiduciary responsibility by the person to whom authority has been delegated which is not proximately caused by the delegating party's failure to properly select or supervise, and in which breach the delegating party does not otherwise participate, will not be considered a breach by the delegating party. 9.8 Information to be Submitted to the Committee. To enable the Committee to perform its functions, the Participating Employers will supply full and timely information to the Committee on all matters relating to Employees and Participants as the Committee may require and will maintain such other records required by the Committee to determine the benefits due to Participants or their Beneficiaries under the Plan. 9.9 Notices, Statements and Reports. The Company will be the "administrator" of the Plan as defined in ERISA section 3(16)(A) for purposes of the reporting and disclosure requirements imposed by ERISA and the Code. The Committee will assist the Company, as requested, in complying with such reporting and disclosure requirements. 9.10 Claims Procedure. (a) Filing Claim for Benefits. If a Participant or Beneficiary 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) Notification by the Committee. 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 -34- 38 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 in subsection (c). 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. (c) Review Procedure. 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, which person will be a named fiduciary under ERISA section 402(a)(2) for purposes of this Section. 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. 9.11 Service of Process. The Committee may from time to time designate an agent of the Plan for the service of legal process. The Committee will cause such agent to be identified in materials it distributes or causes to be distributed when such identification is required under applicable law. In the absence of such a designation, the Company will be the agent of the Plan for the service of legal process. -35- 39 9.12 Review of Benefit Statement. If a Participant or Beneficiary believes a statement he receives regarding his interest in the Plan is incorrect, such Participant or Beneficiary may submit a written request for correction or verification of such statement to the Committee, and the Committee will respond in writing to such request in the same manner as a claim for benefits. 9.13 Payment to Minors or Persons Under Legal Disability. If any benefit becomes payable to a minor or to a person under a legal disability, payment of such benefit will be made only to the conservator or the guardian of the estate of such person appointed by a court of competent jurisdiction or such other person or in such other manner as the Committee determines is necessary to ensure that the payment will legally discharge the Plan's obligation to such person. 9.14 Uniform Application of Rules and Policies. The Committee in exercising its discretion granted under any of the provisions of the Plan or the Trust Agreement will do so only in accordance with rules and policies established by it which will be uniformly applicable to all Participants and Beneficiaries. 9.15 Funding Policy. The Plan is to be funded through Participating Employer contributions and earnings on such contributions; and benefits will be paid to Participants and Beneficiaries as provided in the Plan. The Committee will determine from time to time investment policies that are consistent with the objectives of the Plan. 9.16 The Trust Fund. The Trust Fund will be held by the Trustee for the exclusive benefit of Participants and Beneficiaries. The assets held in the Trust Fund will be invested and reinvested in accordance with the terms of the Trust Agreement, which is hereby incorporated into and made a part of the Plan. All benefits will be paid solely out of the Trust Fund, and no Participating Employer will be otherwise liable for benefits payable under the Plan. -36- 40 ARTICLE 10 LIMITATIONS ON BENEFITS 10.1 Priority Over Other Provisions. The provisions set forth in this Article will supersede any conflicting provisions of Articles 5, 6, 7 and 8. 10.2 Definitions Used in this Article. The following words and phrases, when used with initial capital letters, will have the meanings set forth below. (a) "Annual Addition" means, with respect to a Participant in a Limitation Year, the sum of the following amounts with respect to all Qualified Plans and Welfare Benefit Funds maintained by a Controlled Group Member: (i) The amount of any employer-provided contribution with respect to the Limitation Year which is allocated to the Participant's account; (ii) The amount of any forfeitures for the Limitation Year allocated to the Participant's account; (iii) The amount of a Participant's voluntary nondeductible contributions for the Limitation Year, provided that the Annual Addition for any Limitation Year beginning before January 1, 1987 will not be recomputed to treat all voluntary nondeductible contributions as an Annual Addition; (iv) The amount allocated, after March 31, 1984, to an individual medical account as defined in Code section 415(1)(1), which is part of a Defined Benefit Plan maintained by a Controlled Group Member; and (v) The amount derived from contributions paid or accrued after December 31, 1985, in taxable years ending after such date, which are attributable to post-retirement medical benefits allocated to the separate account of a key employee (as defined in Code section 419A(d)(3)), under a Welfare Benefit Fund maintained by a Controlled Group Member. (b) "Annual Benefit" means a benefit which is payable annually in the form of a straight life annuity with no ancillary benefits and which otherwise satisfies the requirements of Code section 415(b)(2) and the regulations thereunder. -37- 41 (c) "Defined Benefit Dollar Limitation" means for any Plan Year $90,000, adjusted for years beginning after December 31, 1987, to the amount determined by the Commissioner of Internal Revenue, pursuant to the authority of Code section 415(d)(1)(A) and regulations thereunder, which is made effective as of the first day of the Plan Year. (d) "Defined Benefit Fraction" means a fraction, the numerator of which is the Projected Annual Benefit of a Participant under all Defined Benefit Plans maintained by a Controlled Group Member determined as of the close of the Limitation Year and the denominator of which is the lesser of (i) 140% of the Participant's average Includable Compensation that may be taken into account for the Limitation Year under Code section 415(b)(1)(B), or (ii) 125% of the Defined Benefit Dollar Limitation, determined as of the close of the Limitation Year. If the Participant was a participant in a Defined Benefit Plan maintained by a Controlled Group Member in existence on July 1, 1982, or on May 6, 1986, the denominator of the Defined Benefit Fraction will not be less than 125% of the greater of the Participant's accrued Projected Annual Benefit under such plan as of the end of the last Limitation Year beginning before January 1, 1983, or his accrued Projected Annual Benefit of the end of the last Limitation Year beginning January 1, 1987. The preceding sentence applies only if the Defined Benefit Plan satisfied the requirements of Code section 415 as in effect at the end of such Limitation Year. (e) "Defined Benefit Plan" means a Qualified Plan other than a Defined Contribution Plan. (f) "Defined Contribution Dollar Limitation" means, for any Limitation Year, $30,000 or, if greater, 25% of the Defined Benefit Dollar Limitation in effect for the Limitation Year. If a short Limitation Year is created because of a Plan amendment changing the Limitation Year to a different 12-consecutive month period, the Defined Contribution Dollar Limitation for the short Limitation Year will not exceed the amount determined in the preceding sentence multiplied by a fraction, the numerator of which is the number of months in the short Limitation Year, and the denominator of which is 12. (g) "Defined Contribution Fraction" means a fraction, the numerator of which is the sum of the Annual Additions to the Employee's Defined Contribution Plan accounts for the applicable Limitation Year and each prior Limitation Year, and the denominator of which is the sum of the lesser of the following products for each Limitation Year in which the Employee was an Employee (regardless of whether a Defined -38- 42 Contribution Plan was in existence for such Plan Year): (i) the Defined Contribution Dollar Limitation effective for the Limitation Year, multiplied by 125%, or (ii) 35% of the Participant's Includable Compensation for such Limitation Year. (h) "Defined Contribution Plan" means a Qualified Plan which provides individual participant accounts for employer contributions, forfeitures and gains or losses thereon, in accordance with Code section 414(i). (i) "High Three Years" means with respect to a Participant the three consecutive Plan Years of his employment with a Controlled Group Member (or, if he does not have three consecutive Plan Years of such employment, his greatest actual number of consecutive Plan Years of such employment) during which he had the greatest aggregate Includable Compensation. (j) "Includable Compensation" means an Employee's total wages from Participating Employers or other Controlled Group Members as determined for purposes of Internal Revenue Service Form W-2, excluding, however: (i) moving expense reimbursements that are deductible by the Employee under Code section 217, (ii) Controlled Group Member contributions to a simplified employee pension plan to the extent such contributions are deductible by the Employee and Controlled Group Member contributions to any other plan of deferred compensation that, before the application of Section 10.3, are not includable in the Employee's gross income, (iii) distributions to the Employee from any plan of deferred compensation other than an unfunded, nonqualified plan of deferred compensation, (iv) amounts realized from the exercise of a nonqualified stock option, (v) amounts realized under Code section 83 with respect to restricted property that becomes freely transferable or is no longer subject to a substantial risk of forfeiture, (vi) amounts realized from the disposition of stock acquired under a qualified stock option within the meaning of Code section 422, and (vii) any other amounts which receive special tax benefits within the meaning of Section 1.415-2(d)(2) of the Treasury Regulations. (k) "Limitation Year" means the 12-consecutive month period used by a Qualified Plan for purposes of computing the limitations on benefits and annual additions under Code section 415. The Limitation Year for this Plan is the Plan Year. If the Limitation Year is amended to a different 12-consecutive month period, the new Limitation Year will begin on a date within the Limitation Year in which the amendment is made. -39- 43 (l) "Projected Annual Benefit" means the Participant's projected annual benefit under a Defined Benefit Plan maintained by a Controlled Group Member determined in accordance with Code section 415(e) and the regulations thereunder. (m) "Social Security Retirement Age" means the age used as the retirement age under section 216(1) of the Social Security Act, except that such section will be applied without regard to the age increase factor and as if the early retirement age under section 216(1) of such Act were 62. (n) "Welfare Benefit Fund" means an organization described in paragraph (7), (9), (17) or (20) of Code section 501(c), a trust, corporation or other organization not exempt from federal income tax, or to the extent provided in Treasury Regulations, any account held for an employer by any person, which is part of a plan of any employer through which the employer provides benefits to employees or their beneficiaries, other than a benefit to which Code sections 83(h), 404 (determined without regard to section 404(b)(2)) or 404A applies, or to which an election under Code section 463 applies. 10.3 Code Section 415 Limitations. (a) General Limitation. Except as otherwise provided in this Section, a Participant's Accrued Benefit, when expressed as an Annual Benefit, will not at any time during a Limitation Year exceed the lesser of (i) the Defined Benefit Dollar Limitation applicable to that Plan Year, or (ii) 100% of the Participant's average annual Includable Compensation for his High Three Years. If a Participant's Accrued Benefit in any Limitation Year would produce an Annual Benefit in excess of this limitation, the rate of accrual will be reduced so that the Annual Benefit will equal the maximum permitted amount. If the Participant is, or has ever been, covered under more than one Defined Benefit Plan maintained by a Controlled Group Member, the sum of the Participant's Annual Benefits from all such Defined Benefit Plans may not exceed the limitation provided in this subsection, and the rate of accrual under this Plan will be reduced, if necessary, to meet this limitation. (b) Adjustment for Benefit Commencement Date before Social Security Retirement Age. If a Participant's Benefit Commencement Date is prior to the date on which he attains Social Security Retirement Age, the Defined Benefit Dollar Limitation will, with respect to that Participant, be decreased so that it is the actuarial equivalent of an annual benefit of $90,000 (adjusted in the manner described in Code -40- 44 section 415(d)(1)(A)) commencing at Social Security Retirement Age. The adjustment provided for in the preceding sentence will be made in a manner prescribed by the Secretary of the Treasury that is consistent with the reduction under the Social Security Act of old-age insurance benefits commencing before normal retirement age. (c) Adjustment for Benefit Commencement Date after Social Security Retirement Age. If a Participant's Benefit Commencement Date is after the date on which he attains Social Security Retirement Age, the Defined Benefit Dollar Limitation will, with respect to that Participant, be increased so that it is the actuarial equivalent of an annual benefit of $90,000 (adjusted in the manner described in Code section 415(d)(1)(A)) commencing at Social Security Retirement Age. (d) Adjustment for Less Than Ten Years of Participation. If a Participant has less than ten years of participation in the Plan, the Defined Benefit Dollar Limitation applicable to the Participant's Accrued Benefit will be adjusted by multiplying such limitation by a fraction, the numerator of which is the number of the Participant's years of participation (or portion thereof), and the denominator of which is ten. For purposes of this subsection, the term "year of participation" will have such meaning as is set forth in regulations published by the Secretary of the Treasury under Code section 415(b). (e) Expression of Accrued Benefit as an Annual Benefit. If a Participant's Accrued Benefit is payable in any form other than an Annual Benefit, the limitation set forth in subsection (a) will be applied by adjusting the actual form of that Participant's benefit distribution to an Annual Benefit, commencing at the same Benefit Commencement Date as the actual form of his benefit distribution, which is the Actuarial Equivalent of such actual form. In making the foregoing adjustment, the following values will not be taken into account: (i) the value of a Qualified Joint and Survivor Annuity, (ii) the value of ancillary benefits that are not directly related to retirement benefits (including, but not limited to, preretirement disability and death benefits and post-retirement medical benefits), and (iii) the value of benefits provided by the Plan which reflect post-retirement cost of living increases to the extent that such increases are in accordance with Code section 415(d) and Treasury Regulation section 1.415-5. (f) Limitation on Certain Assumptions. For purposes of the adjustments described in subsections (b) and -41- 45 (e), the interest rate assumption will not be less than the greater of 5% or the Applicable Interest Rate. For purposes of the adjustment described in subsection (c), the interest rate assumption will not be greater than the lesser of 5% or the Applicable Interest Rate. For purposes of the adjustments described in subsections (c) and (e), no adjustments under Code section 415(d)(1) will be taken into account prior to the year for which such adjustment first takes effect. (g) Permissible Minimum Benefit. Notwithstanding the provisions of subsection (a), but subject to the provisions of subsection (h), a Participant's Accrued Benefit will be deemed not to exceed the limitations of this Section if (i) the benefits actually paid to him under this Plan and all other Defined Benefit Plans maintained by a Controlled Group Member do not exceed $10,000 in any Plan Year, regardless of the Benefit Commencement Date or the form in which such benefits are paid, and (ii) he has not at any time participated in a Defined Contribution Plan maintained by a Controlled Group Member. For purposes of clause (ii), a Participant will not be deemed to be participating in a separate Defined Contribution Plan maintained by a Controlled Group Member solely by reason of his making Participant contributions to the Plan. (h) Reduction For Less Than Ten Years of Service. If a Participant has less than ten years of service at his Benefit Commencement Date, the limitation set forth in subsection (a) with respect to a Participant's average Includable Compensation for his High Three Years and the limitation set forth in subsection (g) will be reduced by multiplying such limitations by a fraction, the numerator of which is his years of service (or portion thereof), and the denominator of which is ten. (i) Transition Rules for Prior Participation. In the case of an individual who was a participant in one or more Defined Benefit Plans maintained by a Controlled Group Member before July 1, 1982, the application of the limitations of this Section will not cause the maximum permissible benefit for such individual under all such Defined Benefit Plans to be less than the individual's accrued benefit under all such Defined Benefit Plans as of the end of the Limitation Year beginning in 1982 determined without regard to any amendments to such Plans adopted after July 1, 1982, including optional benefit forms. The preceding sentence applies only if all such Defined Benefit Plans met the requirements of Code section 415, as in effect on July 1, 1982, for all Limitation Years beginning before January 1, 1983. -42- 46 In the case of an individual who was a participant in one or more Defined Benefit Plans maintained by a Controlled Group Member before May 6, 1986, the application of the limitations of this Section will not cause the maximum permissible benefit for such individual under all such Defined Benefit Plans to be less than the individual's accrued benefit under all such Defined Benefit Plans as of the end of the Limitation Year beginning in 1986 determined without regard to any amendments to such Plans adopted after May 5, 1986, including optional benefit forms. The preceding sentence applies only if all such Defined Benefit Plans met the requirements of Code section 415, as in effect on May 6, 1986, for all Limitation Years beginning before January 1, 1987. (j) Aggregate Benefit Limitation. If a Controlled Group Member maintains, or at any time maintained, one or more Defined Contribution Plans (or, after December 31, 1985, a Welfare Benefit Fund) covering any Participant in this Plan, the sum of the Defined Benefit Fraction and the Defined Contribution Fraction for any Limitation Year will equal no more than one (1.0). The current Annual Addition under the Defined Contribution Plan(s) will be reduced first, and then the rate of accrual under this Plan will be reduced, if necessary to meet this limitation. If the Participant was a participant in one or more Defined Contribution Plans maintained by a Controlled Group Member which were in existence on July 1, 1982, the numerator of the Defined Contribution Fraction will be adjusted if the sum of this fraction and the Defined Benefit Fraction would otherwise exceed 1.0 under the terms of this Plan. Under the adjustment, an amount equal to the product of (i) the excess of the sum of the fractions over 1.0, times (ii) the denominator of this fraction, will be permanently subtracted from the numerator of this fraction. The adjustment is calculated using the fractions as they would be computed as of the end of the last Limitation Year beginning before January 1, 1983. This adjustment will also be made if at the end of the last Limitation Year beginning before January 1, 1984, the sum of the fractions exceeds 1.0 because of benefit accruals or annual additions that were made before the limitations of this Section became effective to any Qualified Plans of a Controlled Group Member in existence on July 1, 1982. If the Participant was a participant in one or more Defined Contribution Plans that satisfied the requirements of Code section 415 as of the last Limitation Year beginning before January 1, 1987, an amount will be subtracted from the numerator of the Defined Contribution Fraction (not -43- 47 exceeding such numerator) as prescribed by the Secretary of the Treasury so that the sum of the Defined Benefit Fraction and the Defined Contribution Fraction does not exceed 1.0 for such Limitation Year. For purposes of this subsection, a master or prototype plan is a Qualified Plan the form of which is the subject of a favorable opinion letter from the Internal Revenue Service. (k) Aggregation of Plans. For purposes of this Section, all Defined Benefit Plans ever maintained by a Controlled Group Member will be treated as one Defined Benefit Plan, and all Defined Contribution Plans ever maintained by a Controlled Group Member will be treated as one Defined Contribution Plan (whether or not any such Qualified Plan was terminated). (l) Limitation on Certain Adjustments. In no event will the adjustments of subsections (d) and (h) reduce the limitations provided under Code sections 415(b)(1) and 415(b)(4) to an amount less than one-tenth of the applicable limitations as determined without such adjustments. -44- 48 ARTICLE 11 RESTRICTIONS ON DISTRIBUTIONS TO PARTICIPANTS AND BENEFICIARIES 11.1 Priority over Other Distribution Provisions. The provisions set forth in this Article will supersede any conflicting provisions of Article 7 or Article 8. 11.2 Restrictions on Commencement of Distributions. The provisions of this Section will apply to restrict the Committee's ability to delay the commencement of distributions. Unless a Participant elects otherwise in writing, distribution of the Participant's vested interest in his Account will begin no later than the 60th day after the close of the Plan Year in which occurs the latest of (i) the date on which the Participant attains age 65, (ii) the tenth anniversary of the Plan Year in which the Participant began participation in the Plan, or (iii) the Participant's termination of employment. 11.3 Restrictions on Delay of Distributions. The following provisions will apply to limit a Participant's ability to delay the distribution of benefits. Distribution of a Participant's entire vested and nonforfeitable interest will be made or commence not later than April 1 following (i) the calendar year in which he attains age 70-1/2, or (ii) in which his employment with the Controlled Group terminates, if later, except that a distribution to a Participant who is a 5-percent owner (as such term is defined in Code section 416(i)(1)(B)(i)) at any time during the five-plan-year period ending in the calendar year in which he attains age 70-1/2, will be made pursuant to clause (i), or (iii) in which he becomes a 5-percent owner, if he becomes a 5-percent owner during any Plan Year subsequent to that which ended in the calendar year in which he attained age 70-1/2 and his employment with the Controlled Group has not yet terminated. Clauses (ii) and (iii) of the preceding sentence will only apply to employees who attain age 70-1/2 before January 1, 1988. 11.4 Restrictions on Period of Distributions. Unless the form of distribution is a single sum payment, distributions will be made in nonincreasing dollar payments each year over one of the following periods: (i) the life of the Participant, (ii) the joint lives of the Participant and his Beneficiary, (iii) a period certain not exceeding the life expectancy of the Participant, (iv) a period certain not exceeding the joint life expectancy of the Participant and his Beneficiary, or (v) a combination of the foregoing. -45- 49 11.5 Minimum Amounts to be Distributed. If the Participant's entire interest in the Plan is to be distributed in a form other than a single lump sum payment, then the amount to be distributed each year must be at least an amount equal to the quotient obtained by dividing the Participant's entire interest by the life expectancy of the Participant or joint and last survivor expectancy of the Participant and designated Beneficiary. Life expectancy and joint and last survivor expectancy will be computed by the use of the return multiples contained in Section 1.72-9 of the Treasury Regulations. For purposes of this computation, the life expectancy of the Participant (and the Participant's spouse, if the spouse is the designated Beneficiary) may be recalculated no more frequently than annually. The life expectancy of a Beneficiary other than a spouse may not be recalculated. If the Participant's spouse is not the designated Beneficiary, then the method of distribution selected must assure that at least 50% of the present value of the amount available for distribution is paid within the life expectancy of the Participant. 11.6 Restrictions in the Event of Death. Upon the death of a Participant, the following distribution provisions will apply to limit the Beneficiary's ability to delay distributions. If the Participant dies after distribution of his benefit has begun, the remaining portion of his benefit will continue to be distributed at least as rapidly as under the method of distribution being used prior to the Participant's death; but if he dies before distribution of his benefit commences, his entire benefit will be distributed no later than five years after his death, unless an individual who is a designated Beneficiary elects to receive distributions in substantially equal installments over the Beneficiary's life or life expectancy beginning no later than one year after the Participant's death or unless the Participant made an election to the contrary prior to January 1, 1984, under section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act of 1982. If the designated Beneficiary is the Participant's surviving spouse, the date distributions are required to begin will not be earlier than the date on which the Participant would have attained age 70-1/2, and, if the spouse dies before payments begin, subsequent distributions will be made as if the spouse had been the Participant. Any amount paid to a child of the Participant will be treated as if it had been paid to the surviving spouse if the amount becomes payable to the surviving spouse when the child reaches the age of majority. 11.7 Compliance with Regulations. Distributions under the Plan to Participants or Beneficiaries will be made in accordance with Treasury Regulations issued under Code section 401(a)(9). -46- 50 11.8 Delayed Payments. If the amount of a distribution required to begin on a date determined under the applicable provisions of the Plan cannot be ascertained by such date, or if it is not possible to make such payment on such date because the Committee has been unable to locate a Participant or Beneficiary after making reasonable efforts to do so, a payment retroactive to such date may be made no later than 60 days after the earliest date on which the amount of such payment can be ascertained or the date on which the Participant or Beneficiary is located (whichever is applicable). -47- 51 ARTICLE 12 TOP-HEAVY PROVISIONS 12.1 Priority over Other Plan Provisions. If the Plan is or becomes a Top-Heavy Plan in any Plan Year, the provisions of this Article will supersede any conflicting provisions of the Plan. However, the provisions of this Article will not operate to increase the rights or benefits of Participants under the Plan except to the extent required by Code section 416 and other provisions of law applicable to Top-Heavy Plans. 12.2 Definitions Used in this Article. The following words and phrases, when used with initial capital letters, will have the meanings set forth below. (a) "Defined Benefit Dollar Limitation" means the limitation described in Section 10.2(c). (b) "Defined Benefit Plan" means the Qualified Plan described in Section 10.2(e). (c) "Defined Contribution Dollar Limitation" means the limitation described in Section 10.2(f). (d) "Defined Contribution Plan" means the Qualified Plan described in Section 10.2(h). (e) "Determination Date" means for the first Plan Year of the Plan the last day of the Plan Year and for any subsequent Plan Year the last day of the preceding Plan Year. (f) "Determination Period" means the Plan Year containing the Determination Date and the four preceding Plan Years. (g) "Includable Compensation" means the compensation described in Section 10.2(j). (h) "Key Employee" means any Employee or former Employee (and the Beneficiary of a deceased Employee) who at any time during the Determination Period was (i) an officer of a Controlled Group Member, if such individual's Includable Compensation exceeds 1.5 times the Defined Contribution Dollar Limitation, (ii) an owner (or considered an owner under Code section 318) of one of the ten largest interests in a Controlled Group Member, if such individual's Includable Compensation exceeds the Defined Contribution Dollar -48- 52 Limitation, (iii) a 5% owner of a Controlled Group Member, or (iv) a 1% owner of a Controlled Group Member who has annual Includable Compensation of more than $150,000. The determination of who is a Key Employee will be made in accordance with Code section 416(i) and the regulations thereunder. (i) "Minimum Benefit" means the benefit described in the first sentence of Section 12.4(a). (j) "Permissive Aggregation Group" means the Required Aggregation Group of Qualified Plans plus any other Qualified Plan or Qualified Plans of a Controlled Group Member which, when considered as a group with the Required Aggregation Group, would continue to satisfy the requirements of Code sections 401(a)(4) and 410 (including simplified employee pension plans). (k) "Present Value" means present value based only on the interest and mortality rates specified in a Defined Benefit Plan. (l) "Required Aggregation Group" means the group of plans consisting of (i) each Qualified Plan (including simplified employee pension plans) of a Controlled Group Member in which at least one Key Employee participates, and (ii) any other Qualified Plan (including simplified employee pension plans) of a Controlled Group Member which enables a Qualified Plan to meet the requirements of Code sections 401(a)(4) or 410. (m) "Top-Heavy Plan" means the Plan for any Plan Year in which any of the following conditions exists: (i) if the Top-Heavy Ratio for the Plan exceeds 60% and the Plan is not a part of any Required Aggregation Group or Permissive Aggregation Group of Qualified Plans; (ii) if the Plan is a part of a Required Aggregation Group but not part of a Permissive Aggregation Group of Qualified Plans and the Top-Heavy Ratio for the Required Aggregation Group exceeds 60%; or (iii) if the Plan is a part of a Required Aggregation Group and part of a Permissive Aggregation Group of Qualified Plans and the Top-Heavy Ratio for the Permissive Aggregation Group exceeds 60%. (n) "Top-Heavy Ratio" means a fraction, the numerator of which is the sum of the Present Value of accrued benefits and the account balances (as required by Code section 416)) of all Key Employees with respect to such Qualified Plans as of the Determination Date (including any part of any accrued benefit or account balance distributed during the five-year -49- 53 period ending on the Determination Date), and the denominator of which is the sum of the Present Value of the accrued benefits and the account balances (including any part of any accrued benefit or account balance distributed in the five-year period ending on the Determination Date) of all Employees with respect to such Qualified Plans as of the Determination Date. The value of account balances and the Present Value of accrued benefits will be determined as of the most recent Top-Heavy Valuation Date that falls within or ends with the 12-month period ending on the Determination Date, except as provided in Code section 416 for the first and second Plan Years of a Defined Benefit Plan. The account balances and accrued benefits of a participant who is not a Key Employee but who was a Key Employee in a prior year will be disregarded. The calculation of the Top-Heavy Ratio, and the extent to which distributions, rollovers, transfers and contributions unpaid as of the Determination Date are taken into account will be made in accordance with Code section 416. Employee contributions described in Code section 219(e)(2) will not be taken into account for purposes of computing the Top-Heavy Ratio. When aggregating plans, the value of account balances and accrued benefits will be calculated with reference to the Determination Dates that fall within the same calendar year. The accrued benefit of any Employee other than a Key Employee will be determined under the method, if any, that uniformly applies for accrual purposes under all Qualified Plans maintained by all Controlled Group Members and included in a Required Aggregation Group or a Permissive Aggregation Group or, if there is no such method, as if the benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional accrual rate of Code section 411(b)(1)(C). Notwithstanding the foregoing, the account balances and accrued benefits of any Employee who has not performed services for an employer maintaining any of the aggregated plans during the five-year period ending on the Determination Date will not be taken into account for purposes of this subsection. (o) "Top-Heavy Valuation Date" means the last day of each Plan Year. 12.3 Compensation Taken Into Account. For any Plan Year in which the Plan is a Top-Heavy Plan, the amount of each Participant's Includable Compensation taken into account for purposes of determining allocations under the Plan will not exceed the first $200,000 (or such larger amount as may be prescribed by the Secretary of the Treasury or his delegate) of such Participant's Includable Compensation for such Plan Year. -50- 54 12.4 Minimum Benefit. (a) Calculation of Minimum Benefit. Notwithstanding any other provision in this Plan, for any Plan Year in which this Plan is a Top-Heavy Plan, the Accrued Benefit of each Participant who is not a Key Employee provided solely by Participating Employer contributions and expressed as a life annuity commencing at age 65 will be not less than 2% of his average compensation multiplied by years of service credited during Plan Years that the Plan is a Top-Heavy Plan, not in excess of ten such years (the "Minimum Benefit"). Average compensation for this purpose will be the Participant's average Includable Compensation for the five consecutive years of service (or all years of service, if less than five) for which the Participant had the highest Includable Compensation excluding Includable Compensation after the close of the last Plan Year in which the Plan is a Top-Heavy Plan. The Minimum Benefit is determined without regard to any Social Security contribution. The Minimum Benefit applies even though under other Plan provisions the Participant would not otherwise be entitled to receive a benefit, or would have received a lesser benefit for the Plan Year because (i) the non-Key Employee fails to make mandatory contributions to the Plan, (ii) the non-Key Employee's Compensation is less than a stated amount, (iii) the non-Key Employee is not employed on the last day of the Plan Year, or (iv) the Plan is integrated with Social Security. All accruals of employer-derived benefits, whether or not attributable to Plan Years in which the Plan is a Top-Heavy Plan, may be used in computing whether the Minimum Benefit requirement is satisfied. (b) Minimum Benefit or Allocation in Other Plan(s). If a Controlled Group Member maintains one or more Defined Contribution Plans covering Employees who are Participants in this Plan, the minimum benefit or allocation requirement applicable to Top-Heavy Plans will be met in this Plan. (c) Form of Benefit. If the form of benefit provided under the Plan is other than a single life annuity, the Participant must receive a benefit that is the Actuarial Equivalent of the Minimum Benefit. If the benefit commences at a date other than at age 65, the Participant must receive at least an amount that is the Actuarial Equivalent of the Minimum Benefit commencing at age 65. (d) Nonforfeitability. The Participant's Minimum Benefit, to the extent required to be nonforfeitable under Code section 416(b) and the special vesting schedule -51- 55 provided in this Article, may not be forfeited under Code sections 411(a)(3)(B) (relating to suspension of benefits on reemployment) or 411(a)(3)(D) (relating to withdrawal of mandatory contributions). 12.5 Modification of Aggregate Benefit Limit. (a) Modification. Subject to the provisions of subsection (b), in any Plan Year in which the Top-Heavy Ratio exceeds 60%, the aggregate benefit limit described in Article 10 will be modified by substituting "100%" for "125%" in Sections 10.1(d) and (g). (b) Exception. The modification of the aggregate benefit limit described in subsection (a) will not be required if the Top-Heavy Ratio does not exceed 90% and Employees who are not Key Employees accrue a benefit for such Plan Year of not less than 3% of their average Includable Compensation for the five consecutive Plan Years in which they had the highest Includable Compensation (not to exceed a total such benefit of 30%), expressed as a life annuity commencing at age 65. 12.6 Minimum Vesting. (a) Required Vesting. For any Plan Year in which this Plan is a Top-Heavy Plan, the minimum vesting schedule set forth in subsection (b) will automatically apply to the Plan to the extent it provides a higher vested percentage than the regular vesting schedule set forth in Article 4. The minimum vesting schedule applies to a Participant's entire Accrued Benefit including benefits accrued in Plan Years before the effective date of Code section 416 and in Plan Years before the Plan became a Top-Heavy Plan. Further, no reduction in vested Accrued Benefits may occur in the event the Plan's status as a Top-Heavy Plan changes for any Plan Year, and any change in the effective vesting schedule from the schedule set forth in subsection (b) to the regular schedule set forth in Article 4 will be treated as an amendment subject to Section 14.1(iii). However, this subsection does not apply to the Accrued Benefit of any Employee who does not have an Hour of Service after the Plan has initially become a Top-Heavy Plan, and such Employee's Accrued Benefit will be determined without regard to this Section. -52- 56 (b) Minimum Vesting Schedule. PERCENTAGE VESTED YEARS OF SERVICE AND NONFORFEITABLE ---------------- ------------------ Less than 2 0 2 but less than 3 20 3 but less than 4 40 4 but less than 5 60 5 but less than 6 80 6 or more 100 -53- 57 ARTICLE 13 ADOPTION OF THE PLAN BY CONTROLLED GROUP MEMBERS 13.1 Adoption Procedure. Any Controlled Group Member may become a Participating Employer under the Plan provided that (i) the Board approves the adoption of the Plan by the Controlled Group Member and designates the Controlled Group Member as a Participating Employer; (ii) the Controlled Group Member adopts the Plan and Trust Agreement together with all amendments then in effect by appropriate resolutions of the board of directors of the Controlled Group Member; and (iii) the Controlled Group Member by appropriate resolutions of its board of directors agrees to be bound by any other terms and conditions which may be required by the Board, provided that such terms and conditions are not inconsistent with the purposes of the Plan. 13.2 Effect of Adoption by Controlled Group Member. A Controlled Group Member that adopts the Plan pursuant to this Article will be deemed to be a Participating Employer for all purposes hereunder, unless otherwise specified in the resolutions of the Board designating the Controlled Group Member as a Participating Employer. In addition, the Board may provide, in its discretion and by appropriate resolutions, that the Employees of the Controlled Group Member will receive credit for their employment with the Controlled Group Member prior to the date it became a Controlled Group Member for purposes of determining either or both the eligibility of such Employees to participate in the Plan, the determination of their Accrued Benefits and the vested and nonforfeitable interest of such Employees in their Accrued Benefit provided that such credit will be applied in a uniform and nondiscriminatory manner with respect to all such Employees. -54- 58 ARTICLE 14 AMENDMENT OF THE PLAN 14.1 Right of Company to Amend Plan. The Company reserves the right to amend the Plan at any time and from time to time to the extent it may deem advisable or appropriate, provided, however, that (i) no amendment will increase the duties or liabilities of the Trustee without its written consent; (ii) no amendment will cause a reversion of Plan assets to the Participating Employers not otherwise permitted under the Plan; (iii) no amendment (including a change in the actuarial assumptions used for determining Actuarial Equivalence) will be effective to the extent that it has the effect of decreasing a Participant's Accrued Benefit (except to the extent permitted under Code section 412(c)(8)) or of eliminating or reducing an early retirement benefit or a retirement-type subsidy or eliminating an optional form of benefit; and (iv) no amendment will have the effect of reducing the percentage of the vested and nonforfeitable interest of any Participant in his Accrued Benefit nor will the vesting provisions of the Plan be amended unless each Participant with at least three years of Credited Service (including years of Credited Service, if any, disregarded pursuant to Article 4) is permitted to elect to continue to have the prior vesting provisions apply to him, within 60 days after the latest of the date on which the amendment is adopted, the date on which the amendment is effective, or the date on which the Participant is issued written notice of the amendment. 14.2 Amendment Procedure. Any amendment to the Plan will be made only pursuant to action of the Board. A copy of the adopted amendment as executed by the Company will be delivered to the Committee and to the Trustee. Upon such action by the Board, the Plan will be deemed amended as of the date specified as the effective date by such Board action or in the instrument of amendment. The effective date of any amendment may be before, on or after the date of such Board action. 14.3 Effect on Participating Employers. Unless an amendment expressly provides otherwise, all Participating Employers will be bound by any amendment adopted pursuant to this Article 14. -55- 59 ARTICLE 15 TERMINATION AND PARTIAL TERMINATION 15.1 Continuance of Plan. The Participating Employers expect to continue this Plan indefinitely, but they do not assume an individual or collective contractual obligation to do so, and the right is reserved to the Company, by action of the Board to terminate the Plan. In addition, subject to the remaining provisions of this Article, any Participating Employer at any time may discontinue its participation in the Plan with respect to its Employees. 15.2 Complete Vesting. If the Plan is terminated, the Accrued Benefits of all affected Participants at the time of such termination will become 100% vested and nonforfeitable to the extent funded as of such date without regard to their years of Credited Service. For purposes of this Section, a Participant who has terminated employment and is not again an Employee at the time the Plan is terminated will not be an affected Participant entitled to full vesting if the Participant had no vested interest in the Plan attributable to Participating Employer contributions at the time he terminated employment. In the event of a partial termination of the Plan, the Accrued Benefits of those Participants who cease to participate on account of the facts and circumstances which result in the partial termination will become 100% vested and nonforfeitable to the extent funded as of such date without regard to their years of Credited Service. 15.3 Allocation of Assets. In the event of the termination or partial termination of the Plan, the Trust Fund will be allocated among the Participants and Beneficiaries in the following order (except that in the event of a partial termination, such allocation will be with respect to the portion of the Trust Fund as to which such partial termination has occurred): (i) first, in the case of the benefit of a Participant or Beneficiary who was receiving payments as of the beginning of the three-year period ending on the date of the termination or partial termination of the Plan, to each such benefit, based on the provisions of the Plan (as in effect during the five-year period ending on such date) under which such benefit would be the least, and in the case of a Participant's or Beneficiary's benefit (other than a benefit described above) which would have been paid as of the beginning of such three-year period if the Participant had retired prior to the beginning of such three-year period and if his benefits had commenced (in the normal form of payment) as of the -56- 60 beginning of such period, to each such benefit based on the provisions of the Plan (as in effect during the five-year period ending on such date) under which such benefit would be the least; (ii) second, to all other benefits under the Plan subject to guarantee by the Pension Benefit Guaranty Corporation; (iii) third, to all other nonforfeitable benefits under the Plan not subject to guarantee by the Pension Benefit Guaranty Corporation; and (iv) fourth, to all other benefits under the Plan. 15.4 Withdrawal by Participating Employer. A Participating Employer may withdraw from participation in the Plan only with the approval of the Board. If any Participating Employer withdraws from the Plan, a copy of resolutions of the board of directors of the Participating Employer adopting such action, certified by the secretary of such board of directors and reflecting approval by the Board, will be delivered to the Committee as soon as it is administratively feasible to do so, and the Committee will communicate such action to the Trustee and to the Employees of the Participating Employer. 15.5 Prevention of Discrimination on Early Plan Termination. (a) Restricted Employees. Notwithstanding any provisions of the Plan other than Article 12 to the contrary, the benefits provided by Participating Employer contributions for Participants who are among the 25 highest paid Employees at the time the Plan is established and whose anticipated annual benefit exceeds $1,500 will be restricted as provided in subsection (c) upon the occurrence of any of the conditions described in subsection (b). (b) Conditions for Restriction. The restrictions set forth in this Section will apply under any of the following conditions: (i) the Plan is terminated within 10 years after its establishment; (ii) the benefits of such highest paid Employee become payable within 10 years after the establishment of the Plan; or (iii) if the Plan is not subject to the minimum funding standards of Code section 412 (without regard to Code section 412(h)(2)), the benefits of such Employee become payable after the Plan has been in effect for 10 years, and the full current costs of the Plan for the first 10 years have not been funded. (c) Effect of Restriction. Participating Employer contributions which may be used for the benefit of an Employee described in subsection (a) will not exceed the greater of $10,000, or 20% of the first $50,000 of the -57- 61 Employee's Compensation multiplied by the number of years between the date of the establishment of the Plan and (i) if the condition described in subsection (b)(i) applies, the date of the termination of the Plan, (ii) if the condition described in subsection (b)(ii) applies, the date the benefits become payable, or (iii) if the condition described in subsection (b)(iii) applies, the date of the failure to meet the full current costs. (d) Amendment of Plan. If the Plan is amended so as to increase the benefit actually payable in event of the subsequent termination of the Plan, or the subsequent discontinuance of contributions thereunder, then the provisions of this Section will be applied to the Plan as so amended as if it were a new plan established on the date of amendment. The original group of 25 Employees (as described in subsection (a)) will continue to have the limitations in subsection (c) apply as if the Plan had not been amended. The restrictions relating to the amended Plan will apply to benefits or funds for each of the 25 highest paid Employees on the effective date of the change, except that such restrictions need not apply with respect to any Employee in this group for whom the normal annual pension or annuity provided by Participating Employer contributions prior to that date and during the ensuing ten years, based on his rate of Compensation on that date, could not exceed $1,500. The Participating Employer contributions which may be used for the benefit of each Participant in the new group of 25 highest paid Employees will be limited to the greatest of (i) the Participating Employer contributions (or funds attributable thereto) which would have been applied to provide the benefits for the Employee if the previous plan had been continued without change; (ii) $20,000; or (iii) the sum of the Participating Employer contributions (or funds attributable thereto) which would have been applied to provide benefits for the Employee under the previous plan if it had been terminated the day before the effective date of change, and an amount computed by multiplying the number of years for which the current costs of the Plan after that date are met by 20% of the Employee's annual Compensation or $10,000, whichever is smaller. (e) Modification of Restriction. Notwithstanding the above limitations, the following limitations will apply if they would result in a greater amount of Participating Employer contributions being used for the benefit of the restricted Employee: (i) in the case of a "substantial owner" (as defined in Section 4022(b)(5) of -58- 62 ERISA), a dollar amount which equals the present value of the benefit guaranteed for such Employee under Section 4022 of ERISA, or if the Plan has not terminated, the present value of the benefit that would be guaranteed if the Plan terminated on the date the benefit commences, determined in accordance with regulations of the Pension Benefit Guaranty Corporation; and (ii) in the case of the other restricted Employees, a dollar amount which equals the present value of the maximum benefit described in Section 4022(b)(3)(B) of ERISA (determined on the earlier of the date the Plan terminates or the date benefits commence, and determined in accordance with regulations of the Pension Benefit Guaranty Corporation) without regard to any other limitations in Section 4022 of ERISA. (f) Special Rule for Plan Termination. If, as of the date the Plan terminates, the value of Plan assets is not less than the present value of all Accrued Benefits (whether or not nonforfeitable), distributions to each Participant equal to the present value of that Participant's Accrued Benefit will not be discriminatory if the formula for computing benefits as of the date of termination is not discriminatory. For the purpose of this subsection, all present values and the value of Plan assets will be computed using assumptions satisfying Section 4044 of ERISA. (g) Special Rule for Single Sum Payment. Notwithstanding the otherwise applicable restrictions under this Section, a Participant's otherwise restricted benefit may be distributed in full upon depositing with an acceptable depository property having a fair market value equal to 125% of the amount which would be repayable as a distribution in excess of the permitted amount had the plan terminated on the date of the single sum payment. If the market value of the property held by the depository falls below 110% of the amount which would be repayable if the plan were then to terminate, additional property necessary to bring the value of the property held by the depository up to 125% of such amount will be deposited. (h) Special Rule for Disability or Normal Retirement Benefits. The provisions of this Section will not restrict the current payment of full disability or retirement benefits under the Plan for any retired or disabled restricted Participant if (i) the Participating Employer contributions which may be used for any such Participant in accordance with the restriction contained in subsection (a) are applied either to provide level amounts of annuity in the normal form of benefit provided for under the Plan for such Participant at retirement (or, if he has already retired, beginning -59- 63 immediately), or to provide level amounts of annuity in an optional form of benefit provided under the Plan if the level amount of annuity under such optional form of benefit is not greater than the level amount of annuity under the normal form of benefit provided under the Plan; (ii) the annuity thus provided is supplemented to the extent necessary to provide the full retirement benefit in the normal form under the Plan by current payments to such Participant as such benefits become due; and (iii) such supplemental payments are made at any time only if the full current costs of the Plan have been met, or the aggregate of such supplemental payments for all such Participants does not exceed the aggregate Participating Employer contributions already made under the Plan in the current Plan Year. (i) Use of Excess Funding. Excess funding arising from the application of the limitations of this Section upon the benefits of the restricted Participants will first be applied in a nondiscriminatory manner to provide for the Accrued Benefits of nonrestricted Participants. After the satisfaction of the liabilities for Accrued Benefits of such nonrestricted Participants, any remaining excess funding will be applied to provide for the restricted portion of the Accrued Benefits of restricted Participants in a nondiscriminatory manner. 15.6 Residual Assets. Except as otherwise provided herein, no part of the Trust Fund will be recoverable by the Participating Employers from the Trust Fund or from any Participant, Beneficiary, spouse or other person, or be used for or diverted to purposes other than for the exclusive benefit of Participants and their Beneficiaries and spouses, except that any portion of the Trust Fund which remains after the satisfaction of all liabilities to such Participants, Beneficiaries, and spouses determined under the provisions of Sections 15.3 and 15.5 will, upon termination of the Plan, be distributed to the Participating Employers as directed by the Board. -60- 64 ARTICLE 16 MISCELLANEOUS 16.1 Reversion Prohibited. (a) General Rule. Except as otherwise provided in this Section, it will be impossible for any part of the Trust Fund either (i) to be used for or diverted to purposes other than those which are for the exclusive benefit of Participants and their Beneficiaries (except for the payment of taxes and administrative expenses), or (ii) to revert to a Controlled Group Member. (b) Disallowed Contributions. Each contribution of the Participating Employers under the Plan is expressly conditioned upon the deductibility of the contribution under Code section 404. If all or part of a Participating Employer's contribution is disallowed as a deduction under Code section 404, such disallowed amount (reduced by any Trust Fund losses attributable thereto) may be returned by the Trustee to the Participating Employer with respect to which the deduction was disallowed (upon the direction of the Committee) within one year after the disallowance. (c) Mistaken Contributions. If a contribution is made by a Participating Employer by reason of a mistake of fact, then so much of the contribution as was made as a result of the mistake (reduced by any Trust Fund losses attributable thereto) may be returned by the Trustee to the Participating Employer (upon direction of the Committee) within one year after the mistaken contribution was made. (d) Failure to Qualify. In the event the Internal Revenue Service determines that the Plan and the Trust Agreement, as amended by amendments acceptable to the Company, initially fail to constitute a qualified plan and establish a tax-exempt trust under the Code, then notwithstanding any other provisions of the Plan or the Trust Agreement, the contributions made by the Participating Employers prior to the date of such determination will be returned to the Participating Employers and the Plan and Trust Agreement will terminate. 16.2 Bonding, Insurance and Indemnity. (a) Bonding. To the extent required under ERISA, the Participating Employers will obtain, pay for and -61- 65 keep current a bond or bonds with respect to each Committee member and each Employee who receives, handles, disburses, or otherwise exercises custody or control of, any of the assets of the Plan. (b) Insurance. The Participating Employers, in their discretion, may obtain, pay for and keep current a policy or policies of insurance, insuring the Committee members, the members of the board of directors of each Participating Employer and other Employees to whom any fiduciary responsibility with respect to the administration of the Plan has been delegated against any and all costs, expenses and liabilities (including attorneys' fees) incurred by such persons as a result of any act, or omission to act, in connection with the performance of their duties, responsibilities and obligations under the Plan and any applicable law. (c) Indemnity. If the Participating Employers do not obtain, pay for and keep current the type of insurance policy or policies referred to in subsection (b), or if such insurance is provided but any of the parties referred to in subsection (b) incur any costs or expenses which are not covered under such policies, then the Participating Employers will indemnify and hold harmless, to the extent permitted by law, such parties against any and all costs, expenses and liabilities (including attorneys' fees) incurred by such parties in performing their duties and responsibilities under this Plan, provided that such party or parties were acting in good faith within what was reasonably believed to have been the best interests of the Plan and its Participants. 16.3 Merger, Consolidation or Transfer of Assets. There will be no merger or consolidation of all or any part of the Plan with, or transfer of the assets or liabilities of all or any part of the Plan to, any other Qualified Plan unless each Participant who remains a Participant hereunder and each Participant who becomes a participant in the other Qualified Plan would receive a benefit immediately after the merger, consolidation or transfer (determined as if the other Qualified Plan and the Plan were then terminated) which is equal to or greater than the benefit they would have been entitled to receive under the Plan immediately before the merger, consolidation or transfer if the Plan had then terminated. 16.4 Spendthrift Clause. The rights of any Participant or Beneficiary to and in any benefits under the Plan will not be subject to assignment or alienation, and no Participant or Beneficiary will have the power to assign, -62- 66 transfer or dispose of such rights, nor will any such rights to benefits be subject to attachment, execution, garnishment, sequestration, the laws of bankruptcy or any other legal or equitable process. This Section will not apply to a "qualified domestic relations order". A "qualified domestic relations order" means a judgment, decree or order made pursuant to a state domestic relations law which satisfies the requirements of Code section 414(p). 16.5 Rights of Participants. Participation in the Plan will not give any Participant the right to be retained in the employ of a Controlled Group Member or any right or interest in the Plan or the Trust Fund except as expressly provided herein. 16.6 Gender, Tense and Headings. Whenever any words are used herein in the masculine gender, they will be construed as though they were also used in the feminine gender in all cases where they would so apply. Whenever any words used herein are in the singular form, they will be construed as though they were also used in the plural form in all cases where they would so apply. Headings of Articles, Sections and subsections as used herein are inserted solely for convenience and reference and constitute no part of the Plan. 16.7 Governing Law. 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. Executed this 30th day of December, 1988. A. H. BELO CORPORATION By /s/ MICHAEL J. MCCARTHY By________________________ -63- 67 APPENDIX A PARTICIPATING EMPLOYERS A. H. Belo Corporation Dallas-Ft. Worth Suburban Newspapers, Inc. Great Western Broadcasting Corporation Gulf Television Corporation KOTV, Inc. The Dallas Morning News Company WFAA Television, Inc. WVEC Television, Inc. A-1 -64- 68 APPENDIX B ACTUARIAL FACTORS FOR DETERMINING CERTAIN EARLY RETIREMENT BENEFITS The following tables set forth factors for determining early retirement benefits under Section 6.5. PART I D&B FACTOR The D&B Factor will be determined in accordance with Table 1 if an Employee had attained age 55 and completed at least ten, but less than 35 years of service for purposes of vesting under the D&B Plan as of January 30, 1984, and in accordance with Table 2 if he had attained age 55 and completed at least 35 years of service for purposes of vesting under the D&B Plan as of January 30, 1984. If an Employee's Benefit Commencement Date is not a whole number of years prior to his Normal Retirement Date, an interpolated percentage under the applicable table will be used. TABLE 1 Years Prior to Percentage of Normal Retirement Date Accrued Benefit ---------------------- --------------- 0 100.0% 1 97.0% 2 94.0% 3 91.0% 4 88.0% 5 85.0% 6 80.5% 7 74.5% 8 67.0% 9 58.0% 10 47.5% B-1 -65- 69 TABLE 2 Years Prior to Percentage of Normal Retirement Date Accrued Benefit ---------------------- --------------- 5 or less 100.0% 6 94.7% 7 87.6% 8 78.8% 9 68.2% 10 55.9% PART II BELO FACTOR The Belo Factor will be determined in accordance with the following table. If an Employee's Benefit Commencement Date is not a whole number of years prior to his Normal Retirement Date, an interpolated percentage will be used. Years Prior to Percentage of Normal Retirement Date Accrued Benefit ---------------------- --------------- 0 100.0% 1 93.3% 2 86.6% 3 80.0% 4 73.3% 5 66.7% 6 63.3% 7 60.0% 8 56.6% 9 53.3% 10 50.0% B-2 -66- EX-10.3.21 10 FIRST AMEND. TO G.B.DEALEY RETIREMENT PENSION PLAN 1 EXHIBIT 10.3 (21) FIRST AMENDMENT TO THE G. B. DEALEY RETIREMENT PENSION PLAN (As Amended and Restated Effective January, 1, 1988) A. H. Belo Corporation, a Delaware corporation, pursuant to authorization of its Board of Directors, adopts the following amendments to The G. B. Dealey Retirement Pension Plan, as amended and restated effective January 1, 1988 (the "Plan"). 1. Section 5.2 of the Plan is amended in its entirety to read as follows: "5.2 Early Retirement Benefit. A Participant who terminates employment for any reason other than death or total and permanent disability at or after his Early Retirement Age and before age 65 will be entitled to receive a monthly retirement benefit beginning on his Normal Retirement Date in an amount equal to his Accrued Benefit determined as of the date he terminated employment. If the Participant elects to receive his early retirement benefit as of the first day of any month before his Normal Retirement Date, his Accrued Benefit will be reduced by 1/180th for each of the first 60 months and by 1/360th for each of the next 60 months by which his Benefit Commencement Date is earlier than his Normal Retirement Date; provided, however, that the 60-month period to which the 1/180th factor applies will be reduced, and the 60-month period to which the 1/360th factor applies will be increased, by the number of months by which the Participant's Social Security Retirement Age (as defined in Section 10.2(m)) exceeds age 65." 2. Section 8.1 of the Plan is amended in its entirety to read as follows: "8.1 Death Benefits. (a) Death Benefits Payable before Termination of Employment. The Beneficiary of a Participant who dies while an Employee and prior to his Benefit Commencement Date will receive a death benefit in the amount of the Participant's Accrued Benefit (whether or not vested) determined as of the date of his death. (b) Death Benefits Payable after Termination of Employment. The Beneficiary of a Participant who has a 2 vested interest in his Accrued Benefit and who dies after terminating employment and prior to his Benefit Commencement Date will receive a death benefit in the amount of the Participant's Accrued Benefit determined as of the date of his death." 3. Section 2 of the Plan is amended in its entirety to read as follows: "8.2 Form of Death Benefit. (a) Surviving Spouse. If the Participant's Beneficiary is his surviving spouse, the death benefit will be paid in the form of a Qualified Preretirement Survivor Annuity, subject, however, to the exception for small benefits set forth in Section 7.1(e). (b) Other Beneficiaries. If the Participant's Beneficiary is a person other than his surviving spouse, the death benefit will be paid in the form of a ten-year certain and continuous annuity as described in Section 7.1(c), subject, however, to the exception for small benefits set forth in Section 7.1(e)." 3. Section 8.3 of the Plan is amended in its entirety to read as follows: "8.3 Commencement of Death Benefit. Subject to the exception for small benefits set forth in Section 7.1(e), the Beneficiary will begin to receive payments as of the Participant's Normal Retirement Date unless the Beneficiary elects to receive payments as of the first day of any preceding month following the Participant's death. All death benefit payments will be made or will begin as soon as administratively feasible and will be equal to the Actuarially Equivalent present value of the Participant's Accrued Benefit determined as of the date of his death." 4. Subsection (d) of Section 16.1 of the Plan (relating to the reversion of employer contributions on the failure of the Plan to qualify under Section 401(a) of the Internal Revenue Code) is deleted from the Plan. Executed this 12th day of December, 1989. A. H. BELO CORPORATION By /s/ MICHAEL MCCARTHY -2- EX-10.3.22 11 SECND.AMEND. TO G.B.DEALEY RETIREMENT PENSION PLAN 1 EXHIBIT 10.3 (22) SECOND AMENDMENT TO THE G. B. DEALEY RETIREMENT PENSION PLAN (As Amended and Restated Effective January 1, 1988) A. H. Belo Corporation, a Delaware corporation, pursuant to authorization of its Board of Directors, adopts the following amendments to The G. B. Dealey Retirement Pension Plan, as amended and restated effective January 1, 1988 (the "Plan"). 1. Section 1.11 of the Plan is amended in its entirety to read as follows: "1.11 'Compensation' means the wages as defined in Code section 3401(a) for purposes of income tax withholding at the source (but determined without regard to any rules that limit the remuneration included in wages based on the nature or location of the employment or services performed) that are paid to an Employee by the Participating Employers, reduced by all of the following items: reimbursements or other expense allowances, fringe benefits (cash and noncash), moving expenses, deferred compensation and welfare benefits. In addition, the Compensation paid to an Employee who is a 'highly compensated employee' as defined in Code section 414(q) and the Treasury Regulations thereunder will be further reduced by the following items: amounts includible in the Employee's income by reason of the grant or exercise of a stock option, amounts includible in the Employee's income under Code section 83 with respect to restricted stock and any other amounts includible in the Employee's income by reason of an award under the Company's 1986 Long Term Incentive Plan, as amended from time to time. Compensation includes, for all Employees, any contributions made by the Participating Employers on behalf of an Employee pursuant to a deferral election under an employee benefit plan containing a cash or deferred arrangement under Code section 401(k) or any amounts that would have been received as cash but for an election to receive benefits under a cafeteria plan meeting the requirements of Code section 125. 2 For years beginning after December 31, 1988, the annual Compensation of each Employee taken into account under the Plan for any year will not exceed $200,000. This limitation will be adjusted by the Secretary of the Treasury at the same time and in the same manner as under Code section 415(d), except that the dollar increase in effect on January 1 of any calendar year is effective for years beginning in such calendar year and the first adjustment to the $200,000 limitation is effective on January 1, 1990. If an Employee's Compensation is determined with respect to a period of time that contains fewer than 12 calendar months, then the annual compensation limit is an amount equal to the annual compensation limit for the calendar year in which the compensation period begins multiplied by the ratio obtained by dividing the number of full months in the period by 12. In determining the Compensation of an Employee for purposes of the adjusted $200,000 limitation, the rules of Code section 414(q)(6) will apply, except in applying such rules, the term 'family' will include only the spouse of an Employee and any lineal descendants of the Employee who have not attained age 19 before the close of the year. If, as a result of the application of such rules, the adjusted $200,000 limitation is exceeded, then (except for purposes of determining the portion of Compensation up to the integration level), the limitation will be prorated among the affected individuals in proportion to each such individual's Compensation as determined under this Section prior to the application of this limitation. If Compensation for any prior Plan Year is taken into account in determining an Employee's benefits for the current year, the Compensation for such prior year is subject to the applicable annual compensation limit in effect for that prior Plan Year. For this purpose, for years beginning before January 1, 1990, the applicable annual compensation limit is $200,000." 2. Section 1.21 of the Plan is amended in its entirety to read as follows: -2- 3 "1.21 'Final Monthly Compensation' means the average monthly Compensation paid to a Participant (i) during the five full consecutive calendar years of employment occurring within the Participant's last ten years of employment with a Controlled Group Member that produces the highest average monthly Compensation or (ii) during all of his full calendar years of employment, if the Participant has less than five full calendar years of employment." 3. Article 1 of the Plan is amended by the addition of the following sections: "1.38 'Covered Compensation' means the average (without indexing) of the Taxable Wage Bases in effect for each calendar year during the 35-year period ending with the last day of the calendar year in which a Participant attains (or will attain) Social Security Retirement Age (as defined in Section 10.2(m)). No increase in Covered Compensation will decrease a Participant's accrued benefit under the Plan. In determining a Participant's Covered Compensation for a Plan Year, the Taxable Wage Base in effect for the current Plan Year and any subsequent Plan Year will be assumed to be the same as the Taxable Wage Base in effect as of the beginning of the Plan Year for which the determination is being made. A Participant's Covered Compensation for a Plan Year before the 35-year period ending with the last day of the calendar year in which the Participant attains Social Security Retirement Age is the Taxable Wage Base in effect as of the beginning of the Plan Year. A Participant's Covered Compensation for a Plan Year after such 35-year period is the Participant's Covered Compensation for the Plan Year during which the Participant attained Social Security Retirement Age. 1.39 Super Highly Compensated Employee' means an Employee described in Code section 414(q)(1)(A) or (B). 1.40 Taxable Wage Base' means the contribution and benefit base in effect under section -3- 4 230 of the Social Security Act at the beginning of the Plan Year." 4. Section 2.2(b) of the Plan is amended in its entirety to read as follows: "(b) Exclusion after Participation. A Participant who becomes ineligible under subsection (a) will continue to earn Credited Service for purposes of determining his vested interest in his Accrued Benefit, but during the period of ineligibility the Participant's Credited Service will not be taken into account for purposes of determining the amount of his Accrued Benefit unless the Participant is in the service of the armed forces of the United States and returns to employment with a Controlled Group Member within the time his reemployment rights are guaranteed by law." 5. Section 5.1 of the Plan is amended in its entirety to read as follows: "5.1 Normal Retirement Benefit. (a) General Rule. A Participant who terminates employment at age 65 will receive a monthly retirement benefit beginning on his Normal Retirement Date in an amount equal to (i) 1.1% of his Final Monthly Compensation multiplied by his years of Credited Service plus (ii) 0.35% of his Final Monthly Compensation in excess of his Covered Compensation multiplied by his years of Credited Service up to 35 such years. (b) Minimum Retirement Benefit. The retirement benefit payable to a Participant will not be less than his accrued benefit under the Plan as of his Benefit Protection Date (as hereinafter defined), determined under the terms of the Plan in effect on December 31, 1988 (including early payment factors and other actuarial assumptions) as though the Participant had terminated employment on his Benefit Protection Date. For purposes of this Section, "Benefit Protection Date" means (i) December 31, 1988 if the Participant is a Super Highly Compensated Employee during the 1989 Plan Year, (ii) December 31, 1989 if the Participant is a Super Highly Compensated Employee -4- 5 during the 1990 Plan Year but was not a Super Highly Compensated Employee during the 1989 Plan Year, (iii) December 31, 1990 if the Participant is a Super Highly Compensated Employee during the 1991 Plan Year but was not a Super Highly Compensated Employee during the 1989 or the 1990 Plan Year, and (iv) [date of adoption] if the Participant is not a Super Highly Compensated Employee during any of the 1989, 1990 and 1991 Plan Years. (c) Prior Benefit Formula. The normal retirement benefit formula in effect under the Plan on December 31, 1988, for purposes of determining a Participant's minimum retirement benefit under subsection (b) above is set forth on Appendix C to the Plan." 6. The first paragraph of Section 6.1 of the Plan is amended in its entirety to read as follows: "The provisions of Sections 6.2 through 6.8 will apply solely to determine the accrued benefit of certain Participants as of their Benefit Protection Date (as defined in Section 5.1(b)) and will supersede any conflicting provisions of Articles 4, 5 and 8 of the Plan as in effect on December 31, 1988." 7. Section 9.6 of the Plan is amended in its entirety to read as follows: "9.6 Specific Powers and Duties of the Committee. The Committee will administer the Plan and the Trust Agreement and will have the authority and discretion to (i) resolve all questions relating to the eligibility of Employees to become Participants; (ii) determine the amount of benefits payable to Participants or their Beneficiaries, and determine the time and manner in which such benefits are to be paid; (iii) authorize and direct all disbursements by the Trustee from the Trust Fund; (iv) engage any administrative, legal, accounting, clerical, or other -5- 6 services it deems appropriate in administering the Plan or the Trust Agreement; (v) construe and interpret the Plan and the Trust Agreement, supply omissions from, correct deficiencies in, and resolve ambiguities in the language of the Plan and the Trust Agreement, and adopt rules for the administration of the Plan and the Trust Agreement which are not inconsistent with the terms of such documents; (vi) compile and maintain all records it determines to be necessary, appropriate or convenient in connection with the administration of benefit payments; (vii) determine the disposition of assets in the Trust Fund in the event the Plan is terminated; (viii) review the performance of the Trustee with respect to the Trustee's administrative duties, responsibilities and obligations under the Plan and the Trust Agreement, report to the Board regarding such administrative performance of the Trustee, and recommend to the Board, if necessary, the removal of the Trustee and the appointment of a successor Trustee; and (ix) resolve all questions of fact relating to any matter for which it has administrative responsibility." 8. Section 9.13 of the Plan is amended in its entirety to read as follows: "9.13 Payment to Minors or Other Persons Under Legal Disability. If any benefit becomes payable to a minor, payment of such benefit will be made only to the guardian of the person or the estate of the minor, provided the guardian acknowledges in writing, in a form acceptable to the Committee, receipt of the payment on behalf of the minor. If any benefit becomes payable to any other person under a legal disability, payment of such benefit will be made only to the conservator or the guardian of the estate of such person appointed by a court of competent jurisdiction. Any payment made in accordance with the provisions of this Section on behalf of a minor or other person under a legal disability will fully discharge the Plan's obligation to such person." -6- 7 9. Section 9.15 of the Plan is amended in its entirety to read as follows: "9.15 Funding Policy. The Plan is to be funded through Participating Employer contributions and earnings on such contributions; and benefits will be paid to Participants and Beneficiaries as provided in the Plan. The Investment Committee appointed by the Board pursuant to the Trust Agreement will determine from time to time investment policies that are consistent with the objectives of the Plan; provided, however, that if the Board has not appointed an Investment Committee or if any committee appointed by the Board is no longer acting as the Investment Committee under the Trust Agreement, such investment policies will be determined by the Committee." 10. Section 12.2(h) of the Plan is amended in its entirety to read as follows: "(h) 'Key Employee' means any Employee or former Employee (and the Beneficiary of a deceased Employee) who at any time during the Determination Period was (i) an officer of a Controlled Group Member, if such individual's Includable Compensation (modified as described below) exceeds 50% of the Defined Benefit Dollar Limitation, (ii) an owner (or considered an owner under Code section 318) of one of the ten largest interests in a Controlled Group Member, if such individual's Includable Compensation exceeds the Defined Contribution Dollar Limitation, (iii) a 5-percent owner of a Controlled Group Member, or (iv) a 1-percent owner of a Controlled Group Member who has annual Includable Compensation of more than $150,000. The determination of who is a Key Employee will be made in accordance with Code section 416(i) and the Treasury Regulations thereunder. For purposes of this subsection only, Includable Compensation will include salary reduction contributions pursuant to a cash or deferred arrangement under Code section 401(k) or a cafeteria plan meeting the requirements of Code section 125." -7- 8 11. Section 16.4 of the Plan ("Spendthrift Clause") is amended by the addition of the following sentence: "Notwithstanding the foregoing, if the terms of the 'qualified domestic relations order' permit, the amounts payable to the alternate payee under such order will be paid at such time or times specified in the order before the earliest retirement date specified in section 414(p)(4)(B) of the Code and will be paid in the form of a lump sum without regard to any restriction on lump sum payments contained in the Plan." 12. The Plan is amended by the addition of the following appendix: "APPENDIX C NORMAL RETIREMENT BENEFIT FORMULA IN EFFECT ON DECEMBER 31, 1988 A Participant's minimum retirement benefit under Section 5.1(b) will be determined under the formula set forth below, determined as if the Participant terminated employment on his Benefit Protection Date. A Participant who terminates employment at age 65 will receive a monthly retirement benefit beginning on his Normal Retirement Date in an amount equal to the difference between (i) 1.75% of the Participant's Final Monthly Compensation multiplied by his years of Credited Service and (ii) 1.50% of his Primary Social Security Benefit multiplied by his years of Credited Service up to 40 such years; provided, however, that a Participant who was an Employee on January 1, 1978, and who was an active Participant in the Plan on December 31, 1977, will receive a minimum monthly benefit beginning on his Normal Retirement Date equal to 1% of his Final Monthly Compensation multiplied by his years of Credited Service." -8- 9 The foregoing amendments will be effective as of January 1, 1989, and will apply only to Participants who complete an Hour of Service after December 31, 1988; provided, however, that if section 1140 of the Tax Reform Act of 1986, as amended, would require any provision of the Plan, as amended, to be effective as of an earlier date, such provision will be effective as of such earlier date. Executed at Dallas, Texas, this 16th day of June, 1992. A. H. BELO CORPORATION By /s/ MICHAEL MCCARTHY -9- EX-10.3.23 12 THIRD AMEND. TO G.B.DEALEY RETIREMENT PENSION PLAN 1 EXHIBIT 10.3(23) THIRD AMENDMENT TO THE G. B. DEALEY RETIREMENT PENSION PLAN (As Amended and Restated Effective January 1, 1988) A. H. Belo Corporation, a Delaware corporation, pursuant to authorization of its Board of Directors, adopts the following amendments to The G. B. Dealey Retirement Pension Plan, as amended and restated effective January 1, 1988 (the "Plan"). 1. There is added to Article 5 of the Plan ("Retirement Benefits") new Sections 5.10 and 5.11, which shall read as follows: 5.10 Early Retirement Benefit for Certain Employees of WFAA Television, Inc. (a) Eligibility. The provisions of this Section will apply only to each Participant who (i) is an Employee of WFAA Television, Inc. on November 15, 1991, (ii) will have attained at least age 55 and will have completed at least five years of Credited Service as of December 31, 1991, (iii) elects in writing during the period beginning on November 15, 1991, and ending on December 31, 1991, on a form and in the manner prescribed by the Committee to receive the early retirement benefit described in subsection (b) below and (iv) retires from employment with WFAA Television, Inc. on or before December 31, 1991, and does not again become employed by any other Controlled Group Member. A Participant who satisfies the foregoing eligibility requirements is referred to in this Section as a "Qualified Participant." (b) Early Retirement Benefit. The retirement benefit of a Qualified Participant will be determined pursuant to the provisions of Sections 5.1 and 5.2, subject, however, to the following modifications: (i) the Qualified Participant will be credited with five additional years of Credited Service for purposes of the normal retirement benefit formula; (ii) the Qualified Participant will be credited with five additional years of age for purposes of determining his Covered Compensation under the normal retirement benefit formula; (iii) the Qualified Participant's Final Monthly Compensation will be equal to the greater of the Final Monthly Compensation determined under Section 1.21 or the Final 2 Monthly Compensation that would result from including in clause (i) of Section 1.21 the Compensation the Qualified Participant would have earned for the five calendar years after 1991 if his Compensation for such years were equal to his Compensation for 1991 compounded annually at the rate of 5%; and (iv) the early retirement reduction factors under Section 5.2 will be applied by adding five additional years to the Qualified Participant's age. 5.11 Postretirement Cost-of-Living Adjustments. The monthly retirement benefit payable to each Participant who retired under the Plan at or after age 55 and prior to January 1, 1989, and the monthly retirement benefit (if any) payable to the Beneficiary of a Participant who retired at or after age 55 and prior to January 1, 1989, and who died before March 1, 1992, will be increased by a one-time cost-of-living adjustment determined with reference to the Participant's date of retirement in accordance with the table set forth below. The cost-of-living adjustment will be paid beginning with the monthly retirement benefit payable during March, 1992. Date of Retirement Amount of Adjustment ------------------ -------------------- Before January 1, 1981 12% On or after January 1, 1981 and before January 1, 1986 8% On or after January 1, 1986 and before January 1, 1989 4% If a retired Participant who qualifies for the cost-of-living adjustment under this Section dies on or after March 1, 1992, any survivor benefit payable with respect to such Participant will be based on the Participant's benefit as increased by the cost-of-living adjustment. 2. The provisions of Section 5.10 will be effective as of December 31, 1991, and the provisions of Section 5.11 will be effective as of March 1, 1992. Executed at Dallas, Texas, this 19th day of February, 1992. A. H. BELO CORPORATION By /s/ MICHAEL MCCARTHY -2- EX-10.3.24 13 FOURTH AMEND.TO G.B.DEALEY RETIREMENT PENSION PLAN 1 EXHIBIT 10.3(24) FOURTH AMENDMENT TO THE G. B. DEALEY RETIREMENT PENSION PLAN (As Amended and Restated Effective January 1, 1988) A. H. Belo Corporation, a Delaware corporation, pursuant to authorization of its Board of Directors, adopts the amendments to the G. B. Dealey Retirement Pension Plan (the "Plan") set forth below with reference to the following facts: A. The Omnibus Budget Reconciliation Act of 1993 has amended the Internal Revenue Code to reduce to $150,000 the maximum amount of compensation that can be taken into account for Plan purposes effective for years beginning after 1993. B. The definition of Final Monthly Compensation is being amended to conform the provisions of the Plan document to the manner in which the Plan has been administered. NOW, THEREFORE, the Plan is amended as follows: 1. The first two sentences of the second paragraph of Section 1.11 of the Plan ("Compensation") are amended in their entirety to read as follows: For years beginning after December 31, 1988, and before January 1, 1994, the annual Compensation of each Employee taken into account under the Plan for any year will not exceed $200,000, and for years beginning after December 31, 1993, the annual Compensation of each Employee taken into account under the Plan for any year will not exceed $150,000, as such limitations are adjusted by the Secretary of the Treasury, with the first such adjustment effective on January 1, 1990. 2. The phrase "adjusted $200,000 limitation" that appears in the third paragraph of Section 1.11 of the Plan is 2 amended in each place that it appears to read "adjusted $200,000 or $150,000 limitation, as applicable,". 3. Section 1.11 of the Plan is further amended by the addition of the following paragraph: Notwithstanding the foregoing provisions of this Section, the application of the $150,000 limitation on Compensation for Plan years after 1993 will not cause a Participant's Accrued Benefit to be less than his Accrued Benefit at December 31, 1993, plus his Accrued Benefit determined solely with respect to his years of Credited Service after 1993. 4. Section 1.21 of the Plan is amended in its entirety to read as follows: 1.21 "Final Monthly Compensation" means the average monthly Compensation paid to a Participant (i) during the five consecutive calendar years of employment occurring within the Participant's last ten years of employment with a Controlled Group Member that produces the highest average monthly Compensation or (ii) during all of his calendar years of employment, if the Participant has less than five calendar years of employment. In determining a Participant's Final Monthly Compensation, (a) the calendar year in which the Participant terminates employment will be disregarded unless his termination of employment occurs on December 31 of the calendar year or unless such calendar year is the only year of employment, (b) calendar years in which no Compensation was paid to the Participant for services performed as an Employee in those years will be disregarded, and calendar years occurring before and after such years of no Compensation will be considered as consecutive calendar years and (c) if a Participant receives Compensation in any calendar year for services performed as an Employee for less than 12 full months, his Compensation for such year will be his annualized Compensation determined by dividing his Compensation for such year by the number of full and partial months of service during such year and multiplying the result by 12. -2- 3 Executed at Dallas, Texas, this 15th day of December, 1993. A. H. BELO CORPORATION By /s/ ROBERT W. DECHERD ------------------------------ Robert W. Decherd Chairman of the Board, President and Chief Executive Officer -3- EX-10.3.25 14 FIFTH AMEND. TO G.D.DEALEY RETIREMENT PENSION PLAN 1 EXHIBIT 10.3 (25) FIFTH AMENDMENT TO THE G. B. DEALEY RETIREMENT PENSION PLAN (As Amended and Restated Effective January 1, 1988) A. H. Belo Corporation, a Delaware corporation, pursuant to authorization of its Board of Directors, adopts the following amendments to the G. B. Dealey Retirement Pension Plan (the "Plan"). 1. Notwithstanding any other provision of the Plan, no benefits will accrue under the Plan after March 31, 1994, with respect to any Participant or Employee who is employed by DFW Suburban Newspapers, Inc. 2. The first sentence of Section 2.2(a) of the Plan is amended by deleting the word "or" immediately preceding clause (v) and by adding the following new clause at the end thereof: "; or (vi) he is employed by DFW Suburban Newspapers, Inc." 3. Section 2.2(b) of the Plan is amended in its entirety to read as follows: "(b) Exclusion after Participation. A Participant who becomes ineligible under subsection (a) will continue to earn Credited Service for purposes of determining his vested interest in his Accrued Benefit, but during the period of ineligibility the Participant's Credited Service and Compensation will not be taken into account for purposes of determining the amount of his Accrued Benefit." 4. Section 4.1 of the Plan is amended by adding the following new subsection (c): "(c) Full Vesting for Certain Participants. A Participant's interest in his Accrued Benefit as of March 31, 1994 will become 100% vested and nonforfeitable without regard to his years of Credited Service if he is 2 employed by DFW Suburban Newspapers, Inc. on such date. In addition, any Participant who terminated employment with DFW Suburban Newspapers, Inc., or who was classified as a newspaper employee and terminated employment with Dallas-Ft. Worth Suburban Newspapers, Inc., on or after January 1, 1994 and before March 31, 1994 will have a 100% vested and nonforfeitable interest in his Accrued Benefit as of the date of his termination without regard to years of Credited Service. The foregoing amendments are effective on and after April 1, 1994. Executed at Dallas, Texas, this 1st day of March, 1994. A. H. BELO CORPORATION By /s/ ROBERT W. DECHERD -2- EX-10.3.26 15 MASTER TRUST AGREEMENT 1 EXHIBIT 10.3(26) MASTER TRUST AGREEMENT 2 MASTER TRUST AGREEMENT THIS MASTER TRUST AGREEMENT, made and entered into on this 22nd day of December, 1992, effective as of July 1, 1992, between A.H. BELO CORPORATION (hereinafter referred to as the "Corporation") and MELLON BANK, N.A. (hereinafter referred to as the "Master Trustee"), WITNESSETH: WHEREAS, the Corporation and certain of its subsidiaries and affiliates (hereinafter referred to singularly as a "Company" and collectively as the "Companies") have adopted employee benefit plans and may in the future adopt additional employee benefit plans meeting the requirements of section 401(a) of the Internal Revenue Code of 1986, as amended, and validly existing regulations thereunder (hereinafter referred to in their entirety as the "Code"), for the benefit of the employees therein described; and WHEREAS, the Corporation and the Master Trustee wish to establish a master trust, pursuant to which assets will be held to provide for the funding of and payment of benefits under such plans; and WHEREAS, the Corporation wishes to provide for the diversification of management of the assets of the master trust by providing for the appointment of various investment managers to manage separate portions of such assets; and 3 WHEREAS, the Companies adopting this Agreement and the Master Trustee wish to amend those trust agreements referred to in Exhibit A hereto so that this Agreement shall be deemed to supersede all such trust agreements and so that all the separate trusts established by those trust agreements shall be deemed consolidated into a single master trust, and further wish to adopt this Agreement and the master trust created hereby as the trust agreement and trust for those plans referred to in Exhibit B (in each case with separate accounting for the interests of each plan having assets in the master trust, as more completely described herein); NOW, THEREFORE, this Agreement shall be the superseding trust agreement to all trust agreements adopted by the Corporation, as referred to in Exhibit A to this Agreement, and the trusts established under such agreements shall be consolidated into a master trust created hereby; and further, that this Agreement and master trust shall also be the trust agreement and trust for those plans referred to in Exhibit B to this Agreement and such additional employee benefit plans as may be designated by the Corporation or authorized pursuant to Section 21 hereof (such plans are hereinafter referred to individually as the "Plan" and collectively as the "Plans"), provided that this Agreement shall be adopted only with respect to employee benefit plans intended to meet the requirements of section 401(a) of the Code: - 2 - 4 SECTION 1 General 1.1 Compliance With Law. The Trust hereinafter established is intended to comply with the Employee Retirement Income Security Act of 1974, as amended (hereinafter referred to as the "Act") and to be a "qualified trust" as such term is used in sections 401 and 501 of the Code. 1.2 Definition of Terms. The terms used herein shall have the meaning ascribed to them by the Act unless the context clearly indicates an intended different meaning. SECTION 2 Establishment of Trust 2.1 Establishment of Trust. The Corporation hereby establishes with the Master Trustee a trust consisting of such sums of money and such property acceptable to the Master Trustee as shall from time to time be paid or delivered to the Master Trustee. 2.2 Contributions to the Trust. The Master Trustee shall have no duty to determine or collect contributions under any Plan and shall be solely accountable for monies or properties actually received by it. The respective Companies shall have the sole duty and responsibility for the determination of the accuracy or sufficiency of the contributions to be made under any of their Plans, the transmittal of the same to the Master Trustee and compliance with any statute, regulation or rule applicable to contributions. 2.3 Prior Administration. The Master Trustee shall not have any duty to inquire into the administration of the Plans or actions taken under any of the Plans by any prior trustee. 2.4 The Fund. All monies and properties which become subject to this Agreement, all investments and reinvestments made therewith and proceeds thereof and all earnings and profits thereon, less the payments which at the time of reference shall have been made by the Master Trustee as authorized herein and any losses thereto, are referred to herein as the "Fund". 2.5 Fund to be Held in Trust. The Fund shall be held by the Master Trustee in trust and dealt with in accordance with the provisions of this Agreement and the Act. 2.6 Fund to be Held for Benefit of Plan Participants. Except as may be provided by law for the purpose of returning any of the Companies' contributions or in case any Plan of which this Trust forms a part provides for the return of company - 3 - 5 contributions in the event such Plan fails to initially qualify under the applicable provisions of the Code, at no time prior to the satisfaction of all liabilities for benefits under any Plan shall any part of the Fund be used for or diverted to purposes other than for the exclusive benefit of participants, former participants, or their beneficiaries under the Plans and for the payment of the reasonable expenses of the Plans. 2.7 Commingling. The Master Trustee may commingle the assets attributable to the Plans for which contributions are made under this Agreement if this Agreement is applicable to more than one Plan, and may commingle the Fund with funds of other trusts of similar nature created by the Companies for the exclusive benefit of their employees. Where commingling is effected with other trusts maintained by the Companies, the combined trust, to the extent that assets are attributable to contributions made under this Agreement, shall be the Fund referred to herein. The Master Trustee shall maintain such records as are necessary in order to maintain a separation of the Fund from the funds of the other trusts maintained by the Companies and to separate the assets attributable to each of the Plans for which contributions are made under this Agreement. The Companies shall be responsible for causing sufficient records to be maintained to insure that benefits and liabilities payable with respect to each Plan shall be paid from the assets allocable to each such Plan. Should separation be required, either of the Fund from other trusts maintained by the Companies or of any Plan for which contributions are made under this Agreement from the Fund, the Master Trustee shall make such separation in accordance with generally accepted accounting principles and, where applicable, upon the certification of an Enrolled Actuary. SECTION 3 Administration of the Plan 3.1 Administrator. The Plans shall be administered by the person or persons, board, committee or other entity designated by the terms of the Plans to administer the Plans or, in the absence of such designation, the Plans shall be administered by the respective Companies (hereinafter referred to as the "Administrator") and each of such Administrators shall have the sole fiduciary duty as to such plan administration and the Master Trustee shall not be responsible in any respect for such administration. 3.2 Notice of Identity. The Corporation will furnish the Master Trustee from time to time with certified copies of resolutions of its Board of Directors evidencing the appointment, identity and termination of office of any persons acting as or constituting the members of any entity acting as Administrator with respect to any right, power or duty - 4 - 6 specified in this Agreement. The Corporation will notify the Trustee from time to time in writing as to the rights, powers and duties of each such person or entity and, in the absence of any of the above notices, the Master Trustee shall rely solely upon the Corporation. 3.3 Master Trustee's Right to Act. The Master Trustee shall be entitled to deal with any person or entity identified by the Corporation as an Administrator until notified otherwise by the Corporation, in writing. 3.4 Indemnity. The Corporation shall fully indemnify and save harmless the Master Trustee from liability and expense incident to any act or failure to act by reason of the Master Trustee's reliance upon or compliance with instructions issued by the Administrator or the Corporation. SECTION 4 Disbursement from the Fund 4.1 Disbursements by Master Trustee. The Master Trustee shall make such payments out of the Fund as each Administrator may from time to time in writing direct. In the discretion of each Administrator, such payments may be made directly to the person specified by that Administrator or deposited in a checking account maintained by that Administrator for the purpose of making payments to the person, or persons entitled to such payments under the Plans, or to an account maintained by some other entity which that Administrator may designate to make payments. 4.2 Monies Held by Administrator or Other Entity. To the extent monies are held in accounts designated by an Administrator or by some other entity, such Administrator or other entity shall hold such monies in trust in such a manner that the same shall be secure from the claims of all creditors of the Companies, that Administrator, any participant or beneficiary covered by the Plans. 4.3 Direction to the Master Trustee. Any direction given to the Master Trustee in accordance with this Section need not specify the specific application of the payment to be made, but shall specify that the payment is for the purposes of the Plans or the payment of Plans' expenses. SECTION 5 Allocation of Investment Responsibilities 5.1 The Named Fiduciary. (a) The Magemement Committee of the Corporation shall have the power to manage and control the assets of all Plans to the extent of its authority set forth - 5 - 7 herein (hereinafter referred to as the "Named Fiduciary"). The Corporation will appoint the Named Fiduciary and will furnish the Master Trustee from time to time with certified copies of resolutions of its Board of Directors evidencing the appointment, identity and termination of office of any persons acting as or constituting the members of the Named Fiduciary. In addition to its other powers set forth herein, the Named Fiduciary shall have the power and responsibility to appoint and remove one or more investment managers to manage such portions of the Fund as the Named Fiduciary shall designate to the Master Trustee (such investment managers are hereinafter referred to singularly as an "Investment Manager" and collectively as the "Investment Managers"). Each such Investment Manager shall be: (1) registered as an investment adviser under the Investment Advisers Act of 1940; (2) a bank, as defined in that Act; or (3) an insurance company qualified to perform investment services under the laws of more than one State and shall accept its appointment and acknowledge in writing to the Master Trustee and Named Fiduciary that it is a fiduciary with respect to the Plans' assets under its management. (b) In addition to its other powers and responsibilities set forth herein, the Named Fiduciary shall have the power: (i) to manage and control the assets of the Plans; (ii) to deliver written investment policies, objectives and guidelines to the Master Trustee and to Investment Managers from time to time; and (iii) to designate a person to inspect and audit the accounts, books and records of the Master Trustee relating to all investments, receipts, disbursements and other transactions under the Master Trust Agreement. 5.2 Investment by the Named Fiduciary. (a) To the extent that the Named Fiduciary exercises the power to manage and control Plans' assets held as part of the Fund, the Master Trustee, as to those assets, shall be released and relieved of all investment duties, responsibilities and liabilities normally or statutorily incident to a trustee and thereafter shall act in the capacity of custodian of such assets. The Master Trustee shall separate into a separate account those assets as to which the Named Fiduciary has discretion and control. The Master Trustee shall take no action with respect to the duties or powers to be exercised by the Named Fiduciary under Section 6 or Section 7 without receipt of written directions from the Named Fiduciary. Unless specifically prohibited in writing, the Master Trustee, as custodian, may hold the assets of such separate account in the name of a nominee or nominees. - 6 - 8 (b) Should the Named Fiduciary at any time elect to place security transactions directly with a broker or dealer, the Master Trustee shall not recognize such transaction unless and until it has received instructions or confirmation of such fact from the Named Fiduciary. Should the Named Fiduciary direct the Master Trustee to utilize the services of any person with regard to the assets under its management or control, such instructions shall be in writing and shall specifically set forth the actions to be taken by the Master Trustee as to such services. (c) In the event that the Named Fiduciary places security transactions directly or directs the utilization of a service, the Named Fiduciary shall be solely responsible for the acts of such persons. The sole duty of the Master Trustee as to such transactions shall be incident to its duties as custodian. 5.3 Investment Managers. (a) It is contemplated that the Named Fiduciary will from time to time appoint one or more Investment Managers to manage specified portions of the Fund. Upon the appointment of each Investment Manager, the Named Fiduciary shall so notify the Master Trustee and instruct the Master Trustee in writing to separate into a separate account those assets as to which each Investment Manager has discretion and control. The Investment Manager shall designate in writing the person or persons who are to represent any such Investment Manager in dealings with the Master Trustee. Upon the separation of the assets in accordance with the instructions of the Named Fiduciary, the Master Trustee shall thereupon be relieved and released of all investment duties, responsibilities and liabilities normally and statutorily incident to a trustee as to such separate account, and, as to such separate account, the Master Trustee shall act as custodian. Except as otherwise provided by the Named Fiduciary in writing from time to time, the Master Trustee shall take no action with respect to the duties or powers allocated to an Investment Manager in Section 6 or Section 7 without receipt of written directions of the Investment Manager. Unless specifically prohibited in writing, the Master Trustee, as custodian, may hold the assets of such separate account in the name of a nominee or nominees. (b) Should an Investment Manager at any time elect to place security transactions directly with a broker or dealer, the Master Trustee shall not recognize such transaction unless and until it has received instructions or confirmation of such fact from the Investment Manager. Should the Investment Manager direct the Master Trustee to utilize the services of any person with regard to the assets under its management or control, such instructions shall be in writing and shall specifically set forth the actions to be taken by the Master Trustee as to such services. - 7 - 9 (c) In the event that an Investment Manager places security transactions directly or directs the utilization of a service, the Investment Manager shall be solely responsible for the acts of such persons. The sole duty of the Master Trustee as to such transactions shall be incident to its duties as custodian. 5.4 Transfer of Assets to Investment Managers. (a) Upon receipt of written directions by the Named Fiduciary, the Master Trustee shall (i) transfer and deliver such part of the assets of the Fund as may be specified in such writing to any Investment Manager so appointed, and (ii) accept the transfer back to it of any such assets at any time held by an Investment Manager, provided that the Named Fiduciary may only direct such transfers as are in conformity with the provisions of the Plans, this Agreement, and Act, and sections 401(a) and 501(a) of the Code. Any such written direction shall constitute a certification to the Master Trustee by the Named Fiduciary that the transfer so directed is one which the Named Fiduciary is authorized to direct and is in conformity with the aforesaid provisions. (b) If any assets are so transferred to the custody of an Investment Manager, such Investment Manager shall undertake and be responsible for all the custodial duties therefor, and such assets shall remain for all purposes a part of the Fund and the Trust, and as such, subject to all the terms and provisions of this Agreement. Any Investment Manager receiving such assets may invest any part or all of such assets in units of any collective, common or pooled trust fund operated or maintained by a bank or trust company, including the Investment Manager or any affiliate of the Investment Manager, exclusively for the commingling and collective investment of monies or other assets held under or as part of a plan which is established in conformity with and qualifies under section 401(a) of the Code. Notwithstanding the provisions of this Agreement which place restrictions upon the actions of the Master Trustee, or the Investment Manager, to the extent monies or other assets are utilized to acquire units of any collective trust, the terms of the collective trust indenture shall solely govern the investment duties, responsibilities and powers of the trustee of such collective trust, and to the extent required by law, such terms, responsibilities and powers shall be incorporated herein by reference and shall be part of this Agreement. For the purposes of valuation of any interest under the Plans of which this trust forms a part, the value of the interest maintained by the Fund in such collective trust shall be the fair market value of the collective fund units held determined in accordance with generally recognized valuation procedures. (c) The Master Trustee shall have no duty or responsibility as to the safekeeping of such assets or as to the investment and reinvestment of the same, except that the Master Trustee shall - 8 - 10 require such statements and reports from such Investment Manager as may be necessary to enable the Master Trustee and the individual, committee, or committees individually or collectively responsible for benefit administration and identified to the Trustee by the Corporation ("Administrative Committee") to carry out their recordkeeping and reporting duties under this Agreement. The Master Trustee shall enter into and execute such agreements, receipts and releases as shall be required to carry out the directions of the Named Fiduciary with respect to the transfer of any assets of the Fund to or from an Investment Manager in accordance with this Section 5.3. 5.5 The Master Trustee. To the extent that assets of the Fund have not been allocated under Section 5.2 to the investment control of an Investment Manager, and subject to investment policies, objectives and guidelines communicated to the Master Trustee by the Named Fiduciary as contemplated by Section 5.1, the Master Trustee shall from time to time invest and reinvest the Fund and keep it invested in accordance with such policies, objectives and guidelines. SECTION 6 Investment of the Fund 6.1 Standard of Care. The Master Trustee, each Investment Manager and the Named Fiduciary shall discharge their respective investment duties as provided under Sections 5 and 6 hereof with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character with like aims and by diversifying the investments held hereunder consistent with investment policies, objectives and guidelines so as to minimize the risk of large losses, unless under the circumstances it would be clearly not prudent to diversify. 6.2 Waiver of Investment Restrictions. Such investment and reinvestment shall not be restricted to securities or property of the character authorized for investments by trustees or investment managers under any statute or other laws of any state, district or territory. 6.3 Grant of Investment Powers. In addition to any power granted to trustees or investment managers under any statute or other laws, such laws and statutes if necessary being incorporated herein by reference, the Master Trustee's, each Investment Manager's and the Named Fiduciary's investment powers may, unless restricted in writing by the Named Fiduciary, include, but shall not be limited to, investment in the following: - 9 - 11 (a) domestic or foreign common and preferred stocks and options thereon, as well as warrants, rights and preferred stocks convertible into common stock, regardless of where or how traded; (b) corporate bonds and debentures and any such securities which are convertible into common stock, domestic or foreign; (c) bonds or other obligations of the United States of America or any foreign nation, and any agencies thereof, or any bonds or other obligations which are directly or indirectly guaranteed by the United States or any foreign nation, or any agency thereof; (d) obligations of the states and of municipalities or of any agencies thereof; (e) notes of any nature, of foreign or domestic issuers; (f) mortgages and real estate, wherever situate and whether developed or undeveloped, including sales and leasebacks, interests or participations in real estate investment trusts or corporations organized under Section 501(c)(2) or 501(c)(25) of the Code and non-income producing properties. Notwithstanding any other provision of this Agreement, including, without limitation, any specific or general power granted to the Master Trustee, the Master Trustee shall have no responsibility or discretion with respect to the ownership, management, administration, operation or control of any real estate properties, mortgages, leases or other interests now or hereafter held in the Fund, including without limitation responsibility for or in connection with any of the following conditions which now exist or may hereafter be found to exist in, under, about or in connection with any real estate held in the Fund or any interest in any trust, partnership or corporation: (i) any violation of any applicable environmental or health or safety law, ordinance, regulation or ruling; or (ii) the presence, use, generation, storage, release, threatened release, or containment, treatment or disposal of any petroleum, including crude oil or any fraction thereof, hazardous substances, pollutants or contaminants as defined in the Comprehensive Environmental Response Compensation and Liability Act, as amended (CERCLA) or hazardous, toxic or dangerous substances or materials as any of these terms may be defined under any federal or state law in the broadest sense from time to time. Notwithstanding anything to the contrary herein or elsewhere set forth, to the extent permitted by law, the Master Trustee shall be indemnified by the Corporation, to the extent not paid by the Fund, from and against any and all claims, demands, suits, liabilities, losses, damages, costs and expenses (including reasonable attorneys' fees and expenses) arising from or in connection with any matter relating to conditions in subsections (i) or (ii). This paragraph shall - 10 - 12 survive the sale or other disposition of any real estate investment of the Fund and/or the merger or termination of this Master Trust or appointment of a successor master trustee; (g) savings accounts, certificates of deposit and other types of time deposits, bearing a reasonable rate of interest based upon the duration, amount, type and geographical area, with any financial institution or quasi-financial institution or any department of the same, either domestic or foreign, under the supervision of the United States or any State, including any such financial institution owned, operated or maintained by the Master Trustee in its corporate or Association capacity (including any department or division of the same) or a corporation or association affiliated with the same; (h) leaseholds of any duration; (i) mineral and other natural resources, including, but not limited to, oil, gas, timber and coal, and any participation therein in any form, including but not limited to, royalties, ownership, drilling and exploration; (j) any collective or common trust fund or composite security owned, operated and maintained by the Master Trustee, including, but not limited to, demand notes, short-term notes and cash equivalent funds; (k) any collective, common or pooled trust fund operated or maintained exclusively for the commingling and collective investment of monies or other assets including any such fund operated or maintained by the Master Trustee. Notwithstanding the provisions of this Agreement which place restrictions upon the actions of the Master Trustee or an Investment Manager, to the extent monies or other assets are utilized to acquire units of any collective trust, the terms of the collective trust indenture shall solely govern the investment duties, responsibilities and powers of the trustee of such collective trust and, to the extent required by law, such terms, responsibilities and powers shall be incorporated herein by reference and shall be part of this Agreement. For purposes of valuation, the value of the interest maintained by the Fund in such collective trust shall be the fair market value of the collective fund units held, determined in accordance with generally recognized valuation procedures. The Corporation expressly understands and agrees that any such collective fund may provide for the lending of its securities by the collective fund trustee and that such collective fund's trustee will receive compensation from such collective fund for the lending of securities that is separate from any compensation of the Master Trustee hereunder, or any compensation of the collective fund trustee for the management of such collective fund; - 11 - 13 (l) open-end and closed-end investment companies, regardless of the purposes for which such fund or funds were created, and any partnership, limited or unlimited, joint venture and other forms of joint enterprise created for any lawful purpose; (m) individual or group insurance policies and contracts including, but not limited to, life insurance, annuity (fixed or variable) and investment policies and contracts, but only if directed by an Administrator or the Named Fiduciary, as appropriate, to purchase or retain such policies and contracts; 6.4 Maintenance of Cash Balances. The Master Trustee shall keep such portion of the Fund in cash or cash balances as may be specified from time to time in a written request from an Administrator or as required by the Named Fiduciary to meet contemplated payments from the Fund. The Master Trustee shall invest such cash balances and any other portions of the Fund which may be in cash or cash balances in accordance with such investment policies, objectives and guidelines as may be communicated to the Master Trustee from time to time by the Named Fiduciary pursuant to Section 5.1. The Master Trustee shall not be liable for interest on any reasonable cash balances so maintained. SECTION 7 Powers of the Master Trustee, Investment Managers and the Named Fiduciary 7.1 General Powers. The Master Trustee shall have and exercise the following powers and authority in the administration of the Fund only on the direction of an Investment Manager and the Named Fiduciary where such powers and authority relate to a separate account established for an Investment Manager or the Named Fiduciary, and in its sole discretion where such powers and authority relate to investments made by the Master Trustee in accordance with Section 5.4: (a) to purchase, receive or subscribe for any securities or other property and to retain in trust such securities or other property; (b) to sell, exchange, convey, transfer, lend, or otherwise dispose of any property held in the Fund and to make any sale by private contract or public auction; and no person dealing with the Master Trustee shall be bound to see to the application of the purchase money or to inquire into the validity, expediency or propriety of any such sale or other disposition; (c) to vote in person or by proxy any stocks, bonds or other securities held in the Fund; - 12 - 14 (d) to exercise any rights appurtenant to any such stocks, bonds or other securities for the conversion thereof into other stocks, bonds or securities, or to exercise rights or options to subscribe for or purchase additional stocks, bonds or other securities, and to make any and all necessary payments with respect to any such conversion or exercise, as well as to write options with respect to such stocks and to enter into any transactions in other forms of options with respect to any options which the Fund has outstanding at any time; (e) to join in, dissent from or oppose the reorganization, recapitalization, consolidation, sale or merger of corporations or properties of which the Fund may hold stocks, bonds or other securities or in which it may be interested, upon such terms and conditions as deemed wise, to pay any expenses, assessments or subscriptions in connection therewith, and to accept any securities or property, whether or not trustees would be authorized to invest in such securities or property, which may be issued upon any such reorganization, recapitalization, consolidation, sale or merger and thereafter to hold the same, without any duty to sell; (f) to manage, administer, operate or lease for any number of years, regardless of any restrictions on leases made by fiduciaries, develop, improve, repair, alter, demolish, mortgage, pledge, grant options with respect to, or otherwise deal with any real property or interest therein at any time held by it, all upon such terms and conditions as may be deemed advisable, to renew or extend or participate in the renewal or extension of any mortgage upon such terms as may be deemed advisable, and to agree to a reduction in the rate of interest on any mortgage or any other modification or change in the terms of any mortgage or of any guarantee pertaining thereto in any manner and to any extent that may be deemed advisable for the protection of the Fund or the preservation of the value of the investment; to waive any default, whether in the performance of any guarantee, or to enforce any default in such manner and to such extent as may be deemed advisable; to exercise and enforce any and all rights of foreclosure, to bid on the property in foreclosure, to take a deed in lieu of foreclosure, with or without paying a consideration therefor, and in connection therewith to release the obligation on the bonds or notes secured by such mortgage and to exercise and enforce in any action, suit or proceeding at law or in equity any right or remedy in respect to any such mortgage or guarantee; (g) to explore for and to develop mineral interests and other natural resources and to acquire land, either by lease or purchase, for such purpose, and to enter into any type of contract or agreement incident thereto, and to sell any product produced by reason of or resulting from such development or exploration to any person or persons on such terms and - 13 - 15 conditions as the Master Trustee, Investment Manager or Named Fiduciary deems advisable, and to enter into agreements and contracts for transportation of the same; (h) to insure, according to customary standards, any property held in the Fund for any amount and to pay any premiums required for such coverage; (i) to purchase or otherwise acquire and make payment therefor from the Fund any bond or other form of guarantee or surety required by any authority having jurisdiction over this Trust and its operation, or believed by the Master Trustee, Investment Manager or Named Fiduciary to be in the best interests of the Fund, except the Master Trustee, Investment Manager or Named Fiduciary may not obtain any insurance whose premium obligation extends to the Fund which would protect the Master Trustee, Investment Manager or Named Fiduciary against its liability for breach of fiduciary duty; (j) to enter into any type of contract with any insurance company or companies, either for the purposes of investment or otherwise; provided that no insurance company dealing with the Master Trustee shall be considered to be a party to this Agreement and shall only be bound by and held accountable to the extent of its contract with the Master Trustee. Except as otherwise provided by any contract, the insurance company need only look to the Master Trustee with regard to any instructions issued and shall make disbursements or payments to any person, including the Master Trustee, as shall be directed by the Master Trustee. Where applicable, the Master Trustee shall be the sole owner of any and all insurance policies or contracts issued. Such contracts or policies, unless otherwise determined, shall be held as an asset of the Fund for safekeeping or custodian purposes only; (k) to lend the assets of the Fund upon such terms and conditions as are deemed appropriate in the sole discretion of the Master Trustee and, specifically, to loan any securities to brokers, dealers or banks upon such terms, and secured in such manner, as may be determined by the Master Trustee, to permit the loaned securities to be transferred into the name of the borrower or others and to permit the borrower to exercise such rights of ownership over the loaned securities as may be required under the terms of any such loan; provided, that, with respect to the lending of securities pursuant to this paragraph, the Master Trustee's powers shall subsume the role of custodian (the expressed intent hereunder being that the Corporation, in such case, be deemed a financial institution, within the meaning of section 101(21) of the Bankruptcy Code); and provided, further, that any loans made from the Fund shall be made in conformity with such laws or regulations governing such lending activities which may have been promulgated by any appropriate regulatory body at the time of such loan; - 14 - 16 (l) to purchase, enter, sell, hold, and generally deal in any manner in and with contracts for the immediate or future delivery of financial instruments of any issuer or of any other property; to grant, purchase, sell, exercise, permit to expire, permit to be held in escrow, and otherwise to acquire, dispose of, hold and generally deal in any manner with and in all forms of options in any combination. 7.2 Specific Powers of the Master Trustee. The Master Trustee shall have the following powers and authority, to be exercised in its sole discretion with respect to the Fund: (a) to appoint agents, custodians, depositories or counsel, domestic or foreign, as to part or all of the Fund and functions incident thereto where, in the sole discretion of the Master Trustee, such delegation is necessary in order to facilitate the operations of the Fund and such delegation is not inconsistent with the purposes of the Fund or in contravention of any applicable law. To the extent that the appointment of any such person or entity may be deemed to be the appointment of a fiduciary, the Master Trustee may exercise the powers granted hereby to appoint as such a fiduciary any person or entity, including but not limited to, the Named Fiduciary or any Company, notwithstanding the fact that such person or entity is then considered a fiduciary, a party in interest or a disqualified person. Upon such delegation, the Master Trustee may require such reports, bonds or written agreements as it deems necessary to properly monitor the actions of its delegate. (b) to cause any investment, either in whole or in part, in the Fund to be registered in, or transferred into, the Master Trustee's name or the names of a nominee or nominees, including but not limited to that of the Master Trustee, a clearing corporation, or a depository, or in book entry form, or to retain any such investment unregistered or in a form permitting transfer by delivery, provided that the books and records of the Master Trustee shall at all times show that such investments are a part of the Fund; and to cause any such investment, or the evidence thereof, to be held by the Master Trustee, in a depository, in a clearing corporation, in book entry form, or by any other entity or in any other manner permitted by law; (c) to make, execute and deliver, as trustee, any and all deeds, leases, mortgages, conveyances, waivers, releases or other instruments in writing necessary or desirable for the accomplishment of any of the foregoing powers; (d) to defend against or participate in any legal actions involving the Fund or the Master Trustee in its capacity stated herein, in the manner and to the extent it deems advisable, the costs of any such defense or participation to be borne by the - 15 - 17 Fund, unless paid by the Corporation in accordance with Section 10; provided however, the Master Trustee shall notify the Named Fiduciary and the Corporation of all such actions and the Corporation may, in its sole discretion, determine against the incurrence of any such legal fees and expenses which may be incurred beyond those necessary to protect the Fund against default or immediate loss and may participate in the selection of and instructions to legal counsel; (e) to form corporations and to create trusts, to hold title to any security or other property, to enter into agreements creating partnerships or joint ventures for any purpose or purposes determined by the Master Trustee to be in the best interests of the Fund; (f) to establish and maintain such separate accounts in accordance with the instructions of an Administrator or the Named Fiduciary as an Administrator or the Named Fiduciary deems necessary for the proper administration of the Plans, or as determined to be necessary by the Master Trustee. Such accounts shall be subject to the general terms of this Agreement, unless the Master Trustee is notified of a contrary intent by an Administrator or the Named Fiduciary in writing; (g) to generally take all action, whether or not expressly authorized, which the Master Trustee may deem necessary or desirable for the protection of the Fund. 7.3 Maintenance of Indicia of Ownership. The Master Trustee shall not maintain indicia of ownership of any asset of the Fund held by it outside the jurisdiction of the District Courts of the United States unless such holding is approved through ruling or regulation promulgated under the Act by the Secretary of Labor. 7.4 Third Party Transactions. In addition, and not by way of limitation, the Master Trustee shall have any and all powers and duties concerning the investment, retention or sale of property held in trust as if it were absolute owner of the property, and no restrictions with regard to the property so held shall be implied, warranted or sustained by reason of this Agreement; provided, however, at no time shall the exercise of such powers and duties establish any evidence which would permit a third party to assert a right, title or interest superior to that of the Plans in the property held in the Fund. SECTION 8 Discretionary Powers 8.1 Master Trustee Granted Discretion. The Master Trustee is hereby granted any and all discretionary powers not explicitly or implicitly conferred by this Agreement which it may deem - 16 - 18 necessary or proper for the protection of the property held hereunder. SECTION 9 Prohibited Transactions 9.1 Transactions which are Prohibited. Notwithstanding any provision of this Agreement, either appearing before or after this Section, the Master Trustee shall not engage in or cause the Trust to engage in any transaction if it knows or should know, that such transaction constitutes a direct or indirect prohibited transaction, as defined in section 406 of the Act or section 4975 of the Code. 9.2 Provision of Ancillary Services by Master Trustee. Notwithstanding the foregoing, the Master Trustee may, in addition to the services rendered in conjunction with its duties and responsibilities as Master Trustee under the terms of this Agreement, provide such ancillary services as meet the following standards: (a) there have been adopted by the Master Trustee internal safeguards which assure that such ancillary services are consistent with sound banking and financial practices as determined by the appropriate banking authority; (b) the ancillary services are provided in accordance with guidelines which are intended to meet the standards established by the appropriate banking authority; (c) the compensation received by the Master Trustee for such services is reasonable and established in an arm's-length manner. SECTION 10 Expenses, Compensation and Taxes 10.1 Compensation and Expenses of the Master Trustee. The Master Trustee shall be entitled to such reasonable compensation for services rendered by it in accordance with the schedule of compensation as agreed upon by the Corporation and the Master Trustee from time to time, together with all reasonable expenses incurred by the Master Trustee as a result of the execution of its duties hereunder, including, but not limited to, legal and accounting expenses, expenses incurred as a result of disbursements and payments made by the Master Trustee, and reasonable compensation for agents, counsel or other services rendered to the Master Trustee by third parties and expenses incident thereto. - 17 - 19 10.2 Payment from the Fund. All compensation, expenses, taxes and assessments in respect of the Fund, to the extent that they are not paid by the Corporation, shall constitute a charge upon the Fund and be paid by the Master Trustee from the Fund upon written notice from the Corporation. 10.3 Payment of Taxes. The Master Trustee shall notify the Corporation upon receipt of notice with regard to any proposed tax deficiencies or any tax assessments which it receives on any income or property in the Fund and, unless notified to the contrary by the Corporation within thirty (30) days, shall pay any such assessments. If the Corporation notifies the Master Trustee within said period that, in its opinion or the opinion of counsel, such assessments are invalid or that they should be contested, then the Master Trustee shall take whatever action is indicated in the notice received from the Corporation or counsel, including contesting the assessment or litigating any claims. SECTION 11 Accounts, Books and Records of the Fund 11.1 Recordkeeping Duty of Master Trustee. The Master Trustee shall keep accurate and detailed accounts of all investments, receipts and disbursements and other transactions hereunder, and all accounts, books and records relating thereto shall be open at all reasonable times to inspection and audit by any person designated by the Corporation. 11.2 Periodic Reports. In addition, within one hundred twenty (120) days following the close of each fiscal year of the Fund, or following the close of such other period as may be agreed upon between the Master Trustee and the Corporation, and within one hundred twenty (120) days, or such other agreed upon period, unless such period be waived, after the removal or resignation of the Master Trustee as provided for in this Agreement, the Master Trustee shall file with the Administrator, Named Fiduciary and/or the Corporation a certified written report setting forth all investments, receipts and disbursements, and other transactions effected during the fiscal year or other annual period or during the period from the close of the preceding fiscal year or other preceding period to the date of such removal or resignation, including a description of all securities and investment purchases and sales with the cost or net proceeds of such purchases or sales and showing all cash, securities and other property held at the close of such fiscal year or other period, valued currently, and such other information as may be required of the Master Trustee under any applicable law. 11.3 Additional Accounting. Except as provided below, neither the Administrator, Named Fiduciary nor the Corporation shall - 18 - 20 have the right to demand or be entitled to any further accounting different from the normal accounting rendered by the Master Trustee. Further, no participant, beneficiary or any other person shall have the right to demand or be entitled to any accounting by the Master Trustee, other than those to which they may be entitled under the law. The Administrator, Named Fiduciary or the Corporation shall have the right to inspect the Master Trustee's books and records relating to the Fund during normal business hours or to designate an accountant to make such inspection, study, and/or audit with all expenses related thereto to be paid by the Corporation. 11.4 Judicial Determination of Accounts. Nothing contained herein will be construed or interpreted to deny the Master Trustee or the Corporation the right to have the Master Trustee's account judicially determined. 11.5 Limitation of Actions. Notwithstanding any other provision of the Plans or this Agreement, the Master Trustee shall not be subject to any liability for any act or omission, regardless of its nature, unless an action has been commenced against the Master Trustee with respect to such act or omission within the period set forth in Section 413 of the Act. 11.6 Filings by Administrators. For the purposes of this Section, the Master Trustee shall conclusively presume that the Administrators have made all Federal filings as of the date required. Should the Master Trustee incur any liability by reason of an Administrator's failure to timely file, the Corporation shall fully reimburse the Master Trustee for any and all obligations, including penalties, interest or expenses, so incurred by the Master Trustee. 11.7 Determination of Fair Market Value. The Master Trustee shall determine the fair market value of the Fund monthly and annually based upon generally accepted accounting principles applicable to trusts of a same or similar nature to the one created herein. 11.8 Retention of Records. All records and accounts maintained by the Master Trustee with respect to the Fund shall be preserved for such period as may be required under any applicable law. Upon the expiration of any such required retention period, the Master Trustee shall have the right to destroy such records and accounts after first notifying the Corporation in writing of its intention and transferring to the Corporation any records and accounts requested. The Master Trustee shall have the right to preserve all records and accounts in original form, or on microfilm, magnetic tape, or any other similar process. - 19 - 21 SECTION 12 Fiduciary Duties of Master Trustee 12.1 Acknowledgment of Fiduciary Duty. The Master Trustee acknowledges that it assumes the fiduciary duties established by this Agreement. 12.2 Judicial Determination. The Master Trustee shall not, however, be liable for any loss to or diminution of the Fund except to the extent that any such loss or diminution results from act or inaction on the part of the Master Trustee which judicially determined to be a breach of its fiduciary duties. SECTION 13 Resignation and Removal 13.1 Power to Resign or Remove. The Master Trustee may be removed with respect to all, or a part of, the Fund by the Corporation, upon written notice to the Master Trustee to that effect. The Master Trustee may resign as Master Trustee hereunder, upon written notice to that effect delivered to the Corporation. 13.2 Notice. Such removal or resignation shall become effective as of the last day of the month which coincides with or next follows the expiration of sixty (60) days from the date of the delivery of such written notice, unless an earlier or later date is agreed upon in writing by the Corporation and the Master Trustee. 13.3 Successor Appointment. In the event of such removal or resignation, a successor master trustee, or a separate trustee or trustees, shall be appointed by the Corporation to become master trustee, or a separate trustee or trustees, as of the time such removal or resignation becomes effective. Such successor master trustee, or separate trustee or trustees, shall accept such appointment by an instrument in writing delivered to the Corporation and the Master Trustee and upon becoming successor master trustee, or separate trustee or trustees, shall be vested with all the rights, powers, duties, privileges and immunities as successor master trustee, or separate trustee or trustees, hereunder as if originally designated as master trustee, or separate trustee or trustees, in this Agreement. 13.4 Transfer of Fund to Successor. Upon such appointment and acceptance, the retiring Master Trustee shall endorse, transfer, assign, convey and deliver to the successor Master Trustee, or separate trustee or trustees, all of the funds, securities and other property then held by it in the Fund, except such amount as may be reasonable and necessary to cover - 20 - 22 its compensation and expenses as may be agreed to by the Corporation in connection with the settlement of its accounts and the delivery of the Fund to the successor master trustee, or separate trustee or trustees, and the balance remaining of any amount so reserved shall be transferred and paid over to the successor master trustee, or separate trustee or trustees, promptly upon settlement of its accounts, subject to the right of the retiring Master Trustee to retain any property deemed unsuitable by it for transfer until such time as transfer can be made. 13.5 Retention of Nontransferable Assets. If the retiring Master Trustee holds any property unsuitable for transfer, it shall retain such property, and as to such property alone it shall be a co-trustee with the successor master trustee, or separate trustee or trustees, its duties and obligations being solely limited to any such property, and it shall not have fiduciary duties of any nature as to assets transferred. Should the successor master trustee, or separate trustee or trustees, accept fiduciary responsibility as to such property, the Master Trustee shall retain only custodian duties as to such property. 13.6 Accounting. In the event of the removal or resignation of the Master Trustee hereunder, the Master Trustee shall file with the Corporation a statement and report of its accounts and proceedings covering the period from its last annual statement and report, and its liability and accountability to anyone with respect to the propriety of its acts and transactions shown in such written statement and report shall be governed by the terms of this Agreement. SECTION 14 Actions by the Corporation, Administrators or Named Fiduciary 14.1 Action by Corporation. Any action by the Corporation pursuant to this Agreement shall be evidenced or empowered in writing to the Master Trustee, and the Master Trustee shall be entitled to rely on such writing. 14.2 Action by Administrators or Named Fiduciary. Any action by any person or entity duly empowered to act on behalf of an Administrator or the Named Fiduciary with respect to any rights, powers or duties specified in this Agreement shall be in writing, signed by such person or by the person designated by an Administrator or the Named Fiduciary and the Master Trustee shall act and shall be fully protected in acting in accordance with such writing. - 21 - 23 SECTION 15 Amendment or Termination 15.1 Amendment or Termination. The Corporation shall have the right at any time and from time to time by appropriate action: (a) to modify or amend in whole or in part any or all of the provisions of this Agreement upon sixty (60) days' prior notice in writing to the Master Trustee, unless the Master Trustee agrees to waive such notice; provided, however, that no modification or amendment which affects the rights, duties or responsibilities of the Master Trustee may be made without the Master Trustee's consent, or (b) to terminate this Agreement upon sixty (60) days' prior notice in writing delivered to the Master Trustee; provided, further, that no termination, modification or amendment shall permit any part of the corpus or income of the Fund to be used for or diverted to purposes other than for the exclusive benefit of such participants, former participants and their beneficiaries, except for the return of Company contributions which are allowed by law and permitted under a Plan. 15.2 PBGC Approval. Should this Trust form a part of a Plan subject to the jurisdiction of the Pension Benefit Guaranty Corporation as provided in the Act, and should the Corporation notify the Master Trustee of the termination of a Plan, the Master Trustee shall take no action as to the termination of this Trust with respect to such Plan, until it has received notice from the Named Fiduciary or the Corporation that such termination has been approved by the Pension Benefit Guaranty Corporation. Thereafter and in the event that this Trust does not form a part of a Plan subject to the jurisdiction of the Pension Benefit Guaranty Corporation, the Master Trustee shall distribute all cash, securities and other property then constituting the Fund, less any amounts constituting charges and expenses payable from the Fund, on the date or dates specified by the Administrator of such Plan to such persons and in such manner as the Administrator shall direct. In making such distributions, the Master Trustee shall be entitled to assume that such distributions are in full compliance with and are not in violation of any applicable law regulating the termination of retirement plans such as the Plan and the Master Trustee may require the Corporation or the Administrator to furnish it with evidence that such distributions do not violate any such applicable law. The Corporation assumes all liability of any kind whatsoever arising from any distribution made by the Master Trustee at the direction of the Administrator as a result of the termination of this Agreement and shall indemnify and save the Master Trustee harmless from any attempt to impose - 22 - 24 any liability on the Master Trustee with respect to any such distribution. 15.3 Retention of Nontransferable Property. The Master Trustee reserves the right to retain such property as is not, in the sole discretion of the Master Trustee, suitable for distribution at the time of termination of this Agreement and shall hold such property as custodian for those persons or other entities entitled to such property until such time as the Master Trustee is able to make distribution. The Master Trustee's duties and obligations with respect to any property held in accordance with the above shall be purely custodial in nature and the Master Trustee shall only be obligated to see to the safekeeping of such property and make a reasonable effort to prevent deterioration or waste of such property prior to its distribution. Upon complete distribution of all property constituting the Fund, this Agreement shall be deemed terminated. 15.4 Termination in the Absence of Directions from the Administrator. In the event no direction is provided by the Named Fiduciary with respect to the distribution of a Plan's portion of the Fund upon termination of this Agreement, the Master Trustee shall obtain a copy of the Plan and make such distributions as are specified by the Plan after notice to the Corporation. In the event the Plan is silent as to the distributions to be made upon termination of the Plan or the terms of the Plan are inconsistent with the then applicable law or the Master Trustee cannot obtain a copy of the most recent Plan, the Master Trustee shall distribute the Fund to participants and their beneficiaries under the Plan in an equitable manner that will not adversely affect the qualified status of the Plan under section 401(a) of the Code or any other statute of similar import and that will comply with any applicable provisions of the Act regulating the allocation of assets upon termination of plans such as the Plan. The Master Trustee, in such case, reserves the right to seek a judicial and administrative determination as to the proper method of distribution of the Fund upon termination of this Agreement. 15.5 Termination on Corporate Dissolution. If a Company ceases to exist as a result of liquidation, dissolution or acquisition in some manner, the Fund shall be distributed as provided above upon termination of a Plan unless a successor company elects to continue the Plan and this Agreement. SECTION 16 Merger or Consolidation 16.1 Merger or Consolidation of Master Trustee. Any corporation, or national association, into which the Master Trustee may be merged or with which it may be consolidated, or - 23 - 25 any corporation, or national association, resulting from any merger or consolidation to which the Master Trustee is a party, or any corporation, or national association, succeeding to the trust business of the Master Trustee, shall become the successor of the Master Trustee hereunder, without the execution or filing of any instrument of the performance of any further act on the part of the parties hereto. 16.2 Merger or Consolidation of Corporation. Any corporation into which the Corporation may be merged or with which it may be consolidated, or any corporation succeeding to all or a substantial part of the business interests of the Corporation may become the Corporation hereunder by expressly adopting and agreeing to be bound by the terms and conditions of the Plan and this Agreement and so notifying the Master Trustee to such effect by submission to the Master Trustee of an appropriate written document. 16.3 Merger or Consolidation of Plan. In the event that the Named Fiduciary or the Corporation authorizes and directs that the assets of another plan be merged or consolidated with or transferred to a Plan participating in this Trust, the Master Trustee shall take no action with regard to such merger, consolidation or transfer until it has been notified in writing that each participant covered under the plan the assets of which are to be merged, consolidated or transferred will immediately after such merger, consolidation or transfer be entitled to a benefit either equal to or then greater than the benefit he would have been entitled to had the Plan been terminated. SECTION 17 Acceptance of Trust 17.1 Acceptance by Master Trustee. The Master Trustee accepts the Trust created hereunder and agrees to be bound by all the terms of this Agreement. SECTION 18 Non-alienation of Trust 18.1 Trust not Subject to Assignment or Alienation. Except as heretofore provided, no company, participant or beneficiary of the Plans to which the Trust applies shall have any interest in or right to the assets of this Trust, and to the full extent of all applicable laws, the assets of this Trust shall not be subject to any form of attachment, garnishment, sequestration or other actions of collection afforded creditors of the Companies, participants or beneficiaries. The Master Trustee shall not recognize any assignment or alienation of benefits unless, and then only to the extent, written notices are received from the Administrator for the Plan. - 24 - 26 18.2 Plans' Interest in Trust not Assignable. The equity or interest of any participating Plan in the Fund shall not be assignable. SECTION 19 Governing Law 19.1 Governing Law. This Agreement shall be construed and enforced, to the extent possible, according to the laws of the Commonwealth of Pennsylvania, and all provisions hereof shall be administered according to the laws of said Commonwealth and any federal laws, regulations or rules which may from time to time be applicable. In case of any conflict between the provisions of the Plans and this Agreement, the provisions of this Agreement shall govern. SECTION 20 Parties to Court Proceedings 20.1 Only Corporation and Master Trustee Necessary. To the extent permitted by law, only the Master Trustee and the Corporation shall be necessary parties in any application to the courts for an interpretation of this Agreement or for an accounting by the Master Trustee, and no participant under any Plan or other person having an interest in the Fund shall be entitled to any notice or service of process. Any final judgment entered in such an action or proceeding shall, to the extent permitted by law, be conclusive upon all persons claiming under this Agreement or any Plan. SECTION 21 Subsidiaries and Affiliates 21.1 Adoption of Master Trust by Subsidiaries and Affiliates. Any Company which is a subsidiary of the Corporation or which may be affiliated with the Corporation in any way and which is now or may hereafter be organized under the laws of the United States of America, or of any State or Territory thereof, with the approval of the Corporation, by resolution of its own Board of Directors, may adopt this Agreement, if such subsidiary or affiliate shall have adopted one or more Plans qualified under section 401(a) of the Code. If any such subsidiary or affiliate so adopts this Agreement, this Agreement shall establish the trust for such Plans as are specified by such subsidiary or affiliate and shall constitute a continuation, amendment and restatement of any prior trust for any such Plans. Furthermore, the assets of any such Plans may be commingled with the assets of other Plans held in the Fund pursuant to Section 2.7 hereof. However, the assets of any Plan so held in the Fund shall not be subject to any claim - 25 - 27 arising under any other Plan, the assets of which are commingled therewith by the Master Trustee for investment purposes, and under no circumstances shall any of the assets of one Plan be available to provide the benefits under another Plan. A separate trust shall be deemed to have been created with respect to each Plan of such subsidiary or affiliate. 21.2 Segregation from Further Participation. Any Company may, at any time, with the consent of the Corporation, segregate a Plan's trust from further participation in this Agreement. In such event, such subsidiary or affiliate shall file with the Master Trustee a document evidencing the Company's segregation of its Plan from the Fund and its continuance of a separate trust in accordance with the provisions of this Agreement as though such subsidiary or affiliate were the sole creator thereof. In such event, the Master Trustee shall deliver to itself as Master Trustee of such separate trust such share of the Fund as may be determined by the Master Trustee to constitute the appropriate share of the Fund, as confirmed by the Company, then held in respect of the participating employees of such subsidiary or affiliate. Such subsidiary or affiliate may thereafter exercise, in respect of such separate trust, all of the rights and powers reserved to the Corporation under the provisions of this Agreement. The equitable share of any Plan participating in the Fund shall be immediately segregated and withdrawn from the Fund if the Plan ceases to be qualified under section 401(a) of the Code and the Corporation shall promptly notify the Master Trustee of any determination by the Internal Revenue Service that any such Plan has ceased to be so qualified. 21.3 Segregation of Assets Allocable to Specific Employees. An Administrator may at any time direct the Master Trustee to segregate and withdraw the equitable share of any such Plan, or that portion of such equitable share as may be certified to the Master Trustee by the Administrator as allocable to any specified group or groups of employees or beneficiaries. Whenever segregation is required, the Master Trustee shall withdraw from the Fund such assets as it shall in its absolute discretion deem to be equal in value to the equitable share to be segregated. Such withdrawal from the Fund shall be in cash or in any property held in such Fund, or in a combination of both, in the absolute discretion of the Master Trustee. The Master Trustee shall thereafter hold the assets so withdrawn as a separate trust fund in accordance with the provisions of this Agreement, which shall be construed in respect of such assets as if the employer maintaining such Plan (determined without regard to whether any subsidiaries or affiliates of such employer have joined in such Plan) has been named as the Corporation hereunder. Such segregation shall not preclude later readmission to the Fund. - 26 - 28 SECTION 22 Counterparts 22.1 Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and said counterparts shall constitute but one and the same instrument and may be sufficiently evidenced by any one counterpart. (Rest of page left blank intentionally.) - 27 - 29 IN WITNESS WHEREOF, the parties hereto, each intending to be legally bound hereby, have hereunto set their hands and seals as of the day and year first above written. A.H. BELO CORPORATION By: /s/ MICHAEL MCCARTHY Name: Michael McCarthy Title: Senior Vice President, General Counsel MELLON BANK, N.A. By: /s/ ROBERT T. BORZA Name: Robert T. Borza Title: Vice President - 28 - 30 EXHIBIT "A" G.B. Dealey Pension Trust - 29 - 31 EXHIBIT "B" G.B. Dealey Retirement Pension Plan - 30 - EX-10.3.27 16 A.H.BELO SUPPL. EXECUTIVE RETIREMENT PLAN 1 EXHIBIT 10.3(27) A. H. BELO CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN 1. Purpose. The purpose of the Supplemental Executive Retirement Plan is to provide certain executive employees of A. H. Belo Corporation and its subsidiaries with a targeted level of retirement income upon retirement or other termination of employment. 2. Definitions. The following definitions are used throughout the Plan. (a) "Board of Directors" means the Board of Directors of the Company. (b) "Cause" means any intentional act of fraud, embezzlement, or theft committed by a Participant in the course of the Participant's employment by the Company or any subsidiary of the Company or any intentional misconduct engaged in by the Participant which is materially injurious to the business, reputation or property of the Company or any subsidiary of the Company. (c) "Code" means the Internal Revenue Code of 1986, as amended and in effect from time to time. (d) "Committee" means the Compensation Committee of the Board of Directors or any successor committee appointed by the Board of Directors to administer the Plan. (e) "Company" means A. H. Belo Corporation, a Delaware corporation. The term "subsidiary of the Company" means any corporation of which at least 50% of the total combined voting power of all outstanding shares of stock is owned directly or indirectly by the Company. (f) "Effective Date" means January 1, 1992. (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 but without regard to the limitation on compensation under Section 401(a)(17) of the Code. (i) "Participant" means an employee who is eligible to receive benefits under the Plan. The term "Participant" will 2 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 the Company and is intended to qualify under Section 401(a) of the Code. (k) "Plan" means the A. H. Belo Corporation Supplemental Executive Retirement Plan as set forth herein and as amended from time to time. (l) "Plan Year" means the calendar year. (m) "Senior Executive Officer" means any employee of the Company or any subsidiary of the Company who is (i) a member of the Management Committee of the Company, (ii) the Senior Vice President and Chief Financial Officer of the Company, (iii) the Senior Vice President and General Counsel of the Company, or (iv) any other Corporate Senior Vice President. (n) "Supplemental Retirement Benefit" means the benefit described in Section 4. 3. Eligibility. Each employee of the Company or any subsidiary of the Company who, at any time on or after the Effective Date, is a Senior Executive Officer will be a Participant in the Plan, unless such employee has waived the right to participation in or benefits under the Plan in any employment, consulting or other agreement to which the Company or any subsidiary of the Company is a party. In addition, any other key executive employee of the Company or any subsidiary of the Company who is designated by the Committee as eligible to participate in the Plan will be a Participant. 4. Supplemental Retirement Benefit. (a) As soon as practicable after an employee becomes a Participant, the Committee will determine the amount of the Participant's projected annual Final Monthly Compensation on the assumption that the Participant will remain employed by the Company or a subsidiary of the Company through the last day of the month in which the Participant attains age 65. (b) The Committee will also determine the aggregate projected annual employer-provided retirement benefit to be paid to the Participant from the Pension Plan, the Company's Employee Savings and Investment Plan and the Company's Management Security Plan, all payable as a straight life annuity, on the assumption that the Participant will remain employed by the Company or a subsidiary of the Company through the last day of the month in which the Participant attains age 65. -2- 3 (c) The targeted benefit under the Plan for each Participant who is a Senior Executive Officer will be equal to 60%, and the targeted benefit under the Plan for each other Participant will be equal to 55%, of the amount (if any) by which the projected amount determined under Section 4(a) for the Participant exceeds the projected amount determined under Section 4(b) for the Participant, multiplied by a fraction (not to exceed one), the numerator of which is the number of years of vesting service that the Participant will have earned under the Pension Plan if the Participant remains continuously employed by the Company or a subsidiary of the Company until reaching age 65 and the denominator of which is 15. The targeted benefit will be calculated as a straight life annuity. The Committee will then determine the amount the Company would be required to contribute each Plan Year on behalf of a Participant in order to fully fund the Participant's targeted benefit under the Plan as of the last day of the month in which the Participant attains age 65. The Committee will periodically review the projections determined under Sections 4(a) and (b) and in its discretion may make any changes to the Company's contributions on behalf of a Participant that are consistent with any change it makes to such projections. (d) The Company will establish on its books an account for each Participant and will credit annually to each Participant's account the amount of the contribution required to fund the Participant's targeted benefit, plus earnings on such contributions in an amount equal to the earnings factor specified by the Committee. Notwithstanding the foregoing, if the Company with the concurrence of the Committee either invests Company funds in investments that are designated for the purpose of providing a Participant's Supplemental Retirement Benefit or establishes a trust described in Section 9(c) for the purpose of providing Supplemental Retirement Benefits, the actual earnings of such Company 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 greater or lesser than the earnings that would be credited using the earnings factor specified by the Committee. (e) Annual contributions will be credited to the Participant's account as of a date selected by the Company (but not later than 90 days after the end of the Plan Year for which the contribution is to be credited) beginning with the Plan Year in which the Participant first becomes eligible to participate in the Plan and ending with the Plan Year in which the Participant attains age 65, retires or otherwise terminates employment, whichever occurs first. For purposes of the foregoing sentence, a Participant who becomes eligible for benefits under any long term disability plan maintained by the Company or any subsidiary of the Company will be regarded as having terminated employment nine months after the onset of the disability that entitles the -3- 4 Participant to benefits. 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 on a date other than the last day of the Plan Year, contributions to be credited for such Plan Year will be prorated in the manner specified by the Committee. Earnings will continue to be credited to a Participant's account until the Participant's Supplemental Retirement Benefit is paid, even though Company contributions cease to be credited as of an earlier date. (f) Notwithstanding the targeted benefit set forth in Section 4(c), each Participant's actual Supplemental Retirement Benefit as of any time will be the balance of the Participant's account described in Section 4(d). (g) In determining the amount of a Participant's targeted 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, rates of Participant and Company matching contributions to any retirement plan requiring such contributions 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 Company contributions required to provide a Participant's Supplement Retirement Benefit. The Committee's determinations made under Section 4 will be binding and conclusive on the Company and on each Participant. 5. Vesting. Subject to the rights of general creditors as set forth in Section 9 and the right of the Company to discontinue the Plan as provided in Section 12, a Participant will be vested in his Supplemental Retirement Benefit to the same extent that he has a vested interest in his employer-provided benefit under the Pension Plan, unless the Participant's employment with the Company or any subsidiary of the Company is terminated for Cause. If a Participant is terminated for Cause, the Participant's Supplemental Retirement 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 Supplemental Retirement Benefit if he becomes eligible for benefits under any long term disability plan maintained by the Company or any subsidiary of the Company. 6. Commencement of Benefits. Payment of a Participant's vested interest in his Supplemental Retirement Benefit will be made or will begin on the first day of the month following the -4- 5 later of the month in which the Participant retires or otherwise terminates employment or the month in which the Participant attains age 60. A Participant who retires or otherwise terminates employment before reaching age 60 may elect to receive his Supplemental Retirement Benefit as of the first day of any month following his retirement or termination of employment (but not earlier than the first day of the month following attainment of age 55), provided such election is made, at least six months prior to the date the Supplemental Retirement Benefit is scheduled to be paid, in accordance with procedures established by the Committee. 7. Form of Benefits. (a) A Participant's Supplemental Retirement Benefit will be paid in a single lump sum payment, unless the Participant elects, at least six months prior to the date his Supplemental Retirement Benefit is scheduled to be paid under Section 6, in accordance with procedures established by the Committee to receive his Supplemental Retirement 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 single 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 8 will be paid from the Participant's account established under Section 4, and the Company 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), the Company 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. -5- 6 (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. (d) In determining the actuarial equivalence of forms of benefit under Section 7, the Committee will use the actuarial assumptions and other factors that are used from time to time under the Pension Plan to determine actuarially equivalent forms of pension benefits. 8. Death Benefits. (a) Upon the death of a Participant who is receiving a Supplemental Retirement Benefit, the Supplemental Retirement Benefit will continue to be paid (if at all) in accordance with the form of payment elected by the Participant under Section 7. (b) If a Participant who is entitled to receive a Supplemental Retirement Benefit dies before payment of such benefit begins, the Supplemental Retirement 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 subsection (b) will be paid on the first day of the month following the later of the month in which the Participant dies or the month in which the Participant would have attained age 60. If the Participant dies before reaching age 60, the beneficiary may elect to receive the benefit as of the first day of any month following the month in which the Participant died (but not earlier than the first day of the month following the date the Participant would have attained age 55). Such election must be made, at least six months prior to the date the death benefit is scheduled to be paid, in accordance with procedures established by the Committee. The death benefit will be paid to the beneficiary in a single lump sum payment unless the beneficiary elects, at least six months prior to the date the benefit is scheduled to be paid, to receive the death benefit in any other actuarially equivalent form permitted under Section 7 except a joint and survivor annuity. Notwithstanding the foregoing, if the Committee determines that the beneficiary has an immediate and heavy financial need, the Committee, in its discretion, may waive the foregoing election periods and may also permit the beneficiary to receive the death benefit prior to the time the Participant would have attained age 55. 9. 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 the Company or any subsidiary of the -6- 7 Company that employed the Participant, and nothing contained in the Plan will require the Company or any subsidiary of the Company 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 the Company to make payments under the Plan. Any funds of the Company or any subsidiary of the Company available to pay benefits under the Plan will be subject to the claims of general creditors of the Company or such subsidiary and may be used for any purpose by the Company or such subsidiary. (b) If the Supplemental Retirement Benefit payable to a Participant is attributable to periods of employment with the Company and/or one or more subsidiaries of the Company, the Committee may allocate liability for the payment of the benefit among the Company and one or more subsidiaries in any manner the Committee, in its sole discretion, determines to be appropriate. (c) Notwithstanding the provisions of Section 9(a), the Company 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 the Company and the subsidiaries of the Company, and no Participant will at any time have a prior claim to such assets. To the extent that Supplemental Retirement Benefits are paid from any such trust, the Company and each subsidiary of the Company will be relieved of all liability for such Supplemental Retirement Benefits. 10. 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 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 the Company 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. -7- 8 (b) Any action taken or determination made by the Committee will, except as otherwise provided in Section 11 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. 11. 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. (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, which person will be a named fiduciary under Section 402(a)(2) of ERISA for purposes of this Section. 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 -8- 9 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. 12. Miscellaneous. (a) Nothing in the Plan will confer upon a Participant the right to continue in the employ of the Company or any subsidiary of the Company or will limit or restrict the right of the Company or any subsidiary of the Company 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 liable for or 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. Any amendment adopted by the Committee or the Board may reduce prospectively the earnings factor to be applied to a Participant's account established under Section 4. However, 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 -9- 10 constitutes an employee pension benefit plan within the meaning of Section 3(2) of ERISA, which is not so 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 DELAWARE. Executed at Dallas, Texas, this 28th day of February, 1994. A. H. BELO CORPORATION By /s/ MICHAEL D. PERRY -10- EX-10.3.28 17 TRUST AGREEMENT 1 EXHIBIT 10.3(28) TRUST AGREEMENT This agreement (the "Trust Agreement") is made this 28th day of February, 1994, by and between A. H. Belo Corporation, a Delaware corporation (the "Company"), and Mellon Bank, N.A. (the "Trustee"). WHEREAS, the Company has adopted the nonqualified deferred compensation plans, as listed in Appendix A (the "Plans"); WHEREAS, the Company has incurred or expects to incur liability under the terms of the Plans with respect to the individuals participating in the Plans (individually a "Participant" and collectively the "Participants"); WHEREAS, the Company wishes to establish a trust (the "Trust") and to contribute to the Trust the assets that shall be held therein, subject to the claims of the Company's creditors in the event of the Company's insolvency, as herein defined, until paid to Participants and their beneficiaries in such manner and at such times as specified in the Plans; WHEREAS, it is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of each Plan as an unfunded plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended; and WHEREAS, it is the intention of the Company to make contributions to the Trust as provided herein to provide itself with a source of funds to assist it in the meeting of its liabilities under the Plans. NOW, THEREFORE, the parties do hereby establish the Trust and agree that the Trust shall be comprised, held and disposed of as follows. Section 1. Establishment of the Trust. (a) The Company hereby establishes the Trust with the Trustee, consisting of such sums of money and other property acceptable to the Trustee as from time to time shall be paid and delivered to and accepted by the Trustee from the Company. All such money and other property paid or delivered to and accepted by the Trustee shall become the principal of the Trust to be held, administered and disposed of by the Trustee as provided in this Trust Agreement. 2 (b) The Trust hereby established is revocable by the Company; it shall become irrevocable upon a Change of Control, as defined herein. (c) The Trust is intended to be a grantor trust, of which the Company is the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be construed accordingly. (d) The principal of the Trust, and any earnings thereon shall be held separate and apart from other funds of the Company and shall be used exclusively for the uses and purposes of the Participants and general creditors as herein set forth. The Participants and their beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any rights created under the Plans and this Trust Agreement shall be mere unsecured contractual rights of the Participants and their beneficiaries against the Company. Any assets held by the Trust will be subject to the claims of the Company's general creditors under federal and state law in the event of the Company's insolvency, as defined in Section 3(a) herein. (e) The Company, in its sole discretion, may at any time, or from time to time, make additional deposits of cash or other property in trust with the Trustee to augment the principal to be held, administered and disposed of by the Trustee as provided in this Trust Agreement, and except for the sum of money initially paid to the Trustee for the purpose of establishing this Trust, shall have no obligation to make additional deposits until a Funding Event has occurred. For purposes of this Trust Agreement, a "Funding Event" shall occur if (i) any person (other than the Company, any subsidiary of the Company or any employee benefit plan for the benefit of employees of the Company or any subsidiary of the Company) takes any action or makes a public announcement stating an intention to take any action that, if consummated, would constitute a Change of Control as hereinafter defined or (ii) the Company enters into a letter of intent, agreement in principal or other agreement the consummation of which would constitute a Change of Control. Upon the occurrence of a Funding Event, the Company shall make additional deposits to the Trustee in such amounts as directed by the Compensation Committee of the Board of Directors pursuant to resolutions duly adopted by such Committee. Neither the Trustee nor any Participant or beneficiary shall have any right to compel any such additional deposits. -2- 3 Section 2. Payments to the Participants and Their Beneficiaries. (a) The Company shall deliver to the Trustee a schedule (the "Payment Schedule") that indicates the amounts payable in respect of each Participant (and his or her beneficiaries), that provides a formula or other instructions acceptable to the Trustee for determining the amounts so payable, the form in which such amount is to be paid (as provided for or available under the Plans), and the time of commencement for payment of such amounts. Except as otherwise provided herein, the Trustee shall make payments to the Participants and their beneficiaries in accordance with such Payment Schedule. The Trustee shall make provision for the reporting and withholding of any federal, state or local taxes that may be required to be withheld with respect to the payment of benefits pursuant to the terms of this Trust Agreement and shall pay amounts withheld to the appropriate taxing authorities or determine that such amounts have been reported, withheld and paid by the Company. (b) The entitlement of a Participant or his or her beneficiaries to benefits under the Plans shall be determined by the Company or such party as it shall designate under the Plans, and any claim for such benefits shall be considered and reviewed under the procedures set out in the Plans. Notwithstanding the foregoing, the Trustee shall rely on the Payment Schedule described in Section 2(a) in making payments to Participants or beneficiaries until the Company notifies the Trustee in writing of any amendment or modification to the Payment Schedule. After the Trust becomes irrevocable, no amendment or modification to the Payment Schedule that adversely affects any Participant or beneficiary will be effective without the written consent of such Participant or beneficiary. (c) The Company may make payment of benefits directly to the Participants or their beneficiaries as they become due under the terms of the Plans. The Company shall notify the Trustee of its decision to make payment of benefits directly prior to the time amounts are payable to Participants or their beneficiaries. In addition, if the principal of the Trust, and any earnings thereon, are not sufficient to make payments of benefits in accordance with the terms of the Plans, the Company shall immediately make up the balance of each such payment as it falls due. The Trustee shall notify the Company when principal and earnings are not sufficient. Section 3. Trustee Responsibility Regarding Payments to Trust Beneficiary When the Company is Insolvent. (a) The Trustee shall cease payment of benefits to the Participants and their beneficiaries if the Company is Insolvent. -3- 4 The Company shall be considered "Insolvent" for purposes of this Trust Agreement if (i) the Company is unable to pay its debts as they become due, or (ii) the Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. (b) At all times during the continuance of this Trust, as provided in Section 1(d) hereof, the principal and income of the Trust shall be subject to claims of general creditors of the Company under federal and state law as set forth below. (1) The Board of Directors and the Chief Executive Officer of the Company shall have the duty to inform the Trustee in writing of the Company's Insolvency. If a person claiming to be a creditor of the Company alleges in writing to the Trustee that the Company has become Insolvent, the Trustee shall determine whether the Company is Insolvent and, pending such determination, the Trustee shall discontinue payment of benefits to the Participants or their beneficiaries. In all cases, the Trustee shall be entitled to conclusively rely upon the written certification of the Board of Directors or the Chief Executive Officer of the Company when determining whether the Company is insolvent. (2) Unless the Trustee has actual knowledge of the Company's Insolvency, or has received notice from the Company or a person claiming to be a creditor alleging that the Company is Insolvent, the Trustee shall have no duty to inquire whether the Company is Insolvent. The Trustee may in all events rely on such evidence concerning the Company's solvency as may be furnished to the Trustee and that provides the Trustee with a reasonable basis for making a determination concerning the Company's solvency. (3) If at any time the Trustee has determined that the Company is Insolvent, the Trustee shall discontinue payments to the Participants or their beneficiaries and shall hold the assets of the Trust for the benefit of the Company's general creditors. Nothing in this Trust Agreement shall in any way diminish any rights of the Participants or their beneficiaries to pursue their rights as general creditors of the Company with respect to benefits due under the Plans or otherwise. (4) The Trustee shall resume the payment of benefits to the Participants or their beneficiaries in accordance with Section 2 of this Trust Agreement only after the Trustee has determined that the Company is not Insolvent (or is no longer Insolvent). (c) Provided that there are sufficient assets, if the Trustee discontinues the payment of benefits from the Trust pursuant to Section 3(b) hereof and subsequently resumes such payments, the first payment following such discontinuance shall -4- 5 include the aggregate amount of all payments due to the Participants or their beneficiaries under the terms of the Plans for the period of such discontinuance, less the aggregate amount of any payments made to the Participants or their beneficiaries by the Company in lieu of the payments provided for hereunder during any such period of discontinuance. Section 4. Payments to the Company. Before the Trust has become irrevocable, the Company may direct the Trustee to return to the Company all or any portion of the Trust assets. Except as provided in Section 3 hereof, after the Trust has become irrevocable, the Company shall have no right or power to direct the Trustee to return to the Company or to divert to others any of the Trust assets before all payment of benefits have been made to the Participants and their beneficiaries pursuant to the terms of the Plans. Section 5. Investment and Administrative Authority. (a) It is contemplated that the Company will from time to appoint one or more investment managers ("Investment Managers") to manage all or a specified portion of the Trust assets. Upon the appointment of each Investment Manager, the Company shall so notify the Trustee and instruct the Trustee in writing to separate into a separate account those assets as to which each Investment Manager has discretion and control. The Investment manager shall designate in writing the person or persons who are to represent any such Investment Manager in dealings with the Trustee. Upon the separation of the assets in accordance with the instructions of the Company, the Trustee shall thereupon be relieved and released of all investment duties, responsibilities and liabilities normals and statutorily incident to a trustee as to such separate account, and, as to such separate account, the Trustee shall act as custodian. Except as otherwise provided by the Company in writing from time to time, the Trustee shall take no action with respect to the duties or powers allocated to an Investment Manager without receipt of written directions of the Investment Manager. Unless specifically prohibited in writing, the Trustee, as custodian, may hold the assets of such separate account in the name of a nominee or nominees. (b) Should an Investment Manager at any time elect to place security transactions directly with a broker or dealer, the Trustee shall not recognize such transaction unless and until it has received instructions or confirmation of such fact from the Investment Manager. Should the Investment Manager direct the Trustee to utilize the services of any person with regard to the assets under its management or control, such instructions shall -5- 6 specifically set forth the actions to be taken by the Trustee as to such services. (c) In the event that an Investment Manager places security transactions directly or directs the utilization of a service, the Investment Manager shall be solely responsible for the acts of such persons. The sole duty of the Trustee as to such transactions shall be incident to its duties as custodian. (d) The Trustee shall have the power, exercisable in its discretion with respect to any portion of the Trust assets not under the management and control of an Investment Manager, and exercisable in accordance with the directions of an Investment Manager with respect to the portion of the Trust assets under the management and control of the Investment Manager: (1) To invest and reinvest the principal and income of the Trust and keep it invested, without distinction between principal and income, in any security (including without limitation life insurance policies) or Property (as hereinafter defined); provided, however, in no event may the Trustee invest in securities (including stock or rights to acquire stock) or obligations issued by the Company, other than a de minimis amount held in common investment vehicles in which the Trustee invests. All rights associated with assets of the Trust shall be exercised by the Trustee or the person designated by the Trustee, or by an Investment Manager, and shall in no event be exercisable by or rest with the Participants. "Property," as used herein, shall not include any direct or indirect interest in real estate. For this purpose, "real estate" includes, but is not limited to, real property, mortgages, leaseholds, mineral interests, and any form of asset which is secured by any of the foregoing. (2) To collect and receive any and all money and other property due to the Trust and to give full discharge therefore; (3) To invest and reinvest the principal income of the Trust in any collective, common or pooled trust fund operated or maintained exclusively for the commingling and collective investment of monies or other assets. Notwithstanding the provisions of this Trust Agreement which place restrictions upon the actions of the Trustee or an Investment Manager, to the extent monies or other assets are utilized to acquire units of any collective trust, the terms of the collective trust indenture shall solely govern the investment duties, responsibilities and powers of the trustee of such collective trust and, to the extent required by law, such terms, responsibilities and powers shall be incorporated herein by reference and shall be part of this Trust Agreement. For purposes of valuation, the value of the interest maintained by the Trust in such collective trust shall be the fair market value of the collective fund units held, determined -6- 7 in accordance with generally recognized valuation procedures. The Company expressly understands and agrees that any such collective fund may provide for the lending of its securities by the collective fund trustee and that such collective fund's trustee will receive compensation from such collective fund for the lending of securities that is separate from any compensation of the Trustee hereunder, or any compensation of the collective fund trustee for the management of such collective fund. (4) To purchase, enter, sell, hold, and generally deal in any manner in and with contracts for the immediate or future delivery of financial instruments of any issuer or of any other property; to grant, purchase, sell, exercise, permit to expire, permit to be held in escrow, and otherwise to acquire, dispose of, hold and generally deal in any manner with and in all forms of options in any combination. (5) To settle, compromise or submit to arbitration any claims, debt or damages due or owing to or from the Trust; to commence or defend suits or legal proceedings to protect any interest of the Trust; and to represent the Trust in all suits or legal proceedings in any court or before any other body or tribunal. (6) Generally to do all acts, whether or not expressly authorized, which the Trustee may deem necessary or desirable for the protection of the Trust. (e) Notwithstanding the foregoing, the Trustee shall have the power, exercisable in its discretion with respect to any portion of the Trust assets not under the management and control of an Investment Manager, to invest and reinvest the principal income of the Trust in any collective, common or pooled trust fund operated or maintained exclusively for the commingling and collective investment of monies or other assets including any such fund operated or maintained by the Trustee. Notwithstanding the provisions of this Trust Agreement which place restrictions upon the actions of the Trustee, to the extent monies or other assets are utilized to acquire units of any collective trust, the terms of the collective trust indenture shall solely govern the investment duties, responsibilities and powers of the trustee of such collective trust and, to the extent required by law, such terms, responsibilities and powers shall be incorporated herein by reference and shall be part of this Trust Agreement. For purposes of valuation, the value of the interest maintained by the Trust in such collective trust shall be the fair market value of the collective fund units held, determined in accordance with generally recognized valuation procedures. The Company expressly understands and agrees that any such collective fund may provide for the lending of its securities by the collective fund trustee and that such collective fund's trustee will receive compensation -7- 8 from such collective fund for the lending of securities that is separate from any compensation of the Trustee hereunder, or any compensation of the collective fund trustee for the management of such collective fund. Section 6. Disposition of Income. During the term of this Trust, all income received by the Trust, net of expenses and taxes, shall be accumulated and reinvested. Section 7. Accounting by the Trustee. The Trustee shall keep accurate and detailed records of all investments, receipts, disbursements, and all other transactions required to be made, including such specific records as shall be agreed upon in writing between the Company and the Trustee. Within 90 days following the close of each calendar year and within 90 days after the removal or resignation of the Trustee, the Trustee shall deliver to the Company a written account of its administration of the Trust during such year or during the period from the close of the last preceding year to the date of such removal or resignation, setting forth all investments, receipts, disbursements and other transactions effected by it, including a description of all securities and investments purchased and sold with the cost or net proceeds of such purchases or sales (accrued interest paid or receivable being shown separately), and showing all cash securities and other property held in the Trust at the end of such year or as of the date of such removal or resignation, as the case may be. Section 8. Responsibility of the Trustee. (a) The Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, provided, however, that the Trustee shall incur no liability to any person for any action taken pursuant to a direction, request or approval given by the Company which is contemplated by, and in conformity with, the terms of the Plans (as certified to the Trustee by the Company) or this Trust and is given in writing by the Company. In the event of a dispute between the Company and a party, the Trustee may apply to a court of competent jurisdiction to resolve the dispute. The Company agrees to indemnify the Trustee against the Trustee's costs, expenses and liabilities (including, without limitation, attorneys' fees and expenses) arising out of or relating to any -8- 9 action or inaction taken by the Trustee in reliance upon direction, request or approval given by the Company. (b) If the Trustee undertakes or defends any litigation arising in connection with this Trust, the Company agrees to indemnify the Trustee against the Trustee's costs, expenses and liabilities (including, without limitation, attorneys' fees and expenses) relating thereto and to be primarily liable for such payments. If the Company does not pay such costs, expenses and liabilities in a reasonably timely manner, the Trustee may obtain payment from the Trust. (c) The Trustee may consult with legal counsel (who may also be counsel for the Company generally) with respect to any of its duties or obligations hereunder. (d) The Trustee may hire agents, accountants, actuaries, investment advisors, financial consultants or other professionals to assist it in performing any of its duties or obligations hereunder. (e) The Trustee shall have, without exclusion, all powers conferred on the Trustee by applicable law, unless expressly provided otherwise herein, provided, however, that if an insurance policy is held as an asset of the Trust, the Trustee shall have no power to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor the Trustee, or to loan to any person the proceeds of any borrowing against such policy. (f) However, notwithstanding the provisions of Section 8(e) above, the Trustee may loan to the Company the proceeds of any borrowing against an insurance policy held as an asset of the Trust. (g) Notwithstanding any powers granted to the Trustee pursuant to this Trust Agreement or to applicable law, the Trustee shall not have any power that could give this Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of Section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Internal Revenue Code. Section 9. Compensation and Expenses of the Trustee. The Company shall pay all administrative and the Trustee's fees and expenses. If not so paid, the fees and expenses shall be paid from the Trust. The Trustee shall be entitled to the fees listed on Schedule A attached hereto as reasonable -9- 10 compensation for the services rendered under this Trust Agreement. Section 10. Resignation and Removal of the Trustee. (a) The Trustee may resign at any time by written notice to the Company, which shall be effective 60 days after receipt of such notice unless the Company and the Trustee agree otherwise. (b) Subject to Section 10(c), the Trustee may be removed by the Company on 60 days notice or upon shorter notice accepted by the Trustee. (c) Upon a Change of Control, as defined herein, the Trustee may not be removed by the Company for one year. (d) If the Trustee resigns within one year of a Change of Control, as defined herein, the Trustee shall select a successor the Trustee in accordance with the provisions of Section 11(b) hereof prior to the effective date of the Trustee resignation or removal. (e) Upon resignation or removal of the Trustee and appointment of a successor Trustee, all assets shall subsequently be transferred to the successor Trustee. The transfer shall be completed within 180 days after receipt of notice of resignation, removal or transfer, unless the Company extends the time limit. (f) If the Trustee resigns or is removed, a successor shall be appointed, in accordance with Section 11 hereof, by the effective date of resignation or removal under paragraph (a) or (b) of this section. If no such appointment has been made, the Trustee may apply to a court of competent jurisdiction for appointment of a successor or for instructions. All expenses of the Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust. Section 11. Appointment of Successor. (a) If the Trustee resigns or is removed in accordance with Section 10(a) or (b) hereof, the Company may appoint any third party, such as a bank trust department or other party that may be granted corporate trustee powers under state law, as a successor to replace the Trustee upon resignation or removal. The appointment shall be effective when accepted in writing by the new Trustee, who shall have all of the rights and powers of the former Trustee, including ownership rights in the Trust assets. The former Trustee shall execute any instrument necessary or -10- 11 reasonably requested by the Company or the successor Trustee to evidence the transfer. (b) If the Trustee resigns or is removed pursuant to the provisions of Section 10(d) hereof and selects a successor Trustee, the Trustee may appoint any third party such as a bank trust department or other party that may be granted corporate trustee powers under state law. The appointment of a successor Trustee shall be effective when accepted in writing by the new Trustee. The new Trustee shall have all the rights and powers of the former Trustee, including ownership rights in Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by the successor Trustee to evidence the transfer. (c) The successor Trustee need not examine the records and acts of any prior Trustee and may retain or dispose of existing Trust assets, subject to Sections 7 and 8 hereof. The successor Trustee shall not be responsible for and the Company shall indemnify and defend the successor Trustee from any claim or liability resulting from any action or inaction of any prior Trustee or from any other past event, or any condition existing at the time it becomes successor Trustee. Section 12. Amendment or Termination. (a) This Trust Agreement may be amended by a written instrument executed by the Trustee and the Company. Notwithstanding the foregoing, no such amendment shall conflict with the terms of the Plan (as certified to the Trustee by the Company) or shall make the Trust revocable after it has become irrevocable in accordance with Section 1(b). (b) The Trust shall not terminate until the date on which the Participants and their beneficiaries are no longer entitled to benefits pursuant to the terms of the Plans unless sooner revoked in accordance with Section 1(b) hereof. Upon termination of the Trust any assets remaining in the Trust shall be returned to the Company. (c) Upon written approval of all of the Participants or beneficiaries entitled to payment of benefits pursuant to the terms of the Plans, the Company may terminate this Trust prior to the time all benefit payments under the Plans have been made. All assets in the Trust at termination shall be returned to the Company. (d) Notwithstanding any other provision in this Trust Agreement, this Trust Agreement may not be amended within one year of the occurrence of a Change of Control. -11- 12 Section 13. Miscellaneous. (a) Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof. (b) Notwithstanding anything to the contrary contained elsewhere in this Trust Agreement, any reference to the Plan or Plan provisions which require knowledge or interpretation of the Plan shall impose a duty upon the Company to communicate such knowledge or interpretation to the Trustee. The Trustee shall have no obligation to know or interpret any portion of the Plan and shall in no way be liable for any proper action taken contrary to the Plan. (c) Benefits payable to Participants and their beneficiaries under this Trust Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process. (d) This Trust Agreement shall be governed by and construed in accordance with the laws of Pennsylvania. (e) For purposes of this Trust, "Change of Control" shall mean the occurrence of an event which (i) gives rise to an "Acceleration Date" under, and within the meaning of, the Company's 1986 Long Term Incentive Plan, as amended from time to time (the "LTIP"), and (ii) results in the immediate exercisability of options issued pursuant to the LTIP. The Trustee shall be entitled to rely on a written certificate signed by the Company's Chief Executive Officer confirming the existence of a Change of Control. Section 14. Effective Date. The effective date of this Trust Agreement shall be the date first written above. A.H. BELO CORPORATION By: /s/ MICHAEL D. PERRY Date: February 28, 1994 Title: Senior Vice President & CFO -12- 13 MELLON BANK, N.A. By: /s/ Date: March 2, 1994 Title: Vice President -13- 14 APPENDIX A Nonqualified Deferred Compensation Plans A. H. Belo Corporation Supplemental Executive Retirement Plan EX-21 18 SUBSIDIARIES OF THE COMPANY 1 EXHIBIT 21 SUBSIDIARIES OF THE COMPANY
STATE OF NAME OF CORPORATION INCORPORATION - ------------------- ------------- NEWSPAPER PUBLISHING: The Dallas Morning News, Inc. d.b.a. The Dallas Morning News Delaware DFW Printing Company, Inc. Delaware DFW Suburban Newspapers, Inc. d.b.a. Arlington News Delaware Garland News Grand Prairie News Irving News Las Colinas Business News Metrocrest News Mid-Cities News Richardson News TELEVISION BROADCASTING: Great Western Broadcasting Corp. d.b.a. KXTV, Channel 10 Delaware KHOU-TV, Inc. d.b.a. KHOU, Channel 11 Delaware KOTV, Inc. d.b.a. KOTV, Channel 6 Delaware WFAA-TV, Inc. d.b.a. WFAA, Channel 8 Delaware WVEC Television, Inc. d.b.a. WVEC, Channel 13 Delaware Blue Ridge Tower Corporation Texas Hill Tower, Inc. Texas Transtower, Inc. California
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.; 50% of the outstanding common stock of Blue Ridge Tower Corporation; and 33 1/3 percent of the outstanding common stock of Transtower, Inc. EX-23 19 CONSENT OF ERNST & YOUNG 1 Exhibit 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 33-30994 and Form S-8 No. 33-32526) pertaining to the Employee Savings and Investment Plan and Long-Term Incentive Plan of A. H. Belo Corporation of our report dated January 26, 1994, except for Note 12 as to which the date is February 23, 1994, with respect to the consolidated financial statements and schedules of A. H. Belo Corporation included in this Annual Report (Form 10-K) for the year ended December 31, 1993. ERNST & YOUNG Dallas, Texas March 24, 1994 -----END PRIVACY-ENHANCED MESSAGE-----